As filed with the Securities and Exchange Commission on May 27, 1998
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
ISP HOLDINGS INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 6719 51-0376469
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Code Number)
Organization)
818 WASHINGTON STREET
WILMINGTON, DELAWARE 19801
(302) 428-0847
(Address, Including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive Offices)
RICHARD A. WEINBERG, ESQ.
C/O ISP MANAGEMENT COMPANY, INC.
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(973) 628-3000
(Name and Address, Including Zip Code,
and Telephone Number, Including Area Code, of Agent For Service)
Copies to:
STEPHEN E. JACOBS, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
(212) 310-8000
Approximate date of commencement of proposed sale of the securities to the
public: On the Effective Date (as defined in the Proxy Statement/Prospectus
included herein) of the merger of International Specialty Products Inc. ("ISP")
with ISP Holdings Inc. ("Holdings") pursuant to the Agreement and Plan of
Merger, dated as of March 30, 1998, described in the enclosed Proxy
Statement/Prospectus.
If any of the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
NYFS01...:\01\47201\0035\1909\FRM4298R.59F
<PAGE>
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Title of Each Class of Securities to be Amount to be Proposed Maximum Proposed Maximum Amount of
Registered Registered Offering Price Per Aggregate Offering Registration Fee(2)
Share Price(1)
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share... 70,980,226 N/A $1,736,288,699 $512,205
===================================================================================================================================
</TABLE>
(1) Estimated in accordance with Rule 457(f) of the Securities Act of 1933 (the
"Securities Act") solely for the purpose of calculating the registration
fee. If the merger of Holdings were effected in accordance with its terms,
up to 17,146,893 shares of common stock of ISP (which includes shares which
could be acquired upon exercise of outstanding options) would be converted
into an equal number of shares of common stock of Holdings and the
80,500,000 shares of common stock of ISP held by Holdings would be
cancelled. Accordingly, based on a market value of $17.7813 per share, the
average of the high and low sale prices on the NYSE of the common stock of
ISP on May 22, 1998, the filing fee is equal to (17,146,893 x $17.7813 plus
80,500,000 x $17.7813) x .000295 = $512,205.
(2) $108,458 of the registration fee was paid on April 24, 1998, in connection
with the filing of ISP's preliminary proxy materials.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
INTERNATIONAL SPECIALTY PRODUCTS INC.
818 Washington Street
Wilmington, Delaware 19801
___________, 1998
Fellow Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
International Specialty Products Inc. ("ISP" or the "Company") to be held on
[_______], 1998, at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
25th Floor, New York, New York, at 10:00 a.m., local time (the "Meeting").
At the Meeting, in addition to the election of seven (7) directors,
holders of common stock of the Company (the "ISP Common Stock") at the close of
business on ______________, 1998, will consider and vote upon (i) a proposal to
adopt an Agreement and Plan of Merger, dated as of March 30, 1998 (the "Merger
Agreement"), by and between ISP and ISP Holdings Inc., a Delaware corporation
and the holder of approximately 84% of the issued and outstanding ISP Common
Stock ("Holdings"), pursuant to which, among other things, (A) ISP would be
merged with and into Holdings (the "Merger") and the name of the surviving
corporation would be changed to "International Specialty Products Inc.," (B)
each share of ISP Common Stock issued and outstanding immediately prior to the
effective date (the "Effective Date") of the Merger (other than shares held by
Holdings) would be automatically converted into one share of common stock of
Holdings (the "Surviving Corporation Common Stock"), (C) each issued and
outstanding share of ISP Common Stock owned of record by Holdings immediately
prior to the Effective Date would be cancelled and retired without payment of
any consideration therefor and shall cease to exist and (D) each issued and
outstanding share of common stock of Holdings would automatically become a
number of shares of Surviving Corporation Common Stock equal to the quotient
obtained by dividing 53,833,333 by the number of outstanding shares of common
stock of Holdings as of the Effective Date. If the Merger were consummated
today, it would result in the stockholders of Holdings becoming the direct
owners of approximately 78% of the outstanding shares of the Surviving
Corporation, while the existing stockholders of ISP (other than Holdings) would
own the remaining approximately 22% of the outstanding shares thereof.
At the Meeting, holders of ISP Common Stock also will consider and vote
upon (i) an amendment to the Company's 1991 Incentive Plan for Key Employees and
Directors to, among other things, increase the number of shares authorized
thereunder in connection with the consummation of the Merger and (ii) such other
business as may properly come before the Meeting or any adjournments,
continuations or postponements thereof.
The Board of Directors believes that the Merger will enable ISP to utilize
equity more freely. As a result, ISP will have greater access to capital markets
through equity financing and an increased ability to use equity for acquisitions
and other corporate purposes.
A Special Committee of the Board of Directors, composed of members of the
Board of Directors not affiliated with Holdings or its affiliates, has
unanimously approved the Merger Agreement and the transactions contemplated
thereby and, accordingly, the Company's Board of Directors recommends that
holders of ISP Common Stock vote FOR adoption of the Merger Agreement.
You should read carefully the accompanying Notice of Annual Meeting of
Stockholders and the Proxy Statement/Prospectus for details of the Merger, the
other actions to be taken at the Meeting and additional related information.
Directors and officers of the Company will be present at the Meeting to
respond to any questions that our stockholders may have.
It is important that your shares be represented at the Meeting. Whether or
not you plan to attend the Meeting, we urge you to sign, date and return the
enclosed proxy card at your earliest convenience. Your prompt cooperation will
be greatly appreciated.
Sincerely,
<PAGE>
INTERNATIONAL SPECIALTY PRODUCTS INC.
NOTICE OF ANNUAL MEETING
To Be Held [____________], 1998
The Annual Meeting of Stockholders (the "Meeting") of International
Specialty Products Inc., a Delaware corporation ("ISP" or the "Company"), will
be held at 10:00 a.m., local time, on [__________], at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New York, New York, for the
purpose of considering and acting upon the following matters, each of which is
described more fully in the accompanying Proxy Statement/Prospectus:
1. To adopt an Agreement and Plan of Merger, dated as of March 30, 1998
(the "Merger Agreement"), by and between ISP and ISP Holdings Inc.,
a Delaware corporation ("Holdings"), pursuant to which, among other
things, subject to the terms and conditions therein:
(a) (i) ISP will be merged with and into Holdings (the
"Merger"), with Holdings being the surviving corporation in
the Merger (the "Surviving Corporation"), (ii) each share of
ISP common stock, par value $.01 per share (the "ISP Common
Stock"), issued and outstanding immediately prior to the
effective date (the "Effective Date") of the Merger (other
than shares held in treasury or by Holdings) will be
automatically converted into one share of common stock, par
value $.01 per share (the "Surviving Corporation Common
Stock"), of Holdings, (iii) each issued and outstanding
share of ISP Common Stock owned of record by Holdings
immediately prior to the Effective Date will be cancelled
and retired without payment of any consideration therefor
and will cease to exist and (iv) each issued and outstanding
share of common stock of Holdings will automatically become
a number of shares of Surviving Corporation Common Stock
equal to the quotient obtained by dividing 53,833,333 by the
number of outstanding shares of common stock of Holdings as
of the Effective Date;
(b) The name of ISP Holdings Inc. will be changed to
"International Specialty Products Inc."; and
(c) The Surviving Corporation Common Stock will be listed for
trading on the New York Stock Exchange.
2. In connection with the Merger, to consider and approve an amendment
to the Company's 1991 Incentive Plan for Key Employees and
Directors, as amended (the "ISP Incentive Plan"), to increase by
2,000,000 the number of shares of Surviving Corporation Common Stock
for which stock options may be granted thereunder and to allow for
an exception to the limit on the number of shares for which stock
options may be granted to any eligible person during any calendar
year;
3. To vote upon the election of seven (7) directors of the Company; and
4. To transact such other business as may properly come before the
Meeting.
The Board of Directors of ISP has fixed the close of business on
______________, 1998 as the record date for determination of holders of ISP
Common Stock entitled to notice of, and to vote at, the Meeting.
A list of stockholders entitled to vote at the Meeting will be open to the
examination of any stockholder, for any purpose germane to the Meeting, at the
office of The Bank of New York, 101 Barclay Street, New York, New York, during
ordinary business hours for ten days prior to the Meeting.
Adoption of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of ISP Common Stock entitled to
vote at the Meeting. The vote required for the approval of the amendment to the
ISP Incentive Plan is a majority of the shares of ISP Common Stock present in
person or represented by proxy and entitled to vote at the Meeting. Pursuant to
the Merger Agreement, Holdings, the owner of approximately 84% of the ISP Common
Stock, has agreed to vote in favor of the Merger and the transactions
contemplated thereby, thereby ensuring approval at the Meeting by the holders of
ISP Common Stock of the Merger and the amendment to the ISP Incentive Plan. A
copy of the Merger Agreement is attached as Annex A to the accompanying Proxy
Statement/Prospectus. The accompanying Proxy Statement/Prospectus and the
Annexes thereto, including the Merger Agreement, form a part of this Notice.
The vote required for the election of directors is a plurality of the
votes properly cast at the Meeting. Samuel J. Heyman, Chairman of the Board and
Chief Executive Officer of ISP, directly and indirectly through his beneficial
ownership of approximately 97% of the outstanding capital stock of Holdings,
controls approximately 84% of the voting power of the ISP Common Stock. See
"ELECTION OF DIRECTORS -- Security Ownership of Certain Beneficial Owners and
Management." Mr. Heyman has indicated to ISP that he intends to vote, and to
cause ISP Holdings to vote, for the election of the Board of Directors' nominees
as directors. Accordingly, the election of the nominees is assured.
None of the holders of ISP Common Stock are entitled to appraisal rights
in connection with the Merger.
By Order of the Board of Directors,
-------------------------------------
Wayne, New Jersey Richard A. Weinberg
____________________, 1998 Secretary
Return of your signed proxy is the only way your shares can be counted unless
you personally cast a ballot at the Meeting.
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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD AND
SIGN, DATE AND RETURN IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES.
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i
<PAGE>
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. Information
contained herein is subject to completion or amendment. These securities may not
be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. The prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such State.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION
DATED MAY 27, 1998
PROXY STATEMENT/PROSPECTUS
INTERNATIONAL SPECIALTY PRODUCTS INC.
PROXY STATEMENT
For Annual Meeting of Stockholders
To Be Held [________], 1998
ISP HOLDINGS INC.
PROSPECTUS
Common Stock
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to holders of common
stock, par value $.01 per share ("ISP Common Stock"), of International Specialty
Products Inc., a Delaware corporation ("ISP" or the "Company"), in connection
with the solicitation of proxies by the Board of Directors of ISP (the "ISP
Board") for use at the Annual Meeting of Stockholders (the "Meeting") to be held
at 10:00 a.m., local time, on [_______], 1998, at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, 25th Floor, New York, New York, and at any
adjournment, continuation or postponement thereof.
Matters to be Considered. At the Meeting, holders of ISP Common Stock will
be asked:
1. To adopt an Agreement and Plan of Merger, dated as of March 30, 1998
(the "Merger Agreement"), by and between ISP and ISP Holdings Inc.,
a Delaware corporation ("Holdings"), pursuant to which, among other
things:
(a) (i) ISP will be merged with and into Holdings (the
"Merger"), with Holdings being the surviving corporation in the
Merger (the "Surviving Corporation"), (ii) each share of ISP Common
Stock issued and outstanding immediately prior to the effective date
(the "Effective Date") of the Merger (other than shares held in
treasury or by Holdings) will be automatically converted into one
share of common stock, par value $.01 per share (the "Surviving
Corporation Common Stock"), of Holdings, (iii) each issued and
outstanding share of ISP Common Stock owned of record by Holdings
immediately prior to the Effective Date will be cancelled and
retired without payment of any consideration therefor and will cease
to exist and (iv) each issued and outstanding share of common stock
of Holdings will automatically become a number of shares of
Surviving Corporation Common Stock equal to the quotient obtained by
dividing 53,833,333 by the number of outstanding shares of common
stock of Holdings as of the Effective Date;
(b) At the Effective Date, the name of ISP Holdings Inc. will
be changed to "International Specialty Products Inc."; and
(c) The Surviving Corporation Common Stock will be listed for
trading on the New York Stock Exchange.
2. In connection with the Merger, to consider and approve an amendment
to the Company's 1991 Incentive Plan for Key Employees and
Directors, as amended (the "ISP Incentive Plan"), to increase by
2,000,000 the number of shares of Surviving Corporation Common Stock
for which stock options may be granted thereunder and to allow for
an exception to the limit on the number of shares for which stock
options may be granted to any eligible person during any calendar
year;
3. To vote upon the election of seven (7) directors of the Company; and
4. To transact such other business as may properly come before the
Meeting.
The Board of Directors has set the close of business on ________________,
1998 as the record date (the "Record Date") of determination of holders of ISP
Common Stock entitled to notice of, and to vote at, the Meeting. As of the close
of business on the Record Date, there were outstanding [96,094,785] shares of
ISP Common Stock. Holders of record of shares of ISP Common Stock are entitled
to one vote for each share held by them as of the Record Date on any matter
which may properly come before the Meeting.
ii
<PAGE>
The Boards of Directors of ISP and Holdings believe that ISP Common Stock
has been undervalued in the public market for quite some time, primarily because
of the lack of liquidity in the market for ISP Common Stock resulting from the
relatively small public float and the fact that approximately 84% of ISP Common
Stock is held by Holdings. The Boards of Directors of ISP and Holdings believe
that the Merger is an important step in helping to address the lack of liquidity
in the ISP Common Stock by eliminating the need for Holdings to maintain
ownership of at least 80% of the ISP Common Stock in order to avoid certain
adverse tax consequences, thereby enabling ISP to utilize equity for equity
financings, acquisitions and other corporate purposes. The shares of ISP Common
Stock owned by Holdings, which will be relinquished as part of the transactions
contemplated by the Merger Agreement, were valued by ISP and Holdings at $16.125
per share. As a result of the Merger, Holdings' cash and other assets of $110.5
million and Holdings' debt and other liabilities of $562.9 million, in each case
based on book values thereof as of March 29, 1998, will be included, together
with ISP's assets and liabilities, in the Surviving Corporation. After giving
pro forma effect to the Merger, the Surviving Corporation would have had total
assets of $1,697.3 million and total liabilities of $1,155.5 million, in each
case based on book values thereof as of March 29, 1998.
Adoption of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of ISP Common Stock entitled to
vote at the Meeting. The vote required for the approval of the amendment to the
ISP Incentive Plan is a majority of the shares of ISP Common Stock present in
person or represented by proxy and entitled to vote at the Meeting. Pursuant to
the Merger Agreement, Holdings, the owner of approximately 84% of the ISP Common
Stock, has agreed to vote all of its shares of ISP Common Stock in favor of the
Merger and the transactions contemplated thereby, thereby ensuring approval at
the Meeting by the holders of ISP Common Stock of the Merger and the amendment
to the ISP Incentive Plan. A copy of the Merger Agreement is attached as Annex A
to this Proxy Statement/Prospectus.
The election of directors of the Company requires the affirmative vote of
a plurality of votes properly cast by holders of record of outstanding shares of
ISP Common Stock present in person or represented by proxy and entitled to vote
at the Meeting. Samuel J. Heyman, Chairman of the Board and Chief Executive
Officer of ISP, directly and indirectly through his beneficial ownership of
approximately 97% of the outstanding capital stock of Holdings, controls
approximately 84% of the voting power of the ISP Common Stock. See "ELECTION OF
DIRECTORS -- Security Ownership of Certain Beneficial Owners and Management."
Mr. Heyman has indicated to ISP that he intends to vote, and to cause ISP
Holdings to vote, for the election of the Board of Directors' nominees as
directors. Accordingly, the election of the nominees is assured.
Stockholders of record holding a majority of the issued and outstanding
shares of Common Stock entitled to vote at the Meeting, present in person or
represented by proxy, constitute a quorum for the transaction of business at the
Meeting. Abstentions and broker non-votes are included in determining whether or
not a quorum is present. Broker non-votes on proposals are treated as shares as
to which the beneficial holders have withheld voting power and, therefore, are
not considered as shares entitled to vote on any proposal to which they relate.
General. Shares of ISP Common Stock represented by a valid, unrevoked
proxy will be voted at the Meeting, or any adjournment, continuation or
postponement thereof, as specified therein by the person giving the proxy; if no
specification is made, the shares represented by such proxy will be voted (1)
FOR the proposal to adopt the Merger Agreement, (2) FOR the adoption of the
amendment to the ISP Incentive Plan, (3) FOR the election of the Board of
Directors' nominees as directors of the Company, and (4) in the discretion of
the persons named as proxies on the enclosed proxy card, on such other matters
as may properly come before the Meeting. Proxies may be revoked by the person
executing the same at any time before the authority thereby granted is exercised
by execution of a later dated proxy, by delivery to and receipt by ISP's
Secretary of written notice to such effect, or by attending the Meeting and
voting in person.
At the Effective Date, the name of Holdings will be changed to
International Specialty Products Inc. The directors and officers of ISP
immediately prior to the Effective Date will be the initial directors and
officers of the Surviving Corporation until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation or as otherwise provided
by law.
The shares of Surviving Corporation Common Stock will be substantially
similar to the shares of ISP Common Stock. It is a condition precedent to the
Merger that the shares of Surviving Corporation Common Stock to be issued
pursuant to the Merger be listed on the New York Stock Exchange (the "NYSE").
Holdings has filed a Registration Statement on Form S-4 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
iii
<PAGE>
shares of Surviving Corporation Common Stock that are proposed to be issued, and
those shares of common stock of Holdings to be converted, pursuant to the Merger
Agreement. This Proxy Statement/Prospectus also constitutes the Prospectus of
Holdings filed as part of the Registration Statement.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to stockholders of ISP on or about ________________, 1998.
NEITHER THIS TRANSACTION NOR THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY
STATEMENT/PROSPECTUS HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is ____________, 1998.
No persons have been authorized to give any information or to make any
representation other than those contained in this Proxy Statement/Prospectus in
connection with the solicitation of proxies or the offering of securities made
hereby and, if given or made, such information or representation must not be
relied upon as having been authorized by ISP or Holdings or any other person.
This Proxy Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the solicitation of a proxy,
in any jurisdiction to or from any person to whom it is not lawful to make any
such offer or solicitation in such jurisdiction. Neither the delivery of this
Proxy Statement/Prospectus nor any distribution of securities made hereunder
shall, under any circumstances, create an implication that there has been no
change in the affairs of ISP or Holdings since the date hereof or that the
information herein is correct as of any time subsequent to its date.
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<PAGE>
AVAILABLE INFORMATION
Each of ISP and Holdings is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements (in the case of ISP) and
other information with the Securities and Exchange Commission (the
"Commission"). The reports, proxy statements and other information filed by ISP
and by Holdings with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at 75 Park Place, New York, New York 10007 and Northwestern Atrium Center, 5000
West Madison Street, Suite 1400, Chicago, Illinois 60601-2511. Copies of such
material also can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates. In addition, the ISP
Common Stock is listed on the NYSE and materials filed by ISP can be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005. Such
information may also be accessed electronically by means of the Commission's
home page on the Internet at http://www.sec.gov. After consummation of the
Merger, the Surviving Corporation will continue to file periodic reports, proxy
statements or other information with the Commission pursuant to the Exchange Act
and the shares of Surviving Corporation Common Stock to be issued or converted
pursuant to the Merger will be listed on the NYSE.
This Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement filed by Holdings with the Commission,
parts of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement, including any amendments, schedules and
exhibits filed or incorporated by reference as a part thereof, is available for
inspection and copying as set forth above. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated in this Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by ISP and Holdings
pursuant to the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus:
1. ISP's Annual Report on Form 10-K, as amended, for the fiscal year
ended December 31, 1997;
2. ISP's Current Report on Form 8-K filed on April 1, 1998;
3. ISP's Quarterly Report on Form 10-Q for the quarter ended March 29,
1998;
4. Holdings' Annual Report on Form 10-K for the fiscal year ended
December 31, 1997; and
5. Holdings' Quarterly Report on Form 10-Q for the quarter ended March
29, 1998.
All documents and reports subsequently filed by ISP and Holdings pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus and prior to the date of the Meeting shall be deemed
to be incorporated by reference in this Proxy Statement/Prospectus and to be a
part hereof from the date of filing of such documents or reports. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Such documents (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference) are available to any person, including any beneficial owner to whom
this Proxy Statement/Prospectus is delivered, on written or oral request,
without charge, directed to International Specialty Products Inc., 818
Washington Street, Wilmington, DE 19801 (Telephone Number (302) 429-8554).
Attention: Corporate Secretary. In order to ensure timely delivery of the
documents, any requests should be made by _______________, 1998 [five business
days prior to Meeting].
v
<PAGE>
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROXY STATEMENT/PROSPECTUS INCLUDES "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE EXCHANGE ACT. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACT
INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS REGARDING THE COMPANY'S, HOLDINGS'
OR THE SURVIVING CORPORATION'S OPERATIONS OR FINANCIAL POSITION MAY CONSTITUTE
FORWARD-LOOKING STATEMENTS. IN ADDITION, FORWARD-LOOKING STATEMENTS GENERALLY
CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY,"
"WILL," "EXPECT," "INTEND," "ESTIMATE," "ANTICIPATE," "BELIEVE" OR "CONTINUE" OR
THE NEGATIVE THEREOF OR VARIATIONS THEREON OR SIMILAR TERMINOLOGY. ALTHOUGH THE
COMPANY AND HOLDINGS BELIEVE THAT THE EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE REASONABLE AT THIS TIME, NO ASSURANCE CAN BE
GIVEN THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT.
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<PAGE>
TABLE OF CONTENTS
Page
SUMMARY.................................................................... 1
COMPARATIVE PER-SHARE DATA................................................. 6
MARKET PRICES AND DIVIDENDS................................................ 6
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION..................... 7
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION..................... 9
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.......................................... 13
THE MEETING................................................................ 14
PROPOSAL 1 -- THE MERGER................................................... 16
THE MERGER AGREEMENT....................................................... 24
MARKET PRICES AND DIVIDENDS................................................ 29
CAPITALIZATION............................................................. 30
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION..................... 31
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION..................... 33
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.......................................... 37
DESCRIPTION OF SURVIVING CORPORATION COMMON STOCK.......................... 38
COMPARISON OF STOCKHOLDERS' RIGHTS......................................... 38
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...................... 39
PROPOSAL 2 -- AMENDMENT OF ISP INCENTIVE PLAN.............................. 40
PROPOSAL 3 -- ELECTION OF DIRECTORS........................................ 46
vii
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EXECUTIVE OFFICERS......................................................... 48
COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY.......................... 51
CERTAIN TRANSACTIONS....................................................... 60
LEGAL MATTERS.............................................................. 62
INDEPENDENT PUBLIC ACCOUNTANTS............................................. 62
1999 STOCKHOLDERS' PROPOSALS............................................... 62
OTHER MATTERS.............................................................. 63
viii
<PAGE>
SUMMARY
The following is intended only to highlight certain information contained
elsewhere in this Proxy Statement/Prospectus or incorporated by reference herein
(other than the information described below under "Certain Considerations" which
only appears in this Summary). This summary is not intended to be complete and
is qualified in its entirety by the more detailed information appearing
elsewhere in this Proxy Statement/Prospectus and the documents incorporated by
reference or otherwise referred to herein, including the Merger Agreement which
is attached hereto as Annex A. Stockholders are urged to review carefully this
entire Proxy Statement/Prospectus, including the Annexes hereto, and the
documents incorporated herein by reference.
The Companies
ISP. ISP is a leading multinational manufacturer of specialty chemicals,
mineral products and filter products. ISP, incorporated in Delaware in 1991,
operates its business exclusively through 20 domestic subsidiaries, including
ISP Chemicals Inc., ISP Technologies Inc., ISP Van Dyk Inc., ISP Fine Chemicals
Inc. and ISP Freetown Fine Chemicals Inc., 37 international subsidiaries and a
joint venture with Huls Aktiengesellschaft, a German corporation, in which ISP
has a 50% interest and which operates under the name GAF-Huls Chemie GmbH.
ISP is an 84% owned subsidiary of Holdings. ISP is indirectly controlled
by Samuel J. Heyman, Chairman of the Board of Directors and Chief Executive
Officer of ISP, Holdings and GAF Corporation ("GAF"). The remaining 16% of the
outstanding ISP Common Stock is publicly held and traded on the NYSE.
The address and telephone number of the principal executive offices of ISP
are 818 Washington Street, Wilmington, Delaware 19801, (302) 429-8554 or (800)
526-5315.
ISP Holdings Inc. Holdings, incorporated in Delaware in August 1996, owns
approximately 84% of the issued and outstanding ISP Common Stock. Holdings is
controlled by Mr. Heyman. Mr. Heyman also controls GAF and its subsidiaries. See
"ELECTION OF DIRECTORS -- Security Ownership of Certain Beneficial Owners and
Management."
The address and telephone number of the principal executive offices of
Holdings are 818 Washington Street, Wilmington, Delaware 19801, (302) 428-0847.
The Meeting
The Meeting will be held at 10:00 a.m., local time, on [_____________] at
the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New
York, New York.
At the Meeting, holders of ISP Common Stock will be asked:
1. To consider and vote upon a proposal to adopt the Merger Agreement;
2. To consider and approve an amendment to the ISP Incentive Plan;
3. To elect seven (7) directors of the Company; and
4. To transact such other business as may properly come before the
Meeting.
Holders of record of ISP Common Stock as of the close of business on the
Record Date are entitled to notice of the Meeting and to vote at the Meeting. As
of such date, there were [ ] shares of ISP Common Stock outstanding. Each share
of ISP Common Stock will be entitled to one vote on each proposal properly
presented at the Meeting. Under ISP's By-Laws, the presence at the Meeting,
either in person or by proxy, of the holders of record of a majority of the
outstanding shares of ISP Common Stock entitled to vote at the Meeting is
necessary to constitute a quorum and, under the General Corporation Law of the
State of Delaware (the "DGCL"), ISP's Certificate of Incorporation (the "ISP
Charter") and ISP's By-Laws, (i) the affirmative vote of
1
<PAGE>
the holders of a majority of the issued and outstanding shares of ISP Common
Stock entitled to vote at the Meeting is required to adopt the Merger Agreement
and (ii) the affirmative vote of a plurality of votes properly cast at the
Meeting is required for the election of directors. Pursuant to the ISP Incentive
Plan, the affirmative vote of a majority of the shares of ISP Common Stock
present in person or represented by proxy and entitled to vote at the Meeting is
required to approve an amendment thereto. Mr. Heyman, directly and indirectly
through his beneficial ownership of approximately 97% of the outstanding capital
stock of Holdings, controls approximately 84% of the voting power of the ISP
Common Stock. Pursuant to the Merger Agreement, Holdings has agreed to vote its
shares of ISP Common Stock in favor of the Merger and the transactions
contemplated thereby (which include the Amendment to the ISP Incentive Plan).
Mr. Heyman also has indicated to ISP that he intends to vote, and to cause
Holdings to vote, for the election of the ISP Board's nominees as directors.
Accordingly, the approval of the Merger, the election of the nominees to the ISP
Board and approval of the amendment to the ISP Incentive Plan are assured. See
"THE MEETING."
Reasons for the Merger
The Boards of Directors of ISP and Holdings believe that ISP Common Stock
has been undervalued in the public market for quite some time, primarily because
of the lack of liquidity in the market for ISP Common Stock resulting from the
relatively small public float and the fact that approximately 84% of ISP Common
Stock is held by Holdings. The Boards of Directors of ISP and Holdings believe
that the Merger is an important step in helping to address the lack of liquidity
in the Company's stock by eliminating the need for Holdings to maintain
ownership of at least 80% of the ISP Common Stock in order to avoid certain
adverse tax consequences, thereby enabling ISP to utilize equity for equity
financings, acquisitions and other corporate purposes.
Holdings may pursue both debt and equity offerings following consummation
of the Merger with a view toward refinancing its debt on more favorable terms
and increasing liquidity in the Surviving Corporation's Common Stock.
Recommendation of Board of Directors and the Special Committee
In connection with consideration of any proposal by Holdings to enter into
a business combination transaction with ISP, a special committee (the "Special
Committee") of directors not affiliated with Holdings or its affiliates,
composed of Messrs. Charles M. Diker and Burt C. Manning, was created by the ISP
Board. The Special Committee was advised by J.P. Morgan Securities Inc. ("J.P.
Morgan"), which rendered an opinion as to the fairness, from a financial point
of view, to the stockholders of ISP (other than Holdings), of the consideration
proposed to be paid to them pursuant to the Merger, and by Dewey Ballantine LLP
("Dewey Ballantine"), as legal counsel. The ISP Board, based in part on the
unanimous recommendation of the Special Committee, has approved the Merger and
believes that the terms of the Merger are fair to, and in the best interests of,
ISP and its stockholders. Accordingly, the ISP Board recommends its adoption by
the holders of ISP Common Stock. For a discussion of the factors considered by
the Special Committee in reaching its decision, see "THE MERGER --
Recommendation of the ISP Board."
2
<PAGE>
The Merger
Effect of the Merger. Prior to the Merger, all of the assets and
liabilities of ISP will be transferred (the "Transfer") to a newly-formed,
wholly-owned subsidiary of ISP ("Newco"). Upon consummation of the Merger,
pursuant to the Merger Agreement, (a) ISP will be merged with and into Holdings,
with Holdings being the surviving corporation in the Merger, (b) each share of
ISP Common Stock issued and outstanding immediately prior to the Effective Date
(other than shares held in treasury or by Holdings) will be automatically
converted into one share of Surviving Corporation Common Stock, (c) each issued
and outstanding share of ISP Common Stock owned of record by Holdings and each
share of ISP Common Stock held in treasury immediately prior to the Effective
Date will be cancelled and retired without payment of any consideration therefor
and will cease to exist, (d) Newco will become a direct, wholly-owned subsidiary
of the Surviving Corporation and (e) each issued and outstanding share of common
stock of Holdings will automatically become a number of shares of Surviving
Corporation Common Stock equal to the quotient obtained by dividing 53,833,333
by the number of outstanding shares of common stock of Holdings as of the
Effective Date (such quotient being the "Conversion Rate"). At the Effective
Date, the name of Holdings will be changed to "International Specialty Products
Inc." If the Merger were effected as of the date hereof, the Conversion Rate
would result in Holdings' stockholders owning approximately 78% of the Surviving
Corporation Common Stock. As a result of the Merger, Holdings' cash and other
assets of $110.5 million and Holdings' debt and other liabilities of $562.9
million, in each case based on book values thereof as of March 29, 1998, will be
included, together with ISP's assets and liabilities, in the Surviving
Corporation. After giving pro forma effect to the Merger, the Surviving
Corporation would have had total assets of $1,697.3 million and total
liabilities of $1,155.5 million, in each case based on book values thereof as of
March 29, 1998. See "CAPITALIZATION."
The directors and officers of ISP immediately prior to the Effective Date
will be the initial directors and officers of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified in the
manner provided in the Certificate of Incorporation and By-Laws of the Surviving
Corporation or as otherwise provided by law.
The shares of Surviving Corporation Common Stock will be substantially
similar to the shares of ISP Common Stock. See "COMPARISON OF STOCKHOLDERS'
RIGHTS."
It is a condition precedent to the Merger that the shares of Surviving
Corporation Common Stock to be issued pursuant to the Merger be listed on the
NYSE.
Security Ownership of Directors and Executive Officers. As of April 17,
1998, directors and executive officers of ISP were beneficial owners of
approximately 80,673,039 (or 84%) of the shares of ISP Common Stock outstanding
on such date. Each such director and executive officer has advised ISP that he
intends to vote or direct the vote of all outstanding shares of ISP Common Stock
over which he has voting control in favor of adoption of the Merger Agreement.
Pursuant to the Merger Agreement, Holdings, the owner of 80,500,000 (or 83.7%)
shares of ISP Common Stock, has agreed to vote all of its shares of ISP Common
Stock in favor of the Merger, thereby ensuring adoption at the Meeting of the
Merger Agreement by the holders of ISP Common Stock. See "ELECTION OF DIRECTORS
- -- Security Ownership of Certain Beneficial Owners and Management."
Fairness Opinion. J.P. Morgan has delivered to the Special Committee its
written opinion, dated March 30, 1998 (the "Fairness Opinion"), to the effect
that, based upon and subject to the various considerations set forth therein, as
of the date of the Merger Agreement, the consideration to be paid to ISP's
stockholders (other than Holdings) in the Merger is fair, from a financial point
of view, to such stockholders. A copy of the Fairness Opinion, which sets forth
the assumptions made, matters considered and limits of the review, is attached
to this Proxy Statement/Prospectus as Annex B and should be read in its
entirety. See "THE MERGER - Fairness Opinion."
Interests of Certain Persons in the Merger. In considering the
recommendation of the ISP Board and the Special Committee with respect to the
Merger, stockholders should be aware that certain members of the ISP Board and
ISP's management have certain interests that are in addition to or different
from the interests of stockholders of ISP generally. The Merger Agreement
provides for the Surviving Corporation to make certain indemnification of
present and former officers and directors of ISP against liabilities arising
prior to the Effective Date and to maintain certain directors' and officers'
insurance for at least six years from the Effective Date. In addition, options
to purchase shares of cumulative redeemable preferred stock of Holdings and
stock appreciation
3
<PAGE>
rights based on the price of shares of the common stock of Holdings which are
held by officers and directors of Holdings on the Effective Date will become
rights to receive cash and, in certain cases, options to purchase Surviving
Corporation Common Stock. See "THE MERGER -- Indemnification"; "THE MERGER --
Interests of Certain Persons in the Merger"; and "ELECTION OF DIRECTORS ---
Summary Compensation Table."
Effective Date. The Merger will become effective on the date when the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware (the "Effective Date"). This filing is anticipated to take place as
soon as practicable after the last of the conditions precedent to the Merger set
forth in the Merger Agreement have been satisfied or, where permissible, waived.
See "THE MERGER AGREEMENT -- The Merger."
Conditions to the Merger. The respective obligations of ISP and Holdings
to consummate the Merger are subject to the satisfaction of certain conditions,
including, among others, (a) adoption of the Merger Agreement and approval of
the transactions contemplated thereby by the requisite vote of the stockholders
of ISP, (b) adoption of the Merger Agreement by a majority of the outstanding
shares of common stock of Holdings, (c) the absence of any injunction or similar
order preventing consummation of the transactions contemplated by the Merger
Agreement as provided therein, (d) the effectiveness of the Registration
Statement and the absence of any stop order or proceeding seeking a stop order
with respect thereto and (e) the approval for listing on the NYSE, subject to
official notice of issuance, of the shares of Surviving Corporation Common Stock
to be issued in the Merger. See "THE MERGER AGREEMENT -- Conditions to the
Merger."
Termination of the Merger Agreement. The Merger Agreement may be
terminated at any time prior to the Effective Date, whether before or after
approval by the stockholders of ISP, (i) by mutual consent of the Boards of
Directors of ISP and Holdings, (ii) by the Board of Directors of either ISP or
Holdings if the Merger shall not have been consummated on or before September
26, 1998 or (iii) by the Special Committee or Holdings if the Special Committee
determines in good faith, after consultation with J.P. Morgan and outside
counsel to the Special Committee, that the Special Committee's fiduciary
obligations under applicable law require it to withdraw its recommendation of
the Merger Agreement and the transactions contemplated thereby. In the event of
any such termination, the Merger Agreement will become void and there will be no
liability or obligation on the part of ISP or Holdings or their respective
officers or directors. See "THE MERGER AGREEMENT -- Termination."
Indemnification. The Merger Agreement provides that the present and former
directors and officers of ISP will be indemnified by the Surviving Corporation
after the Effective Date against all liabilities pertaining to any matter
existing or occurring on or prior to the Effective Date (including the
transactions contemplated by the Merger Agreement), to the extent that a
corporation is permitted under Delaware law to indemnify its own directors or
officers. The Surviving Corporation has also agreed in the Merger Agreement that
it will maintain for a period of at least six years from the Effective Date,
directors' and officers' liability insurance providing at least the same amounts
and coverage with respect to all persons currently covered under ISP's officers'
and directors' liability insurance policies pertaining to any matter existing or
occurring on or prior to the Effective Date (including the transactions
contemplated by the Merger Agreement), subject to a cap with respect to the
premium to be paid thereunder. See "THE MERGER AGREEMENT -- Indemnification."
The By-Laws of the Surviving Corporation will be those of ISP immediately
prior to the Effective Date, and the Certificate of Incorporation of the
Surviving Corporation will be amended as of the Effective Date to be identical
to the ISP Charter. Therefore, the provisions providing for indemnification of
ISP's directors and officers immediately prior to the Merger would remain
unchanged upon consummation of the Merger.
Certain Considerations
In deciding whether to adopt the Merger Agreement, holders of ISP Common
Stock should carefully evaluate the information contained in this Proxy
Statement/Prospectus and, in particular, the following factors: (i) the stock
price of the ISP Common Stock at the Effective Date may differ significantly
from the price of such stock as of the date of execution of the Merger
Agreement, the date of this Proxy Statement/Prospectus or the date on which
stockholders vote on the adoption of the Merger Agreement; (ii) the Merger
Agreement does not contain any provision for adjustment, based on fluctuations
in stock prices or the fair market value thereof of (x) the one-for-one ratio of
the number of shares of ISP Common Stock to be converted into shares of
Surviving Corporation Common Stock or (y) the Conversion Rate with respect to
the issued and outstanding shares of common stock of Holdings; (iii) J.P. Morgan
does not have an obligation to update its Fairness Opinion rendered on March 30,
1998; (iv) in addition to the assets and liabilities of ISP, the Surviving
Corporation will include $110.5 million of
4
<PAGE>
Holdings' cash and other assets and will be subject to $562.9 million of
Holdings' debt and other liabilities, in each case based on book values thereof
as of March 29, 1998; and (v) following the Merger, the trading price of
Surviving Corporation Common Stock could be subject, among other things, to
fluctuations in response to general business and market conditions, competitive
factors in the various industries in which the Surviving Corporation will be
competing and variations in the Surviving Corporation's operating and financial
results.
Regulatory Requirements
Except as described in "THE MERGER AGREEMENT - Conditions to the Merger"
and except for the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, no other Federal or state regulatory
requirements must be complied with or approvals must be obtained prior to
consummation of the Merger in connection with the Merger.
Appraisal Rights
Holders of ISP Common Stock are not entitled to appraisal rights under the
DGCL with respect to their shares in connection with the Merger because such
shares of stock were listed for trading on the NYSE at the Record Date and such
holders will only be entitled to receive shares of Surviving Corporation Common
Stock, which shares will, at the Effective Date, be approved for listing on the
NYSE, subject to official notice of issuance in the Merger.
Certain United States Federal Income Tax Consequences
Holders of ISP Common Stock will not recognize any gain or loss for
Federal income tax purposes upon their receipt of Surviving Corporation Common
Stock in the Merger. The Merger is conditioned upon, among other things, a legal
opinion of counsel as to its tax-free nature. See "THE MERGER -- Certain United
States Federal Income Tax Consequences."
Accounting Treatment
The Merger will be accounted for as a purchase under generally accepted
accounting principles.
Description of Holdings Common Stock
As of the Effective Date, the Surviving Corporation will have authorized
capitalization of 300,000,000 shares of Surviving Corporation Common Stock and
20,000,000 shares of preferred stock.
Comparison of Stockholders' Rights
Upon consummation of the Merger, the stockholders of ISP will become
stockholders of Holdings. There will be no material differences between the
rights of holders of shares of ISP Common Stock and shares of common stock of
Holdings. ISP and Holdings are both Delaware corporations, and, upon
consummation of the Merger, (i) the By-Laws of ISP will become the By-Laws of
Holdings (as the Surviving Corporation) and (ii) the Certificate of
Incorporation of Holdings (as the Surviving Corporation) will be identical to
the ISP Charter as in effect immediately prior to the Effective Date.
5
<PAGE>
COMPARATIVE PER-SHARE DATA
The following table presents ISP's historical per-share data and
Holdings' unaudited pro forma per-share data to reflect consummation of the
Merger on the basis set forth in the Pro Forma Condensed Consolidated Financial
Information included elsewhere herein. The unaudited pro forma condensed
consolidated financial information does not purport to be indicative of the
results that would actually have been attained had the Merger been completed as
assumed in such pro forma data. The information contained in the table set forth
below should be read in conjunction with the Pro Forma Condensed Consolidated
Financial Information and with the historical consolidated financial statements
and related notes included in ISP's and Holdings' Annual Reports on Form 10-K
for the year ended December 31, 1997, and Quarterly Reports on Form 10-Q for the
quarter ended March 29, 1998.
<TABLE>
<CAPTION>
Year Ended Quarter Ended
December 31,1997 March 30, 1997 March 29, 1998
---------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Earnings per share of common stock:
Historical:
ISP (Basic and diluted).......................... $.96 $.24 $.27
Pro Forma:
Holdings - Basic................................. $.94 $.27
Holdings - Diluted............................... $.93 $.27
As of As of
December 31,1997 March 29, 1998
---------------- --------------
Book value per share of common stock outstanding:
Historical:
ISP.............................................. $8.17 $8.39
Pro Forma:
Holdings......................................... $7.64 $7.81
</TABLE>
MARKET PRICES AND DIVIDENDS
Shares of ISP Common Stock are traded on the NYSE. At May 22, 1998, there
were 229 holders of record of ISP Common Stock. The table below sets forth, for
the fiscal periods indicated, the high and low sale prices per share of ISP
Common Stock as reported in the NYSE Composite Transactions in 1997 and during
the first quarter of 1998. No cash dividends have been declared on such stock
since 1995. On March 27, 1998, the last trading day before the public
announcement of the Merger, the high and low prices of ISP Common Stock were $17
15/16 and $17 5/8, respectively. On May 22, 1998, the high and low sale prices
of shares of ISP Common Stock were $ 17 15/16 and $ 17 5/8, respectively. For
additional information with respect to market prices in 1996, see "MARKET PRICES
AND DIVIDENDS."
Market Price Range
-------------------------------------------
Fiscal 1998 Fiscal 1997
-------------------------------------------
High Low High Low
-------------------------------------------
ISP Common Stock
(Symbol: ISP)
1st Quarter $18 1/2 $13 9/16 $13 3/4 $11 3/4
2nd Quarter (through $20 1/16 $17 9/16 $14 3/8 $11 1/2
May 22, 1998)
3rd Quarter N/A N/A $15 1/4 $13 1/2
4th Quarter N/A N/A $16 1/2 $13 7/8
- ----------------------------------------------------------------------
6
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth, for the periods indicated, selected
historical consolidated financial information of ISP. This information should be
read in conjunction with the historical financial statements and notes thereto
included in ISP's Annual Report on Form 10-K for the year ended December 31,
1997, and Quarterly Report on Form 10-Q for the quarter ended March 29, 1998.
SELECTED FINANCIAL DATA OF ISP
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
MARCH 30, MARCH 29,
YEAR ENDED DECEMBER 31, 1997 1998
-------------------------------------------------------------
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
------------------------------------------------------------- ----------------------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales...................... $ 548.3 $ 600.0 $ 689.0 $ 716.5 $ 749.2 $ 191.2 $ 200.7
Gross profit................... 218.7 232.3 274.3 297.6 312.5 77.0 81.5
Operating income............... 65.1 99.2 127.1 136.0 143.3 36.8 38.3
Interest expense............... 24.5 28.7 33.1 28.7 26.1 6.7 6.2
Income before income taxes..... 49.8 72.5 106.1 126.0 144.6 36.2 40.9
Net income..................... 29.6 44.5 67.4 80.7 92.6 23.2 26.2
MARCH 29,
DECEMBER 31, 1998
1993 1994 1995 1996 1997 (UNAUDITED)
----------------------------------------------------------------- -----------
(MILLIONS)
Balance Sheet Data:
Total working capital.......... $ 78.3 $ 121.8 $ 142.6 $ 219.7 $ 267.0 $ 109.9
Total assets................... 1,243.3 1,251.3 1,312.9 1,316.9 1,395.6 1,435.7
Long-term debt
less current maturities....... 367.7 377.1 347.5 372.9 328.6 141.6
Stockholders' equity........... 534.0 582.4 643.2 701.5 784.2 805.6
QUARTER ENDED
-------------
MARCH 30, MARCH 29,
YEAR ENDED DECEMBER 31, 1997 1998
-----------------------------------------------------------
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
------------------------------------------------------------- ----------------------------
(MILLIONS)
Other Data:
Gross profit margin............ 39.9% 38.7% 39.8% 41.5% 41.7% 40.3% 40.6%
Operating margin............... 11.9% 16.5% 18.4% 19.0% 19.1% 19.2% 19.1%
Depreciation................... $ 28.7 $ 32.8 $ 36.0 $ 38.3 $ 41.6 $ 10.0 $ 10.5
Goodwill amortization.......... 13.9 13.4 13.2 13.2 13.2 3.3 3.3
Capital expenditures and
acquisitions................. 62.9 31.1 38.9 54.6 68.5 13.9 75.1
</TABLE>
7
<PAGE>
The following table sets forth, for the periods indicated, selected
historical consolidated financial information of Holdings. This information
should be read in conjunction with the historical financial statements and notes
thereto included in Holdings' Annual Report on Form 10-K for the year ended
December 31, 1997, and Quarterly Report on Form 10-Q for the quarter ended March
29, 1998. All financial data relating to Holdings and its subsidiaries contained
herein have been prepared to retroactively reflect the formation of Holdings.
SELECTED FINANCIAL DATA OF HOLDINGS
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
MARCH 30, MARCH 29,
YEAR ENDED DECEMBER 31, 1997 1998
-------------------------------------------------------------
1993 1994 1995 1996 1997 (UNAUDITED)(UNAUDITED)
---------------------------------------------------------------------------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales...................... $ 548.3 $ 600.0 $ 689.0 $ 716.5 $ 749.2 $ 191.2 $ 200.7
Operating income............... 65.1 99.2 127.1 136.0 141.3 36.3 37.8
Interest expense............... 24.5 28.7 33.1 38.3 73.6 18.6 17.9
Income from continuing
operations before income
taxes and extraordinary
items........................ 49.8 72.5 106.1 116.6 107.8 25.2 31.2
Income from continuing
operations before
extraordinary items and
cumulative effect of
accounting change............ 23.8 37.1 55.1 60.8 54.0 12.2 15.7
Net income..................... 14.4 28.0 32.8 53.9 54.0 12.2 15.7
MARCH 29,
DECEMBER 31, 1998
1993 1994 1995 1996 1997 (UNAUDITED)
----------------------------------------------------------------- -----------
(MILLIONS)
Balance Sheet Data:
Total working capital.......... $ 143.9 $ 228.0 $ 290.0 $ 476.8 $ 322.1 $ 165.7
Total assets................... 1,309.0 1,357.5 1,460.4 1,600.4 1,485.7 1,546.0
Long-term debt less current
maturities................... 367.7 285.4 280.3 834.3 798.8 615.7
Stockholders' equity (deficit). (42.6) (15.8) (1.7) 42.7 261.8 272.7
QUARTER ENDED
-------------
MARCH 30, MARCH 29,
YEAR ENDED DECEMBER 31, 1997 1998
-----------------------------------------------------------
1993 1994 1995 1996 1997 (UNAUDITED)(UNAUDITED)
---------------------------------------------------------------------------------------
(MILLIONS)
Other Data:
Depreciation................... $ 28.7 $ 32.8 $ 36.0 $ 38.3 $ 41.9 $ 10.0 $ 10.6
Goodwill amortization.......... 13.9 13.4 13.2 13.2 13.3 3.3 3.3
Capital expenditures and
acquisitions................. 62.9 31.1 38.9 54.6 68.7 13.9 75.1
</TABLE>
8
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Set forth below are pro forma summary condensed consolidated financial data
of Holdings and ISP. The pro forma balance sheet data give effect to the Merger
and the transactions contemplated thereby as if they had been consummated as of
March 29, 1998. The pro forma income statement data give effect to the Merger
and the transactions contemplated thereby as if they had been completed as of
January 1, 1997. The pro forma financial information does not purport to project
the financial position or the results of operations for any future period or to
represent what the financial position or results of operations would have been
if the Merger and the transactions contemplated thereby had been completed as of
the dates indicated.
9
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 29, 1998
(Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Adjustments
Holdings ---------------------------------------
Parent Pro Forma
ISP Company After
Actual Actual Eliminations(1) Adjustments Merger
------ ------ --------------- ----------- ------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $15,084 $1,235 $16,319
Investments in securities and other short-term
investments 198,006 83,663 281,669
Accounts receivable - trade and other 114,980 114,980
Receivable from related parties, net 536 6,479 7,015
Inventories 115,224 $5,765 (2) 120,989
Other current assets 18,430 555 (2) 21,939
2,954 (3)
--------- ----------- ----------- -------- ----------
Total current assets 462,260 91,377 9,274 562,911
Property plant and equipment, net 517,982 5,643 523,625
Excess of cost over net assets of businesses
acquired, net 400,780 5,766 $ 7 142,102 (2) 548,655
Loan receivable from subsidiary 50,013 (50,013) 0
Investment in ISP 675,082 (675,082) 0
Other assets 54,685 7,723 (262) 62,146
--------- ----------- ----------- -------- ----------
Total Assets $1,435,707 $835,604 $(725,350) $151,376 $1,697,337
========== =========== =========== ======== ==========
Current Liabilities:
Short-term debt $35,158 $16,770 $51,928
Current maturities of long-term debt 200,609 $810 (2) 201,419
Accounts payable and accrued liabilities 109,920 17,713 1,500 (2) 137,117
7,984 (3)
Income taxes 6,658 1,154 7,812
--------- ----------- ----------- -------- ----------
Total current liabilities 352,345 35,637 10,294 398,276
--------- ----------- ----------- -------- ----------
Long-term debt less current maturities 91,585 524,152 615,737
Long-term notes payable to related party 50,013 $ (50,013) 0
Deferred income taxes 74,818 (255) 2,409 (2) 76,972
Other liabilities 61,360 3,068 64 (3) 64,492
Stockholders' Equity:
Common stock and paid-in capital 442,552 214,025 (313,217) 143,703 (2) 487,063
Treasury stock, at cost (37,091) (1,169) 38,260 0
Retained earnings 399,126 55,752 (399,126) (5,094) (3) 50,658
Accumulated other comprehensive income 999 4,139 (999) 4,139
--------- ----------- ----------- -------- ----------
Total Stockholders' Equity 805,586 272,747 (675,082) 138,609 541,860
--------- ----------- ----------- -------- ----------
Total Liabilities and Stockholders' Equity $1,435,707 $835,604 $(725,350) $151,376 $1,697,337
========== =========== =========== ======== ==========
</TABLE>
See accompanying NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
10
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1997
(Thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Adjustments
-------------------------------------
Holdings
Parent Pro Forma
ISP Company After
Actual Actual Eliminations(1) Adjustments Merger
------ ------ --------------- ----------- ------
<S> <C> <C> <C> <C> <C>
Net sales $749,208 $749,208
-------- --------
Cost of products sold 436,693 $ 187 436,880
Selling, general and administrative 156,042 $1,263 425 $ 760 (4) 158,490
Goodwill amortization 13,176 118 3,639 (5) 16,933
--------- --------- -------- -------- ---------
Total costs and expenses 605,911 1,263 730 4,399 612,303
--------- --------- -------- -------- ---------
Operating income 143,297 (1,263) (730) (4,399) 136,905
Equity in net income of ISP 77,103 (77,103)
Interest expense (26,126) (50,676) 3,190 777 (6) (72,835)
Equity in earnings of joint venture 5,909 5,909
Other income, net 21,558 15,988 (3,313) 34,233
--------- --------- -------- -------- ---------
Income before income taxes 144,638 41,152 (77,956) (3,622) 104,212
Income taxes (51,989) 12,853 (6) (7) (39,142)
--------- --------- -------- -------- ---------
Net income $92,649 $54,005 $(77,956) ($3,628) $65,070
========= ========= ======== ======== =========
Earnings per common share:
Basic $.96 $.94
==== ====
Diluted $.96 $.93
==== ====
Weighted average number of common and
common equivalent shares outstanding:
Basic 96,061 69,394
====== ======
Diluted 97,010 70,343
====== ======
</TABLE>
See accompanying NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
11
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Quarter Ended March 29, 1998
(Thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Adjustments
-------------------------------------
Holdings
Parent Pro Forma
ISP Company After
Actual Actual Eliminations(1) Adjustments Merger
------ ------ --------------- ----------- ------
<S> <C> <C> <C> <C> <C>
Net sales $200,703 $200,703
-------- --------
Cost of products sold 119,177 119,177
Selling, general and administrative 39,926 $ 395 $ 100 $ 190 (4) 40,611
Goodwill amortization 3,302 37 888 (5) 4,227
---------- --------- --------- -------- ---------
Total costs and expenses 162,405 395 137 1,078 164,015
---------- --------- --------- -------- ---------
Operating income 38,298 (395) (137) (1,078) 36,688
Equity in net income of ISP 21,802 (21,802)
Interest expense (6,176) (12,486) 724 203 (6) (17,735)
Equity in earnings of joint venture 1,455 1,455
Other income, net 7,313 3,395 (753) 9,955
---------- --------- --------- -------- ---------
Income before income taxes 40,890 12,316 (21,968) (875) 30,363
Income taxes (14,710) 3,356 (5) (7) (11,359)
---------- --------- --------- -------- ---------
Net income $26,180 $15,672 $(21,968) ($880) $19,004
========== ========= ========= ======== =========
Earnings per common share:
Basic $.27 $.27
==== ====
Diluted $.27 $.27
==== ====
Weighted average number of common and
common equivalent shares outstanding:
Basic 95,978 69,311
====== ======
Diluted 96,972 70,305
====== ======
</TABLE>
See accompanying NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
12
<PAGE>
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Reflects consolidation eliminations.
2. Reflects the application of the purchase method of accounting to the
Merger. Accordingly, the historical book values of ISP's assets and
liabilities attributable to the shares of ISP Common Stock owned by the
minority shareholders will be adjusted to their fair values as
estimated as of the Effective Date, with any excess of cost over the
fair values of the net assets allocated to goodwill. The pro forma
adjustments represent management's current estimate of the application
of the purchase method of accounting. The actual purchase accounting
adjustments may differ from the pro forma adjustments.
3. Reflects a nonrecurring charge and related deferred tax benefit to be
recorded in connection with the termination of Holdings' Stock
Appreciation Rights and Preferred Stock option programs.
4. Reflects a charge to be recorded over the remaining vesting periods in
connection with the termination of Holdings' Stock Appreciation Rights
and Preferred Stock option programs.
5. Reflects amortization of goodwill over a period of 40 years.
6. Reflects amortization of the write-up of long-term debt to fair value
over its average remaining life as a reduction of interest expense.
7. Reflects the deferred tax expense related to item (6), offset by the
deferred tax benefit related to item (4).
13
<PAGE>
THE MEETING
This Proxy Statement/Prospectus is being furnished to holders of ISP Common
Stock in connection with the solicitation of proxies by the ISP Board for use at
the Meeting.
Time and Place; Purpose
The Meeting will be held at 10:00 a.m., local time, on [____________] at
the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New
York, New York. At the Meeting, holders of ISP Common Stock will be asked to
consider and vote upon a proposal to adopt the Merger Agreement, a proposal to
amend the ISP Incentive Plan to increase the number of authorized shares
thereunder in connection with the Merger, the election of directors and to
transact such other business as may properly come before the Meeting.
Voting Rights; Vote Required for Approval
The ISP Board has fixed the close of business on ______________, 1998, as
the Record Date for the determination of holders of ISP Common Stock entitled to
notice of, and to vote at, the Meeting. Only holders of record of shares of ISP
Common Stock at the close of business on that date will be entitled to vote at
the Meeting. At the close of business on the Record Date, there were
[__________] shares of ISP Common Stock outstanding and entitled to vote at the
Meeting held by ____ stockholders of record.
Each holder of record of ISP Common Stock on the Record Date is entitled
to cast one vote per share, in person or by proxy, on each proposal properly
presented at the Meeting. The presence, in person or by proxy, of the holders of
record of a majority of issued and outstanding shares of ISP Common Stock
entitled to vote at the Meeting is necessary to constitute a quorum at the
Meeting. The affirmative vote, in person or by proxy, of the holders of a
majority of the outstanding shares of ISP Common Stock is required to adopt the
Merger Agreement. The vote required for the approval of the amendment to the ISP
Incentive Plan is a majority of the shares of ISP Common Stock present in person
or represented by proxy and entitled to vote at the Meeting. The election of
directors of the Company requires the affirmative vote of a plurality of votes
properly cast by holders of record of outstanding shares of ISP Common Stock
present in person or represented by proxy and entitled to vote at the Meeting.
As of April 17, 1998, directors and executive officers of ISP and its
affiliates were beneficial owners of 80,673,039 outstanding shares of ISP Common
Stock, representing approximately 84% in total voting power of the shares of ISP
Common Stock outstanding on such date. Each such director and executive officer
has informed ISP that he intends to vote or direct the vote of all outstanding
shares of ISP Common Stock over which he has voting control in favor of adoption
of the Merger Agreement, in favor of the amendment to the ISP Incentive Plan and
for the election of the Board of Directors' nominees as directors of the
Company. Holdings, the owner of approximately 84% of the outstanding ISP Common
Stock, has agreed, pursuant to the Merger Agreement, to vote its shares in favor
of adoption of the Merger Agreement and the transactions contemplated thereby.
Accordingly, the approval of the Merger by the holders of ISP Common Stock, the
election of the nominees and approval of the amendment to the ISP Incentive Plan
are assured. See "ELECTION OF DIRECTORS -- Security Ownership of Certain
Beneficial Owners and Management."
Proxies
All shares of ISP Common Stock represented by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted in
accordance with the instructions indicated in such proxies; however, a properly
executed proxy marked "Abstain," although counted for purposes of determining
whether there is a quorum at the Meeting, will not be voted. If no instructions
are indicated, the shares represented by such proxies will be voted (1) FOR the
proposal to adopt the Merger Agreement, (2) FOR the proposal to adopt the
amendment to the ISP Incentive Plan, (3) FOR the election of the Board of
Directors' nominees as directors and (4) in the discretion of the persons named
as proxies on the enclosed proxy card, on such other matters as may properly
come before the Meeting.
14
<PAGE>
A stockholder may revoke his or her proxy at any time prior to its use by
delivering to the Secretary of ISP a signed notice of revocation or a later
dated signed proxy or by attending the Meeting and voting in person. Attendance
at the Meeting will not in itself constitute the revocation of a proxy. Any
written notice of revocation or subsequent proxy should be sent so as to be
delivered to International Specialty Products Inc., 818 Washington Street,
Wilmington, Delaware 19801, Telephone Number: (302) 429-8554, Attn: Corporate
Secretary, at or before the vote to be taken at the Meeting.
The cost of solicitation of proxies will be paid by ISP. In addition to
solicitation by mail, officers and regular employees of ISP may solicit proxies
by telephone, facsimile or by personal interviews. Such persons will receive no
additional compensation for such services. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
material to the beneficial owners of shares held of record by them and will be
reimbursed for their reasonable expenses.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
15
<PAGE>
PROPOSAL 1 -- THE MERGER
Effect of the Merger
Upon consummation of the Merger, pursuant to the Merger Agreement, (a) ISP
will be merged with and into Holdings, with Holdings being the Surviving
Corporation in the Merger, (b) each share of ISP Common Stock issued and
outstanding immediately prior to the Effective Date (other than shares held in
treasury or by Holdings) will be automatically converted into one share of
Surviving Corporation Common Stock, (c) each issued and outstanding share of ISP
Common Stock owned of record by Holdings or held in treasury immediately prior
to the Effective Date will be cancelled and retired without payment of any
consideration therefor and will cease to exist and (d) each issued and
outstanding share of common stock of Holdings will automatically become a number
of shares of Surviving Corporation Common Stock equal to the Conversion Rate. On
the Effective Date, the name of Holdings will be changed to "International
Specialty Products Inc."
The directors and officers of ISP on the Effective Date will be the
initial directors and officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Certificate of Incorporation and By-Laws of the Surviving
Corporation or as otherwise provided by law.
The shares of Surviving Corporation Common Stock will be substantially
similar to the shares of ISP Common Stock. See "COMPARISON OF STOCKHOLDERS'
RIGHTS."
It is a condition precedent to the Merger that the shares of Surviving
Corporation Common Stock to be issued pursuant to the Merger be listed on the
NYSE.
If the Merger Agreement is adopted by the stockholders of ISP and the
other conditions to the Merger are satisfied or waived, the Merger will become
effective at the time when the Certificate of Merger is filed with the Secretary
of State of the State of Delaware.
At the Effective Date, each then outstanding option to purchase ISP Common
Stock granted under the ISP Incentive Plan will be assumed by the Surviving
Corporation and will be deemed to constitute an option to acquire shares of
Surviving Corporation Common Stock on terms equivalent to those in effect with
respect to such options immediately prior to the Effective Date. See "THE MERGER
AGREEMENT-Treatment of Holdings' Options and SARs" and "Amendment of ISP
Incentive Plan."
Reasons for the Merger
The Boards of Directors of ISP and Holdings believe that ISP Common Stock
has been undervalued in the public market for quite some time, primarily because
of the lack of liquidity in the market for ISP Common Stock resulting from the
relatively small public float and the fact that approximately 84% of ISP Common
Stock is held by Holdings. The Boards of Directors of ISP and Holdings believe
that the Merger is an important step in helping to address the lack of liquidity
in the Company's stock by eliminating the need for Holdings to maintain
ownership of at least 80% of the ISP Common Stock in order to avoid certain
adverse tax consequences, thereby enabling ISP to utilize equity for equity
financings, acquisitions and other corporate purposes.
Holdings may pursue both debt and equity offerings following consummation
of the Merger with a view toward refinancing its debt on more favorable terms
and increasing liquidity in the Surviving Corporation's stock.
Background of the Merger
Commencing in early 1997, the ISP Board began to address itself to the
fact that ISP Common Stock was, in its view, undervalued relative to comparable
specialty chemical companies and its belief that the lack of liquidity in the
public market for shares of ISP Common Stock was having an adverse effect on the
performance of ISP Common Stock.
16
<PAGE>
During a May 19, 1997 telephone conference call, James Rogers, the Chief
Financial Officer of Holdings, expressed to the ISP Board Holdings' concerns
regarding the liquidity and market performance of ISP Common Stock and suggested
that a potential business combination of Holdings and ISP (a "Merger
Transaction") might be a possible solution to this situation. The ISP Board
determined that, in light of Holdings' significant ownership interest in ISP and
common directors and officers, it was appropriate to form the Special Committee,
and requested that Charles M. Diker and Burt C. Manning, independent directors
of ISP, serve as members thereof. The ISP Board advised Messrs. Diker and
Manning to engage legal counsel and retain a financial advisor so that the ISP
Board would be prepared to respond should Holdings make a proposal regarding a
Merger Transaction.
On May 23, 1997, pursuant to the directions of the ISP Board, Messrs.
Diker and Manning met with representatives of, and retained, the law firm of
Dewey Ballantine as special counsel to the Special Committee. Messrs. Diker and
Manning discussed with representatives of Dewey Ballantine the Special
Committee's role in the Merger Transaction and the fiduciary obligations of the
Special Committee to the ISP stockholders (other than Holdings).
At a meeting of the ISP Board on September 8, 1997, Mr. Rogers, on behalf
of Holdings, made a formal presentation to the ISP Board at which the liquidity
issue and its perceived negative impact on the market price of ISP Common Stock
were further discussed. Mr. Rogers also discussed the possibility that a Merger
Transaction might help to enable ISP to increase the liquidity of its stock. A
formal resolution was adopted by the ISP Board to form the Special Committee to
act on behalf of the ISP Board in matters relating to any transaction proposed
by Holdings to address the Company's equity performance concerns. The Special
Committee was authorized to (i) consider the Merger Transaction and, if a
proposal therefor was made by Holdings, to conduct, or supervise the conduct of,
any negotiations with respect to the Merger Transaction, (ii) make
recommendations to the ISP Board with respect to the Merger Transaction, it
being understood that the ISP Board would not approve the Merger Transaction
unless the Special Committee so recommended, (iii) retain financial advisors of
its choice to assist the Special Committee, including with respect to the
negotiations or preparation of a fairness opinion as appropriate, and (iv)
engage legal counsel of its choice to assist the Special Committee.
During June and September of 1997, Messrs. Diker and Manning interviewed a
number of potential financial advisors to the Special Committee. On October 9,
1997, the Special Committee formally retained J.P. Morgan as financial advisor
to assist the Special Committee in the negotiation of the Merger Transaction and
to issue an opinion as to the fairness, from a financial point of view, to the
stockholders of ISP (other than Holdings) of the Merger Transaction if one was
ultimately agreed to by both parties.
During the period from September 19, 1997 through March 26, 1998, the
Special Committee met on numerous occasions with representatives of J.P. Morgan
and Dewey Ballantine to discuss J.P. Morgan's analysis of the value of ISP
Common Stock and the liabilities of Holdings. During this period J.P. Morgan
conducted additional due diligence and revised its financial assumptions. In
addition, during this period, Dewey Ballantine held discussions with Weil,
Gotshal & Manges LLP, counsel to Holdings ("Weil Gotshal"), regarding the terms
of a merger agreement and Dewey Ballantine and Weil Gotshal revised drafts of
the agreement in the event a proposal regarding the Merger Transaction were
made.
On March 27, 1998, after the close of trading on the NYSE, the Special
Committee received a proposal from Holdings under the terms of which Holdings
and ISP would merge and the stockholders of Holdings would surrender shares of
ISP Common Stock based on a formula which would value the ISP Common Stock at
$18 1/4 per share and value the net liabilities of Holdings at book value of
$400 million. That same day, the Special Committee met with representatives of
Dewey Ballantine and J.P. Morgan. After discussion of such proposal, the Special
Committee determined that the proposal was not a basis for further discussion or
negotiation with Holdings and directed J.P. Morgan to so advise Holdings.
On March 28, 1998, the Special Committee received a revised Merger
Transaction proposal from Holdings, under the terms of which the ISP Common
Stock would be valued at $17 15/16 per share, equal to the
17
<PAGE>
closing price of the ISP Common Stock on the NYSE on March 27, 1998, and the net
liabilities of Holdings would be valued at book value of $400 million. At a
meeting with representatives of Dewey Ballantine and J.P. Morgan, the Special
Committee discussed the revised proposal and again determined that it was not a
basis to negotiate a merger between Holdings and ISP.
On March 29, 1998, the Special Committee received two revised merger
proposals from Holdings. The first revised proposal valued the ISP Common Stock
at $17 1/4 per share and the net liabilities of Holdings at book value of $400
million. After meeting with representatives of Dewey Ballantine and J.P. Morgan,
and discussing this revised proposal, the Special Committee determined again
that such proposal did not provide a basis for negotiation and determined not to
make a counter-offer to Holdings. This decision was conveyed to Holdings Later
in the day, on March 29, 1998, the Special Committee received another revised
proposal from Holdings which valued the ISP Common Stock at $16 1/2 per share
and valued the net liabilities of Holdings at $420 million.
After meeting to consider the second revised proposal and discussing such
proposal with representatives of Dewey Ballantine and J.P. Morgan, the Special
Committee made a counter-offer that valued the ISP Common Stock at $15 3/4 per
share and the net liabilities of Holdings at $440 million. Later, on the evening
of March 29, 1998, the Special Committee met with representatives of Dewey
Ballantine and J.P. Morgan to discuss Holdings' response to its counter-offer
and it was reported by J.P. Morgan that Holdings had rejected the Special
Committee's counter-offer and stated that it would not make another revised
proposal. The Special Committee determined not to revise its counter-offer and
the meeting of the Special Committee was adjourned.
On March 30, 1998, the Special Committee met with representatives of Dewey
Ballantine and J.P. Morgan to discuss another revised proposal received from
Holdings which had been communicated by Holdings to representatives of J.P.
Morgan and Dewey Ballantine on March 29, 1998, after adjournment of the final
Special Committee meeting on such date. The Special Committee was advised that
Holdings' revised merger proposal valued the ISP Common Stock at $16 3/8 per
share and valued the net liabilities of Holdings at $425 million. After
discussion of this new proposal, the Special Committee rejected the proposal and
then received a new revised offer from Holdings. Such offer valued the ISP
Common Stock at $16 1/8 per share and valued the net liabilities of Holdings at
$430 million. Following (i) a discussion of the most recent Holdings proposal,
(ii) presentations by J.P. Morgan and (iii) a review of the terms of the Merger
Agreement, the Special Committee unanimously recommended that the ISP Board
approve and adopt the Merger Agreement on those terms.
With respect to their service on the Special Committee, Messrs. Diker and
Manning entered into a Compensation and Indemnification Agreement with ISP,
dated October 10, 1997. Pursuant to this agreement, each of Messrs. Diker and
Manning received $88,000 (which amount consisted of a $50,000 fee for serving on
the Special Committee, plus $2,000 per Special Committee meeting), plus
reimbursement of out-of-pocket expenses, in addition to the regular compensation
paid to members of the ISP Board. Pursuant to this agreement, ISP has agreed to
indemnify and hold harmless Messrs. Diker and Manning with respect to their
service on, and any matter or transaction considered by, the Special Committee
to the full extent permitted by law and by the indemnification provisions of the
ISP Charter.
Recommendation of ISP Board
On March 30, 1998, by unanimous vote of all directors present and voting,
based in part on the recommendation and approval of the Special Committee, the
ISP Board (i) determined that the Merger Agreement and the transactions
contemplated thereby, including the Merger, are fair to, and in the best
interests of, the stockholders of ISP (other than Holdings), (ii) approved the
Merger Agreement and the transactions contemplated thereby, including the
Merger, and (iii) resolved to recommend to the stockholders of ISP that they
approve and adopt the Merger Agreement and the transactions contemplated
thereby. Accordingly, the ISP Board recommends that the stockholders of ISP
approve and adopt the Merger Agreement and the transactions contemplated
thereby. See "THE MERGER AGREEMENT." In considering the recommendation of the
ISP Board and the Special Committee with respect to the Merger, stockholders
should be aware that certain officers and directors of Holdings and ISP have
interests in the Merger which may present them with certain potential
18
<PAGE>
conflicts of interest in connection with the Merger. See "THE MERGER AGREEMENT
- -- Interests of Certain Persons in the Merger."
In reaching its determination to advise the ISP Board to approve the
Merger Agreement and the transactions contemplated thereby, the Special
Committee considered the following factors, each of which, in the view of the
Special Committee, supported such determination:
(i) the presentation by, and the advice and views of J.P. Morgan
and the opinion of J.P. Morgan, dated as of March 30, 1998, to the effect
that the consideration to be received by the stockholders of ISP (other
than Holdings) in the Merger Transaction was fair to such stockholders
from a financial point of view;
(ii) the terms of the Merger Agreement, including the parties'
respective representations, warranties and covenants and the conditions to
their respective obligations, including a provision whereby the Special
Committee could terminate the Merger Agreement if the Special Committee
determines, in good faith, after consultation with J.P. Morgan and Dewey
Ballantine, that the Special Committee's fiduciary obligations under
applicable law require it to withdraw its recommendation of the Merger
Agreement and the transactions contemplated thereby; and
(iii) certain factors related to the business of Holdings and ISP
including the advice and views of J.P. Morgan that the merger of Holdings
and ISP provided the opportunity to clarify to the market the relationship
between the two companies.
Fairness Opinion
Pursuant to an engagement letter dated October 9, 1997, ISP retained J.P.
Morgan as its exclusive financial advisor with respect to the delivery of a
fairness opinion to the Special Committee in connection with the proposed
Merger, and to assist the Special Committee in the negotiation of the Merger.
At the meeting of the Special Committee on March 30, 1998, J.P. Morgan
rendered its oral opinion to the Special Committee that, as of such date, the
consideration to be paid to the stockholders of ISP in the proposed Merger was
fair, from a financial point of view, to such stockholders (other than
Holdings). J.P. Morgan has confirmed its oral opinion by delivering its written
opinion to the Special Committee, dated March 30, 1998, that, as of such date,
the consideration to be paid to the stockholders of ISP in the proposed Merger
was fair, from a financial point of view, to such stockholders (other than
Holdings). No limitations were imposed by the Special Committee upon J.P. Morgan
with respect to the investigations made or procedures followed by it in
rendering its opinions.
The full text of the written opinion of J.P. Morgan dated March 30, 1998,
which sets forth the assumptions made, matters considered and limits on the
review undertaken, is attached as Annex B to this Proxy Statement/Prospectus and
is incorporated herein by reference. Stockholders are urged to read the opinion
in its entirety. J.P. Morgan's written opinion is addressed to the Special
Committee, is directed only to the consideration to be paid in the Merger and
does not constitute a recommendation to any stockholder of ISP as to how such
stockholder should vote at the Meeting. The summary of the opinion of J.P.
Morgan set forth in this Proxy Statement/Prospectus is qualified in its entirety
by reference to the full text of such opinion.
In arriving at its opinions, J.P. Morgan reviewed, among other things, (i)
the Merger Agreement, (ii) the audited financial statements of ISP and the
unaudited financial statements of Holdings for the fiscal year ended December
31, 1997, and the unaudited financial statements of ISP for the period ended
February 22, 1998 and of Holdings for the period ended March 27, 1998, (iii)
current and historical market prices of the common stock of ISP, (iv) certain
publicly available information concerning the business of ISP and of certain
other companies engaged in businesses comparable to those of ISP, and the
reported market prices for certain other companies' securities deemed
comparable, (v) certain internal financial analyses and forecasts prepared by
ISP and Holdings and their respective managements, (vi) certain agreements with
respect to outstanding indebtedness or obligations
19
<PAGE>
of ISP and Holdings, and (vii) certain public reports prepared by debt rating
agencies. J.P. Morgan also held discussions with certain members of the
management of ISP and Holdings with respect to certain aspects of the Merger,
the past and current business operations of ISP and Holdings, the financial
condition and future prospects and operations of ISP and Holdings, the effects
of the Merger on the financial condition and future prospects of ISP, and
certain other matters believed necessary or appropriate to J.P. Morgan's
inquiry. In addition, J.P. Morgan reviewed such other financial studies and
analyses and considered such other information as it deemed appropriate for the
purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by ISP or Holdings or otherwise reviewed by J.P. Morgan, and
J.P. Morgan has not assumed any responsibility or liability therefor. J.P.
Morgan has not conducted any valuation or appraisal of any assets or
liabilities, nor have any valuations or appraisals been provided to J.P. Morgan.
In relying on financial analyses and forecasts provided to J.P. Morgan, J.P.
Morgan has assumed that they have been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments by management as
to the expected future results of operations and financial condition of ISP to
which such analyses or forecasts relate. J.P. Morgan has also assumed that the
Merger will have the tax consequences described in discussions with, and
materials furnished to J.P. Morgan by, representatives of ISP, and that the
other transactions contemplated by the Merger Agreement will be consummated as
described in the Merger Agreement.
The projections furnished to J.P. Morgan for ISP and Holdings were
prepared by the respective managements of ISP and Holdings. ISP and Holdings do
not publicly disclose internal management projections of the type provided to
J.P. Morgan in connection with J.P. Morgan's analysis of the Merger, and such
projections were not prepared with a view toward public disclosure. These
projections were based on numerous variables and assumptions that are inherently
uncertain and may be beyond the control of management, including, without
limitation, factors related to general economic and competitive conditions and
prevailing interest rates. Accordingly, actual results could vary significantly
from those set forth in such projections.
J.P. Morgan's opinions are based on economic, market and other conditions
as in effect on, and the information made available to J.P. Morgan as of, the
date of such opinions. Subsequent developments may affect the written opinion
dated March 30, 1998, and J.P. Morgan does not have any obligation to update,
revise or reaffirm such opinion. J.P. Morgan expressed no opinion as to the
price at which the Surviving Corporation Common Stock will trade at any future
time.
J.P. Morgan was not requested to and did not provide advice concerning the
structure, the specific amount of consideration, or any other aspects of the
Merger, or to provide services other than the delivery of its opinion. J.P.
Morgan was not authorized to and did not solicit expressions of interest from
any other parties with respect to the sale of all or any part of ISP or any
other alternative transaction.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its opinion.
Public Trading Multiples. Using publicly available information, J.P.
Morgan compared selected financial data of ISP with similar data for selected
publicly traded companies engaged in businesses which J.P. Morgan judged to be
analogous to ISP. The companies selected by J.P. Morgan were categorized in two
major groups, specialty chemicals and commodity chemicals, according to the
businesses in which they were participating. The specialty chemicals group
included Albermarle Corp., Cytec Industries Inc., BetzDearborn Inc., Engelhard
Corp., Ecolab Inc., Ethyl Corp., W.R.Grace & Co., Hercules Inc., Lubrizol Corp.,
M.A.Hanna & Co., Morton International Inc., Nalco Chemical Co., Witco Corp.,
Dexter Corp., and H.B.Fuller Co. The commodity chemicals group included Arco
Chemical Co., Cabot Corp., Dow Chemical, Union Carbide Corp., Georgia Gulf
Corp., Geon Co., Millennium Chemicals Inc., and General Chemical Group Inc.
These companies were selected, among other reasons, because they are engaged in
businesses similar to that of ISP, and have operating and net margins for the
twelve months ended December 31, 1997, as well as long-term earnings growth
rates (as
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forecasted by the following equity analysts covering ISP: Christopher Crooks of
Janney Montgomery Scott, Michael Kostolansky of BT-Alex Brown, Kimberly Ritrievi
of Goldman Sachs, Timothy Gerdeman of Salomon Smith Barney, Christopher Bodnar
of Bear Sterns, and Stuart Pulvirent of Furman Selz), similar to ISP's. For each
comparable company, publicly available financial performance through the twelve
months ended December 31, 1997 (or, in some cases, September 30, 1997, as
available) was measured. J.P. Morgan selected the median value for each
multiple, specifically: firm value over 1998 and 1999 earnings before interest,
taxes, depreciation and amortization ("EBITDA"); and equity value over 1998 and
1999 earnings. These multiples were then applied to ISP's EBITDA and earnings as
projected by the aforementioned equity analysts, yielding implied trading values
for ISP Common Stock of $14.62 to $18.46 per share.
Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash
flow analysis for the purpose of determining the fully diluted equity value per
share of ISP Common Stock. J.P. Morgan calculated the unlevered free cash flows
that ISP is expected to generate during fiscal years 1998 through 2002 based
upon financial projections prepared by the management of ISP for the year ending
on December 31, 1998 and upon the median earnings long term growth rate as
projected by the aforementioned equity analysts for the fiscal years 1999
through 2002. J.P. Morgan also explored the impact to free cash flows of
alternative business scenarios, such as the lower growth and margins from a
downturn in the business cycle, or higher growth and margins from implementation
of alternative management strategies. J.P. Morgan also calculated a range of
terminal asset values of ISP at the end of the five year period ending December
31, 2002 by applying an exit multiple ranging from 7 times to 8 times ISP's
fiscal 2002 EBITDA. The unlevered free cash flows and the range of terminal
asset values were then discounted to present values using a range of discount
rates from 8.5% to 10.5%, which were chosen by J.P. Morgan based upon an
analysis of the weighted average cost of capital of ISP and other companies with
businesses analogous to ISP. The present value of the unlevered free cash flows
and the range of terminal asset values were then adjusted for ISP's estimated
1997 fiscal year-end excess cash, option exercise proceeds and total debt. Based
on the aforementioned assumptions, the discounted cash flow analysis indicated a
range of equity values for ISP Common Stock of $13.36 to $23.17 per share.
Valuation of Holdings' Net Liabilities. J.P. Morgan analyzed the value of
Holdings' assets and liabilities for the purpose of determining the value of the
net liabilities to be assumed by ISP in connection with the Merger. J.P. Morgan
calculated the market value of the net liabilities by marking to market the
public debt of Holdings using the last bid price on March 27, 1998 (the last
business day prior to announcement of the Merger), eliminating book assets
lacking market value (property, plant and equipment, and the goodwill accounts)
and discounting to present values the deferred assets. Based on the
aforementioned assumptions, J.P. Morgan determined the value of the net
liabilities to be assumed by ISP in connection with the Merger to be a range
between the book value and market value of the net liabilities, or approximately
$402.2 million to $442.7 million.
The summary set forth above does not purport to be a complete description
of the analyses or data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that the summary set forth
above and their analyses must be considered as a whole and that selecting
portions thereof, without considering all of its analyses, could create an
incomplete view of the processes underlying its analyses and opinion. J.P.
Morgan based its analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions and
industry-specific factors. The other principal assumptions upon which J.P.
Morgan based its analyses are set forth above under the description of each such
analysis. J.P. Morgan's analyses are not necessarily indicative of actual values
or actual future results that might be achieved, which values may be higher or
lower than those indicated. Moreover, J.P. Morgan's analyses are not and do not
purport to be appraisals or otherwise reflective of the prices at which
businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. J.P. Morgan was selected to deliver an opinion to
the Special Committee with respect to the Merger on the basis of such experience
and its familiarity with ISP.
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For its services in connection with the Merger (including the delivery of
its opinion), ISP has agreed to pay J.P. Morgan a fee of $1,000,000, $200,000 of
which was paid at the time of J.P. Morgan's engagement, $600,000 of which was
paid at the time J.P. Morgan delivered its opinion, and $200,000 of which is
payable upon closing of the Merger. In addition, ISP has agreed to reimburse
J.P. Morgan for the reasonable fees and disbursements of counsel incurred by
J.P. Morgan in performing its engagement, and will indemnify J.P. Morgan against
certain liabilities, including liabilities arising under the Federal securities
laws.
J.P. Morgan has no other financial advisory or other relationships with
ISP or Holdings. In the ordinary course of their businesses, affiliates of J.P.
Morgan may actively trade the debt and equity securities of ISP or Holdings for
their own accounts or for the accounts of customers and, accordingly, they may
at any time hold long or short positions in such securities.
Interests of Certain Persons in the Merger
In considering the recommendation of the Special Committee with respect to
the Merger, stockholders should be aware that certain members of ISP's
management and the ISP Board have certain interests that are in addition to or
different from the interests of stockholders of ISP generally. The Special
Committee was aware of these interests and considered them, among other matters,
in approving the Merger Agreement. See "COMPENSATION OF EXECUTIVE OFFICERS OF
THE COMPANY -- Summary Compensation Table."
Indemnification. The Merger Agreement provides that the present and former
directors and officers of ISP will be indemnified by the Surviving Corporation
after the Effective Date against all liabilities pertaining to any matter
existing or occurring on or prior to the Effective Date (including the
transactions contemplated by the Merger Agreement), to the extent that a
corporation is permitted under Delaware law to indemnify its own directors or
officers (and the Surviving Corporation will pay expenses in advance of the
final disposition of any such action or proceeding to each such director or
officer of ISP seeking indemnification thereunder to the full extent permitted
by law). The Surviving Corporation has also agreed in the Merger Agreement that,
from and after the Effective Date, it will maintain for a period of at least six
years from the Effective Date, directors' and officers' liability insurance
providing at least the same amounts and coverage with respect to all persons
currently covered under ISP's officers' and directors' liability insurance
policies, which insurance shall contain terms and conditions which are
substantially no less advantageous to the covered persons than such existing
insurance, pertaining to any matter existing or occurring on or prior to the
Effective Date (including the transactions contemplated by the Merger
Agreement); provided, however, that the Surviving Corporation shall not be
required to maintain or procure such coverage to pay an annual premium in excess
of 200% of the current annual premium paid by ISP for its existing coverage (the
"Cap"); and provided, further, that if equivalent coverage cannot be obtained,
or can be obtained only by paying an annual premium in excess of 200% of the
Cap, the Surviving Corporation shall only be required to obtain as much coverage
as can be obtained by paying an annual premium equal to 200% of the Cap. The
By-Laws of the Surviving Corporation will be those of ISP immediately prior to
the Effective Date, and the Certificate of Incorporation of the Surviving
Corporation will be amended as of the Effective Date to be identical to the ISP
Charter. Therefore, the provisions providing for indemnification of ISP's
directors and officers immediately prior to the Merger would remain unchanged
upon consummation of the Merger.
Treatment of Holdings' Options and SARs. In accordance with the Merger
Agreement, upon the Effective Date, (i) each outstanding option (each, a
"Holdings Preferred Stock Option") to purchase shares of Holdings Series A
Cumulative Redeemable Preferred Stock will entitle its holder to receive cash
and options to purchase Surviving Corporation Common Stock under the ISP
Incentive Plan, and (ii) each stock appreciation right (each, an "SAR") granted
by Holdings based upon the value of the common stock of Holdings will entitle
its holder to receive cash on the Effective Date or on subsequent vesting dates
pursuant to the agreement under which the SARs were granted, if any. See "THE
MERGER AGREEMENT -- The Merger -- Treatment of Holdings' Options and SARs" and
"COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY -- Summary Compensation
Table."
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Accounting Treatment
The Merger will be accounted for as a purchase under generally accepted
accounting principles.
Regulatory Requirements
Except as described in "THE MERGER AGREEMENT - Conditions to the Merger"
and except for the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, no other Federal or state regulatory
requirements must be complied with or approvals must be obtained prior to
consummation of the Merger.
Federal Securities Law Consequences
All shares of Surviving Corporation Common Stock issued or converted in
the Merger will be freely transferable, except that any shares of Surviving
Corporation Common Stock received by persons who are deemed to be "affiliates"
(as such term is defined under the Securities Act) of ISP prior to the Merger
may be resold by them only in transactions permitted by the resale provisions of
Rule 145 promulgated under the Securities Act (or Rule 144 if such persons are
or become affiliates of Holdings) or as otherwise permitted under the Securities
Act. Persons who may be deemed to be affiliates of ISP or Holdings generally
include individuals or entities that control, are controlled by, or are under
common control with, such party and may include certain officers and directors
of such party as well as principal stockholders of such party.
Appraisal Rights
Holders of ISP Common Stock are not entitled to appraisal rights under the
DGCL with respect to their shares in connection with the Merger because shares
of such stock were listed for trading on the NYSE at the Record Date and such
holders will only be entitled to receive shares of Surviving Corporation Common
Stock, which shares will, at the Effective Date, be approved for listing on the
NYSE, subject to official notice of issuance in the Merger.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Annex A to this Proxy Statement/Prospectus and
is incorporated herein by reference. Such summary is qualified in its entirety
by reference to the Merger Agreement.
The Merger
The Merger Agreement provides that, following the adoption of the Merger
Agreement by the stockholders of ISP and the satisfaction or waiver of the other
conditions of the Merger, ISP will be merged with and into Holdings, with
Holdings continuing as the Surviving Corporation. As a result of the Merger, ISP
will cease to exist and Holdings will change its name to "International
Specialty Products Inc."
If the Merger Agreement is adopted by the stockholders of ISP and the
other conditions to the Merger are satisfied or waived, the Merger will become
effective at the time the Certificate of Merger is filed with the Secretary of
State of the State of Delaware.
Conversion of Shares. Prior to the Merger, all of the assets and
liabilities of ISP will be transferred to Newco pursuant to the Transfer. Upon
consummation of the Merger, pursuant to the Merger Agreement, (a) ISP will be
merged with and into Holdings, with Holdings being the surviving corporation in
the Merger, (b) each share of ISP Common Stock issued and outstanding
immediately prior to the Effective Date (other than shares held in treasury or
by Holdings) will be automatically converted into one share of Surviving
Corporation Common Stock, (c) each issued and outstanding share of ISP Common
Stock owned of record by Holdings and each share of ISP Common Stock held in
treasury immediately prior to the Effective Date will be cancelled and retired
without payment of any consideration therefor and will cease to exist, (d) Newco
will become a direct, wholly-owned subsidiary of the Surviving Corporation, and
(e) each issued and outstanding share of common stock of Holdings will
automatically become a number of shares of Surviving Corporation Common Stock
equal to the Conversion Rate.
Certificate of Incorporation and By-Laws. The Certificate of Incorporation
of the Surviving Corporation, until thereafter amended as provided by the DGCL
and such Certificate of Incorporation, will be the Certificate of Incorporation
of Holdings immediately prior to the Effective Date, except that it will be
amended, as of the Effective Date, to be identical to the ISP Charter as in
effect immediately prior to the Effective Date. The By-Laws of ISP immediately
prior to the Effective Date shall be the By-Laws of the Surviving Corporation
until thereafter amended as provided by the DGCL, the Certificate of
Incorporation of the Surviving Corporation and such By-Laws.
Directors and Officers. The directors of ISP immediately prior to the
Effective Date shall be the initial directors of the Surviving Corporation and
will hold office from the Effective Date, until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and By-Laws of the Surviving Corporation or as
otherwise provided by law. For information with respect to the directors of ISP
who have been nominated for election at the Meeting, see "ELECTION OF
DIRECTORS." The officers of ISP immediately prior to the Effective Date shall be
the initial officers of the Surviving Corporation and will hold office from the
Effective Date until their respective successors are duly elected or appointed
and qualified in the manner provided in the Certificate of Incorporation and
By-Laws of the Surviving Corporation or as otherwise provided by law.
ISP Incentive Plan. As of the Effective Date, by virtue of the Merger and
without any action on the part of the holders thereof, all outstanding stock
options granted pursuant to the ISP Incentive Plan shall be exercisable for
shares of Surviving Corporation Common Stock at the same prices and on the same
terms and conditions as such options would have been exercisable for ISP Common
Stock immediately prior to the Merger. As of the Effective Date, the ISP
Incentive Plan shall continue as the ISP Incentive Plan of the Surviving
Corporation and shall be amended to provide that all stock options issued
thereunder that are outstanding as of the Effective Date, or that may be granted
thereunder after the Effective Date, shall become immediately exercisable if a
Change of Control (as defined in the ISP Incentive Plan) shall occur and at any
time following such Change of Control, the Surviving Corporation (or any
successor thereto) terminates without cause the employment of the holder of such
stock option, such holder's employment is terminated as a result of his death or
permanent disability or such holder terminates such employment for
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<PAGE>
"good reason." The holder thereof shall be deemed to terminate his employment
for "good reason" if he does so as a result of a change or changes in the terms
of his employment that are materially adverse to the holder, including with
respect to his salary and bonus, level of responsibility or geographic location
of employment. For information with respect to proposed amendments to the ISP
Incentive Plan, see "AMENDMENT OF ISP INCENTIVE PLAN."
Treatment of Holdings' Options and SARs.
(a) As of the Effective Date, by virtue of the Merger and without
any further action on the part of the holders thereof, each outstanding Holdings
Preferred Stock Option that has not vested prior to the Effective Date, will
represent, subject to paragraph (f) below, the right to receive cash from the
Surviving Corporation on each vesting date (each, a "Preferred Stock Vesting
Date") prescribed by the applicable agreement pursuant to which Holdings granted
such Holdings Preferred Stock Options (the "Option Agreements"), in an amount
equal to the excess of (i) the Option Price (as hereinafter defined) with
respect to the Holdings Preferred Stock Options that vest on such Preferred
Stock Vesting Date, over (ii) the aggregate exercise price of such vested
Holdings Preferred Stock Options. The Option Price shall be equal to (i) the
number of shares of Surviving Corporation Common Stock that would have been
received in the Merger pursuant to the Merger Agreement if, immediately prior to
the Effective Date and subject to paragraph (e) below, the applicable Holdings
Preferred Stock Option had been exercised and the shares of preferred stock
underlying the Holdings Preferred Stock Options had been converted into shares
of common stock of Holdings multiplied by (ii) $16.125 (the value determined by
ISP and Holdings with respect to the shares of ISP Common Stock owned by
Holdings being relinquished in the Merger).
(b) On the Effective Date, each holder of Holdings Preferred Stock
Options also will be granted options under the ISP Incentive Plan (the "New
Stock Options") to purchase such number of shares of Surviving Corporation
Common Stock as the holder would have been entitled to receive pursuant to the
Merger Agreement, assuming such holder had exercised all of such holder's
Holdings Preferred Stock Options immediately prior to Effective Date and
converted such shares of preferred stock into common stock of Holdings and
subject to paragraph (e) below. The New Stock Options will have an exercise
price equal to $16.125, will vest, subject to the terms of the ISP Incentive
Plan, in accordance with the vesting schedule of such holder's Option Agreement
and will have such other terms as are prescribed by the ISP Incentive Plan and
the agreement pursuant to which the New Stock Options will be issued to such
holder. The term of expiration of the New Stock Options will be the same as the
term of expiration of the Holdings Preferred Stock Options.
(c) As of the Effective Date, with respect to SARs granted by
Holdings based upon the value of common stock of Holdings that are vested as of
the Effective Date and, with respect to SARs that are not vested prior to the
Effective Date, on each subsequent vesting date (each, an "SAR Vesting Date")
prescribed by the agreement pursuant to which Holdings granted such holder SARs
(the "SAR Agreements"), such SARs will represent, subject to paragraph (f)
below, the right to receive from the Surviving Corporation cash in an amount
equal to (i) the SAR Price (as hereinafter defined) with respect to SARs that
vest on such SAR Vesting Date, over (ii) the aggregate Appreciation Value (as
defined in the applicable SAR Agreement and as calculated as set forth in
paragraph (e) below) of such SARs. The SAR Price shall be equal to the (i) the
number of shares of New Common Stock that would have been received in the Merger
pursuant to the Merger Agreement if, subject to paragraph (e), the shares of
common stock of Holdings underlying the SAR had been outstanding at the
Effective Date multiplied by (ii) $16.125.
(d) On the Effective Date, each holder of an SAR also will be
granted (which grant shall be made as of the date hereof) options under the ISP
Incentive Plan (the "New SAR Options") to purchase such number of shares of
Surviving Corporation Common Stock as is equal to the number of shares of common
stock of Holdings underlying the SAR multiplied by the Conversion Rate. The New
SAR Options will have an exercise price equal to $16.125, will vest, subject to
the terms of the ISP Incentive Plan, in accordance with the existing vesting
schedule of such holder's SAR Agreement and will have such other terms as are
prescribed by the ISP Incentive Plan and the agreement pursuant to which the New
SAR Options will be issued to such holder. The term of expiration of the New SAR
Options will be the same as the term of expiration of the SARs.
(e) With respect to calculating (i) the number of shares of common
stock of Holdings that holders of Holdings Preferred Stock Options would have
received had they exercised their options and converted the underlying
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<PAGE>
preferred stock immediately prior to the Effective Date and (ii) the
Appreciation Value of the shares of common stock of Holdings underlying the
SARs, (A) for purposes of paragraphs (a) and (c) above, it is assumed that each
portion of the Holdings Preferred Stock Options would have been exercised and
the underlying preferred stock would have been converted on, and that each
portion of the SARs would have been held until, the date such portion would have
initially become vested (or, if later, the Effective Date) and (B) for purposes
of paragraph (b) above, it is assumed that the Holdings Preferred Stock Options
would have been exercised and the underlying preferred stock would have been
converted on the date that all of the options (each grant to be treated
separately) held by a holder would have become vested, so that, in each case,
the interest factor under the terms of the Option Agreements and the SAR
Agreements in respect of the shares of common stock of Holdings underlying the
preferred stock and SARs would be deemed to continue to accrue until such time.
(f) The right of each holder to receive cash in accordance with
paragraph (a) and (c) shall be subject to the terms of the applicable Option
Agreements and SAR Agreements regarding continued employment with Holdings or
its affiliates. In addition, the right of each holder to receive cash in
accordance with paragraphs (a) and (c), and the right of each holder to exercise
New Stock Options and New SAR Options, shall become immediately exercisable if a
Change of Control (as defined in the ISP Incentive Plan) shall occur and at any
time following such Change of Control, the Surviving Corporation (or any
successor thereto) terminates without cause the employment of the holder of such
Holdings Preferred Stock Option or SAR, such holder's employment is terminated
as a result of his death or permanent disability or such holder terminates such
employment for "good reason." The holder shall be deemed to terminate his
employment for "good reason" if he does so as a result of a change or changes in
the terms of his employment that are materially adverse to the holder, including
with respect to his salary and bonus, level of responsibility or geographic
location of employment.
Exchange of Shares. On the Effective Date, each issued and outstanding
share of ISP Common Stock (other than the shares owned of record by Holdings,
which will be cancelled) shall automatically, by virtue of the Merger and
without any action on the part of the holder thereof, become one share of
Surviving Corporation Common Stock, and the certificates which represent such
shares of ISP Common Stock will automatically represent the shares of Surviving
Corporation Common Stock into which such shares of ISP Common Stock shall have
been converted in the Merger. After the Effective Date, as presently outstanding
certificates representing shares of ISP Common Stock (other than the shares
owned of record by Holdings) are presented for transfer, new stock certificates
bearing the name of the Surviving Corporation and representing the appropriate
number of shares of Surviving Corporation Common Stock shall be issued.
On the Effective Date, each issued and outstanding share of common stock
of Holdings shall automatically, by virtue of the Merger and without any action
on the part of the holder thereof, become a number of shares of Surviving
Corporation Common Stock equal to the Conversion Rate, and the certificates
which represent such shares of common stock of Holdings will automatically
represent the shares of Surviving Corporation Common Stock into which such
shares of common stock of Holdings shall have become in the Merger. After the
Effective Date, as presently outstanding certificates representing shares of
common stock of Holdings are presented for transfer, new stock certificates
bearing the name of the Surviving Corporation and representing the appropriate
number of shares of Surviving Corporation Common Stock shall be issued.
Certain Covenants
Pursuant to the Merger Agreement, Holdings agreed, among other things, (i)
to promptly prepare and file a registration statement with respect to the shares
of Surviving Corporation Common Stock to be issued in the Merger and to have the
registration statement declared effective, (ii) to call a meeting, or obtain a
written consent, of its stockholders, for the purpose of adopting and approving
the Merger Agreement and the transactions contemplated thereby, (iii) to vote
its shares of ISP Common Stock in favor of the adoption of the Merger Agreement
and the transactions contemplated thereby and (iv) to use its best efforts to
effect authorization for listing on the NYSE of the shares of Surviving
Corporation Common Stock to be issued pursuant to the Merger.
ISP agreed, among other things, (i) to take all steps necessary to hold a
meeting of its stockholders for the purpose of adopting the Merger Agreement and
the transactions contemplated thereby, (ii) to recommend to its stockholders the
adoption of the Merger Agreement and the transactions contemplated thereby,
(iii) to take all necessary
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<PAGE>
steps, no later than immediately prior to the Effective Date, to effect the
Transfer to Newco, and (iv) subject to the fiduciary duties with respect to
ISP's stockholders, to obtain necessary approval by its stockholders of the
Merger Agreement and the transactions contemplated thereby.
Indemnification
The Merger Agreement provides that the present and former directors and
officers of ISP will be indemnified by the Surviving Corporation after the
Effective Date against all liabilities pertaining to any matter existing or
occurring on or prior to the Effective Date (including the transactions
contemplated by the Merger Agreement), to the extent that a corporation is
permitted under Delaware law to indemnify its own directors or officers (and the
Surviving Corporation will pay expenses in advance of the final disposition of
any such action or proceeding to each such director or officer of ISP seeking
indemnification thereunder to the full extent permitted by law). The Surviving
Corporation has also agreed in the Merger Agreement that, from and after the
Effective Date, it will maintain for a period of at least six years from the
Effective Date, directors' and officers' liability insurance providing at least
the same amounts and coverage with respect to all persons currently covered
under ISP's directors' and officers' liability insurance policies, which
insurance shall contain terms and conditions which are substantially no less
advantageous to the covered persons than such existing insurance, pertaining to
any matter existing or occurring on or prior to the Effective Date (including
the transactions contemplated by the Merger Agreement); provided, however, that
the Surviving Corporation shall not be required to maintain or procure such
coverage to pay an annual premium in excess of 200% of the Cap; and provided,
further, that if equivalent coverage cannot be obtained, or can be obtained only
by paying an annual premium in excess of 200% of the Cap, the Surviving
Corporation shall only be required to obtain as much coverage as can be obtained
by paying an annual premium equal to 200% of the Cap. The By-Laws of the
Surviving Corporation will be those of ISP immediately prior to the Effective
Date, and the Certificate of Incorporation of the Surviving Corporation will be
amended as of the Effective Date to be identical to the ISP Charter. Therefore,
the provisions providing for indemnification of ISP's directors and officers
immediately prior to the Merger would remain unchanged upon consummation of the
Merger.
Conditions to the Merger
The respective obligations of ISP and Holdings to consummate the Merger
are subject to the satisfaction of certain conditions, including, among others,
(a) adoption of the Merger Agreement by the requisite vote of the stockholders
of ISP and the stockholders of Holdings, (b) the absence of any effective
injunction or similar order preventing consummation of the transactions
contemplated by the Merger Agreement as provided therein, (c) the effectiveness
of the Registration Statement and the absence of any stop order or proceeding
seeking a stop order with respect thereto, (d) the approval for listing on the
NYSE, subject to official notice of issuance, of the shares of Surviving
Corporation Common Stock to be issued in the Merger and (e) the delivery to ISP
and Holdings of an opinion of Weil, Gotshal to the effect that, for United
States Federal income tax purposes, the Merger and the Transfer to Newco will be
treated as tax-free transactions pursuant to the Internal Revenue Code of 1986,
as amended, and that no income, gain or loss will be recognized by Holdings,
ISP, Newco, any of their respective subsidiaries or any holder of ISP Common
Stock by reason of the Merger and the Transfer. ISP and Holdings also made
customary representations and warranties to each other with respect to the
Merger, their businesses and the transactions contemplated by the Merger
Agreement. It is also a condition of the obligations of ISP and Holdings to
consummate the Merger that these representations and warranties of such party be
true and correct in all material respects as of the closing date of the Merger.
Termination
The Merger Agreement may be terminated at any time prior to the Effective
Date, whether before or after approval by the stockholders of ISP, (i) by mutual
consent of the Boards of Directors of ISP and Holdings, (ii) by the Board of
Directors of either ISP or Holdings if the Merger shall not have been
consummated on or before September 26, 1998, or (iii) by the Special Committee
of Holdings if the Special Committee determines in good faith, after
consultation with J.P. Morgan and outside counsel to the Special Committee, that
the Special Committee's fiduciary obligations under applicable law require it to
withdraw its recommendation of the Merger Agreement and the transactions
contemplated thereby. In the event of any such termination of the Merger
Agreement, the Merger
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Agreement will become void and there will be no liability or obligation on the
part of ISP or Holdings or their respective officers or directors.
Amendment and Waiver
Subject to applicable law, the Merger Agreement may be amended at any time
prior to the Effective Date, by the mutual written agreement of ISP and
Holdings; provided, however, that after the Merger Agreement is adopted by
stockholders of ISP or by the stockholders of Holdings, no such amendment may be
made that would decrease the amount or change the form of consideration to be
delivered to such stockholders.
Any failure of ISP or Holdings to comply with any obligation, covenant,
agreement or condition may be waived only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of any subsequent or other failure.
Fees and Expenses
The Merger Agreement provides that each party thereto shall pay all costs
and expenses incurred by it in connection with the Merger Agreement and the
consummation of the transactions contemplated thereby; provided, however, that
if the Merger is not consummated, all costs and expenses incurred in connection
with the Merger Agreement by ISP and Holdings will be paid by Holdings. The
aggregate fees and expenses to be incurred in consummating the Merger, including
filing fees, legal, accounting, solicitation expenses and printing costs, are
expected to be $______________.
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MARKET PRICES AND DIVIDENDS
Shares of ISP Common Stock are traded on the NYSE. At May 22, 1998,
there were 229 holders of record of ISP Common Stock. The table below sets
forth, for the fiscal periods indicated, the high and low sale prices per share
of ISP Common Stock as reported in the NYSE Composite Transactions. No cash
dividends have been declared on such stock since 1995. On March 27, 1998, the
last trading day before the public announcement of the Merger, the high and low
sale prices of shares of ISP Common Stock were $17 15/16 and $17 5/8,
respectively. On May 22, 1998, the high and low sale prices of shares of ISP
Common Stock were $ 17 15/16 and $ 17 5/8, respectively.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Market Price Range
--------------------------------------------------------------------------
Fiscal 1998 Fiscal 1997 Fiscal 1996
----------- ----------- ----------- ------------ ------------ ------------
High Low High Low High Low
----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ISP Common Stock (Symbol: ISP)
1st Quarter $18 1/2 $13 9/16 $13 3/4 $11 3/4 $13 1/4 $10 1/8
2nd Quarter (through $20 1/16 $17 9/16 $14 3/8 $11 1/2 $12 5/8 $10 3/4
May 22, 1998)
3rd Quarter N/A N/A $15 1/4 $13 1/2 $11 3/8 $9 5/8
4th Quarter N/A N/A $16 1/2 $13 7/8 $12 3/4 $9
------------------------------------ ----------- ----------- ----------- ------------ ------------ ------------
</TABLE>
29
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of ISP
and its subsidiaries and the capitalization of Holdings, in each case as of
March 29, 1998, and as adjusted to give effect to the Merger and the
transactions contemplated thereby. This information should be read in
conjunction with the historical financial statements and notes thereto included
in ISP's and Holdings' Annual Reports on Form 10-K for the year ended December
31, 1997, ISP's and Holdings' Quarterly Reports on Form 10-Q for the quarter
ended March 29, 1998, and the pro forma financial statements and notes thereto
included elsewhere in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 29, 1998
--------------------
(THOUSANDS)
Holdings
Parent Eliminations Pro Forma
Company and After
ISP Actual Actual Adjustments (1) Merger
---------- ------ --------------- ------
<S> <C> <C> <C> <C>
Short-term Debt and Current maturities of
Long-term debt:
Current maturities of Long-term debt........... $ 200,609 $ 810 $ 201,419
Short-term debt................................ 35,158 $ 16,770 51,928
-------- --------- ------ ---------
Total.......................................... $ 235,767 $ 16,770 $ 810 $ 253,347
======== ========= ====== =========
Long-term Debt (excluding current maturities):
Holdings 9% Senior Notes due 2003.............. $ 324,281 $ 324,281
Holdings 9-3/4% Senior Notes due 2002.......... 199,871 199,871
Obligation on mortgaged property, due 1999..... $ 38,125 38,125
Borrowings under revolving credit facility..... 52,000 52,000
Obligations under capital leases............... 1,247 1,247
Long-term notes payable to related party....... 50,013 $ (50,013)
Other.......................................... 213 213
-------- --------- ------ ---------
Total Long-term Debt........................... $ 141,598 $ 524,152 $ (50,013) $ 615,737
======= ========== ======== =========
Stockholders' Equity........................... $ 805,586 $ 272,747 $ (536,473) $ 541,860
======= ========== ========= =========
Total Capitalization........................... $ 947,184 $ 796,899 $(586,486) $ 1,157,597
======= ========== ========= ==========
</TABLE>
- --------------
(1) For an explanation of the assumptions used to arrive at such pro forma
information, see "Notes to Pro Forma Condensed Consolidated Financial
Statements."
30
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth, for the periods indicated, selected
historical consolidated financial information of ISP. This information should be
read in conjunction with the historical financial statements and notes thereto
included in ISP's Annual Report on Form 10-K for the year ended December 31,
1997, and Quarterly Report on Form 10-Q for the quarter ended March 29, 1998.
SELECTED FINANCIAL DATA OF ISP
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
MARCH 30, MARCH 29,
YEAR ENDED DECEMBER 31, 1997 1998
-------------------------------------------------------------
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
------------------------------------------------------------- ----------------------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales...................... $ 548.3 $ 600.0 $ 689.0 $ 716.5 $ 749.2 $ 191.2 $ 200.7
Gross profit................... 218.7 232.3 274.3 297.6 312.5 77.0 81.5
Operating income............... 65.1 99.2 127.1 136.0 143.3 36.8 38.3
Interest expense............... 24.5 28.7 33.1 28.7 26.1 6.7 6.2
Income before income taxes..... 49.8 72.5 106.1 126.0 144.6 36.2 40.9
Net income..................... 29.6 44.5 67.4 80.7 92.6 23.2 26.2
Earnings per common share:
Basic....................... .30 .45 .68 .83 .96 .24 .27
Diluted..................... .30 .45 .68 .82 .96 .24 .27
Dividends per common share..... .05 .05 -- -- -- -- --
MARCH 29,
DECEMBER 31, 1998
1993 1994 1995 1996 1997 (UNAUDITED)
----------------------------------------------------------------- -----------
(MILLIONS)
Balance Sheet Data:
Total working capital.......... $ 78.3 $ 121.8 $ 142.6 $ 219.7 $ 267.0 $ 109.9
Total assets................... 1,243.3 1,251.3 1,312.9 1,316.9 1,395.6 1,435.7
Long-term debt
less current maturities....... 367.7 377.1 347.5 372.9 328.6 141.6
Stockholders' equity........... 534.0 582.4 643.2 701.5 784.2 805.6
QUARTER ENDED
-------------
MARCH 30, MARCH 29,
YEAR ENDED DECEMBER 31, 1997 1998
-----------------------------------------------------------
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
------------------------------------------------------------- ----------------------------
(MILLIONS)
Other Data:
Gross profit margin............ 39.9% 38.7% 39.8% 41.5% 41.7% 40.3% 40.6%
Operating margin............... 11.9% 16.5% 18.4% 19.0% 19.1% 19.2% 19.1%
Depreciation................... $ 28.7 $ 32.8 $ 36.0 $ 38.3 $ 41.6 $ 10.0 $ 10.5
Goodwill amortization.......... 13.9 13.4 13.2 13.2 13.2 3.3 3.3
Capital expenditures and
acquisitions................. 62.9 31.1 38.9 54.6 68.5 13.9 75.1
</TABLE>
31
<PAGE>
The following table sets forth, for the periods indicated, selected
historical consolidated financial information of Holdings. This information
should be read in conjunction with the historical financial statements and notes
thereto included in Holdings' Annual Report on Form 10-K for the year ended
December 31, 1997, and Quarterly Report on Form 10-Q for the quarter ended March
29, 1998. All financial data relating to Holdings and its subsidiaries contained
herein have been prepared to retroactively reflect the formation of Holdings.
SELECTED FINANCIAL DATA OF HOLDINGS
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
MARCH 30, MARCH 29,
YEAR ENDED DECEMBER 31, 1997 1998
-------------------------------------------------------------
1993 1994 1995 1996 1997 (UNAUDITED)(UNAUDITED)
---------------------------------------------------------------------------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales...................... $ 548.3 $ 600.0 $ 689.0 $ 716.5 $ 749.2 $ 191.2 $ 200.7
Operating income............... 65.1 99.2 127.1 136.0 141.3 36.3 37.8
Interest expense............... 24.5 28.7 33.1 38.3 73.6 18.6 17.9
Income from continuing
operations before income
taxes and extraordinary
items........................ 49.8 72.5 106.1 116.6 107.8 25.2 31.2
Income from continuing
operations before
extraordinary items and
cumulative effect of
accounting change............ 23.8 37.1 55.1 60.8 54.0 12.2 15.7
Net income..................... 14.4 28.0 32.8 53.9 54.0 12.2 15.7
MARCH 29,
DECEMBER 31, 1998
1993 1994 1995 1996 1997 (UNAUDITED)
----------------------------------------------------------------- -----------
(MILLIONS)
Balance Sheet Data:
Total working capital.......... $ 143.9 $ 228.0 $ 290.0 $ 476.8 $ 322.1 $ 165.7
Total assets................... 1,309.0 1,357.5 1,460.4 1,600.4 1,485.7 1,546.0
Long-term debt less current
maturities................... 367.7 285.4 280.3 834.3 798.8 615.7
Stockholders' equity (deficit). (42.6) (15.8) (1.7) 42.7 261.8 272.7
QUARTER ENDED
-------------
MARCH 30, MARCH 29,
YEAR ENDED DECEMBER 31, 1997 1998
-----------------------------------------------------------
1993 1994 1995 1996 1997 (UNAUDITED)(UNAUDITED)
---------------------------------------------------------------------------------------
(MILLIONS)
Other Data:
Depreciation................... $ 28.7 $ 32.8 $ 36.0 $ 38.3 $ 41.9 $ 10.0 $ 10.6
Goodwill amortization.......... 13.9 13.4 13.2 13.2 13.3 3.3 3.3
Capital expenditures and
acquisitions................. 62.9 31.1 38.9 54.6 68.7 13.9 75.1
</TABLE>
32
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Set forth below are pro forma summary condensed consolidated financial data
of Holdings and ISP. The pro forma balance sheet data give effect to the Merger
and the transactions contemplated thereby as if they had been consummated as of
March 29, 1998. The pro forma income statement data give effect to the Merger
and the transactions contemplated thereby as if they had been completed as of
January 1, 1997. The pro forma financial information does not purport to project
the financial position or the results of operations for any future period or to
represent what the financial position or results of operations would have been
if the Merger and the transactions contemplated thereby had been completed as of
the dates indicated.
33
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 29, 1998
(Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Adjustments
Holdings ---------------------------------------
Parent Pro Forma
ISP Company After
Actual Actual Eliminations(1) Adjustments Merger
------ ------ --------------- ----------- ------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $15,084 $1,235 $16,319
Investments in securities and other short-term
investments 198,006 83,663 281,669
Accounts receivable - trade and other 114,980 114,980
Receivable from related parties, net 536 6,479 7,015
Inventories 115,224 $5,765 (2) 120,989
Other current assets 18,430 555 (2) 21,939
2,954 (3)
--------- ----------- ----------- -------- ----------
Total current assets 462,260 91,377 9,274 562,911
Property plant and equipment, net 517,982 5,643 523,625
Excess of cost over net assets of businesses
acquired, net 400,780 5,766 $ 7 142,102 (2) 548,655
Loan receivable from subsidiary 50,013 (50,013) 0
Investment in ISP 675,082 (675,082) 0
Other assets 54,685 7,723 (262) 62,146
--------- ----------- ----------- -------- ----------
Total Assets $1,435,707 $835,604 $(725,350) $151,376 $1,697,337
========== =========== =========== ======== ==========
Current Liabilities:
Short-term debt $35,158 $16,770 $51,928
Current maturities of long-term debt 200,609 $810 (2) 201,419
Accounts payable and accrued liabilities 109,920 17,713 1,500 (2) 137,117
7,984 (3)
Income taxes 6,658 1,154 7,812
--------- ----------- ----------- -------- ----------
Total current liabilities 352,345 35,637 10,294 398,276
--------- ----------- ----------- -------- ----------
Long-term debt less current maturities 91,585 524,152 615,737
Long-term notes payable to related party 50,013 $ (50,013) 0
Deferred income taxes 74,818 (255) 2,409 (2) 76,972
Other liabilities 61,360 3,068 64 (3) 64,492
Stockholders' Equity:
Common stock and paid-in capital 442,552 214,025 (313,217) 143,703 (2) 487,063
Treasury stock, at cost (37,091) (1,169) 38,260 0
Retained earnings 399,126 55,752 (399,126) (5,094) (3) 50,658
Accumulated other comprehensive income 999 4,139 (999) 4,139
--------- ----------- ----------- -------- ----------
Total Stockholders' Equity 805,586 272,747 (675,082) 138,609 541,860
--------- ----------- ----------- -------- ----------
Total Liabilities and Stockholders' Equity $1,435,707 $835,604 $(725,350) $151,376 $1,697,337
========== =========== =========== ======== ==========
</TABLE>
See accompanying NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
34
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1997
(Thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Adjustments
-------------------------------------
Holdings
Parent Pro Forma
ISP Company After
Actual Actual Eliminations(1) Adjustments Merger
------ ------ --------------- ----------- ------
<S> <C> <C> <C> <C> <C>
Net sales $749,208 $749,208
-------- --------
Cost of products sold 436,693 $ 187 436,880
Selling, general and administrative 156,042 $1,263 425 $ 760 (4) 158,490
Goodwill amortization 13,176 118 3,639 (5) 16,933
--------- --------- -------- -------- ---------
Total costs and expenses 605,911 1,263 730 4,399 612,303
--------- --------- -------- -------- ---------
Operating income 143,297 (1,263) (730) (4,399) 136,905
Equity in net income of ISP 77,103 (77,103)
Interest expense (26,126) (50,676) 3,190 777 (6) (72,835)
Equity in earnings of joint venture 5,909 5,909
Other income, net 21,558 15,988 (3,313) 34,233
--------- --------- -------- -------- ---------
Income before income taxes 144,638 41,152 (77,956) (3,622) 104,212
Income taxes (51,989) 12,853 (6) (7) (39,142)
--------- --------- -------- -------- ---------
Net income $92,649 $54,005 $(77,956) ($3,628) $65,070
========= ========= ======== ======== =========
Earnings per common share:
Basic $.96 $.94
==== ====
Diluted $.96 $.93
==== ====
Weighted average number of common and
common equivalent shares outstanding:
Basic 96,061 69,394
====== ======
Diluted 97,010 70,343
====== ======
</TABLE>
See accompanying NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
35
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Quarter Ended March 29, 1998
(Thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Adjustments
-------------------------------------
Holdings
Parent Pro Forma
ISP Company After
Actual Actual Eliminations(1) Adjustments Merger
------ ------ --------------- ----------- ------
<S> <C> <C> <C> <C> <C>
Net sales $200,703 $200,703
-------- --------
Cost of products sold 119,177 119,177
Selling, general and administrative 39,926 $ 395 $ 100 $ 190 (4) 40,611
Goodwill amortization 3,302 37 888 (5) 4,227
---------- --------- --------- -------- ---------
Total costs and expenses 162,405 395 137 1,078 164,015
---------- --------- --------- -------- ---------
Operating income 38,298 (395) (137) (1,078) 36,688
Equity in net income of ISP 21,802 (21,802)
Interest expense (6,176) (12,486) 724 203 (6) (17,735)
Equity in earnings of joint venture 1,455 1,455
Other income, net 7,313 3,395 (753) 9,955
---------- --------- --------- -------- ---------
Income before income taxes 40,890 12,316 (21,968) (875) 30,363
Income taxes (14,710) 3,356 (5) (7) (11,359)
---------- --------- --------- -------- ---------
Net income $26,180 $15,672 $(21,968) ($880) $19,004
========== ========= ========= ======== =========
Earnings per common share:
Basic $.27 $.27
==== ====
Diluted $.27 $.27
==== ====
Weighted average number of common and
common equivalent shares outstanding:
Basic 95,978 69,311
====== ======
Diluted 96,972 70,305
====== ======
</TABLE>
See accompanying NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
36
<PAGE>
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Reflects consolidation eliminations.
2. Reflects the application of the purchase method of accounting to the
Merger. Accordingly, the historical book values of ISP's assets and
liabilities attributable to the shares of ISP Common Stock owned by the
minority shareholders will be adjusted to their fair values as
estimated as of the Effective Date, with any excess of cost over the
fair values of the net assets allocated to goodwill. The pro forma
adjustments represent management's current estimate of the application
of the purchase method of accounting. The actual purchase accounting
adjustments may differ from the pro forma adjustments.
3. Reflects a nonrecurring charge and related deferred tax benefit to be
recorded in connection with the termination of Holdings' Stock
Appreciation Rights and Preferred Stock option programs.
4. Reflects a charge to be recorded over the remaining vesting periods in
connection with the termination of Holdings' Stock Appreciation Rights
and Preferred Stock option programs.
5. Reflects amortization of goodwill over a period of 40 years.
6. Reflects amortization of the write-up of long-term debt to fair value
over its average remaining life as a reduction of interest expense.
7. Reflects the deferred tax expense related to item (6), offset by the
deferred tax benefit related to item (4).
37
<PAGE>
DESCRIPTION OF SURVIVING CORPORATION COMMON STOCK
Common Stock
General. On the Effective Date, pursuant to the terms of the Merger
Agreement, the Certificate of Incorporation of the Surviving Corporation shall
be amended to be identical to the ISP Charter as in effect immediately prior the
Effective Date, until thereafter amended as provided by law. Immediately after
the Effective Date, therefore, the authorized capital stock of the Surviving
Corporation will consist of 300,000,000 shares of Surviving Corporation Common
Stock, par value $0.01 per share, of which, assuming the Merger were consummated
on the date hereof, [________] shares will be issued and outstanding, and
20,000,000 shares of preferred stock, par value $0.01 per share, of which no
shares will be issued and outstanding. The Board of Directors of the Surviving
Corporation will have authority to issue, without further stockholder action,
one or more series of preferred stock, and to determine at the time of issuance
of each such series the rights and preferences thereof (including dividend rate,
liquidation priority, and conversion and voting rights, if any).
Dividends. The Surviving Corporation may pay dividends if, as and when
declared by its Board of Directors, subject to applicable provisions of Delaware
law. The holders of Surviving Corporation Common Stock will be entitled to
receive and to share equally in such dividends as may be declared by the Board
of Directors of Holdings out of funds legally available therefor.
Voting Rights. Holders of Surviving Corporation Common Stock will be
entitled to one vote for each share held by them on all matters submitted for
approval by the stockholders of the Surviving Corporation. Holders of Surviving
Corporation Common Stock do not have cumulative voting rights in the election of
directors.
Liquidation. In the event of liquidation, dissolution or winding up of the
Surviving Corporation, the holders of Surviving Corporation Common Stock would
be entitled to receive, after payment of all its debts and liabilities and other
payments to holders of any preferred stock having priority rights, if any, all
of the assets of the Surviving Corporation available for distribution to the
holders of Surviving Corporation Common Stock. Such stockholders would be
entitled to participate ratably in the net assets available for distribution.
Transfer Agent. The Bank of New York will be the transfer agent and
registrar for shares of Surviving Corporation Common Stock.
COMPARISON OF STOCKHOLDERS' RIGHTS
Upon consummation of the Merger, the stockholders of ISP will become
stockholders of Holdings. Holdings and ISP are both incorporated under the laws
of the State of Delaware and, upon consummation of the Merger, (i) the By-Laws
of ISP will become the By-Laws of Holdings (as the Surviving Corporation), and
(ii) the Certificate of Incorporation of Holdings (as the Surviving Corporation)
will be amended to be identical to the ISP Charter as in effect immediately
prior to the Effective Date. Therefore, the rights of holders of Surviving
Corporation Common Stock which is to be issued to stockholders of ISP pursuant
to the Merger will not differ materially from the rights of ISP stockholders
immediately prior to the Effective Date.
38
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material Federal
income tax consequences of the Merger and is based on the Internal Revenue Code
of 1986, as amended (the "Code"), the final, proposed and temporary Treasury
Regulations promulgated thereunder, administrative rulings and interpretations,
and judicial decisions, in each case as in effect as of the date hereof. All of
the foregoing are subject to change at any time, possibly with retroactive
effect.
The summary set forth below does not address all aspects of Federal income
taxation that may be relevant either to a stockholder in light of such
stockholder's particular circumstances or to stockholders subject to special
treatment under the Code, such as dealers in securities, banks, insurance
companies, other financial institutions, nonUnited States persons, tax-exempt
organizations, taxpayers who hold ISP Common Stock as part of a "straddle,"
"hedge" or "conversion transaction," or stockholders who acquired their ISP
Common Stock pursuant to the exercise of employee stock options or otherwise as
compensation. Any additional tax consequences that may arise under the laws of
any state, locality or foreign jurisdiction also are not discussed. Holders are
assumed to hold their shares of ISP Common Stock as "capital assets" within the
meaning of Section 1221 of the Code (i.e., property held for investment).
Neither ISP nor Holdings intends to secure a ruling from the Internal
Revenue Service (the "Service") with respect to the tax consequences of the
Merger. It is a condition to the obligation of ISP and Holdings to consummate
the Merger, however, that each of them shall have received an opinion of Weil,
Gotshal to the effect that: (i) no income, gain or loss will be recognized by
ISP, Holdings, Newco or any of their respective subsidiaries by reason of the
Merger and the Transfer and (ii) no income, gain or loss will be recognized by
any of the stockholders of ISP who exchange their ISP Common Stock for Surviving
Corporation Common Stock in the Merger. The opinion of Weil, Gotshal will be
based on the law existing as of the Effective Date and will rely on
representations and covenants made by ISP, Holdings and Newco.
Tax Implications to ISP Stockholders. As will be set forth in the opinion
of Weil, Gotshal, no gain or loss will be recognized for Federal income tax
purposes by holders of ISP Common Stock upon their receipt of Surviving
Corporation Common Stock in the Merger. In addition, the aggregate adjusted tax
basis to a former stockholder of ISP in the Surviving Corporation Common Stock
received in the Merger will be the same as the stockholder's aggregate adjusted
tax basis in the ISP Common Stock surrendered in exchange therefor. The holding
period of Surviving Corporation Common Stock in the hands of a former
stockholder of ISP will include the period during which such stockholder held
the ISP Common Stock exchanged therefor in the Merger, provided that such shares
of ISP Common Stock are held as capital assets at the Effective Date.
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT
OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS AND OF ANY PROPOSED CHANGES IN THE
TAX LAWS.
- - - - - - - -
The ISP Board, based in part upon the advice of the Special Committee,
recommends a vote FOR adoption of the Merger Agreement and approval of the
transactions contemplated thereby.
39
<PAGE>
PROPOSAL 2 -- AMENDMENT OF ISP INCENTIVE PLAN
As of the Effective Date, by virtue of the Merger and without any action
on the part of the holders thereof or the holders of ISP Common Stock, all
outstanding stock options granted pursuant to the ISP Incentive Plan shall be
exercisable for shares of Surviving Corporation Common Stock at the same prices
and on the same terms and conditions as such options would have been exercisable
for ISP Common Stock immediately prior to the Merger. As of the Effective Date,
the ISP Incentive Plan shall continue as the ISP Incentive Plan of the Surviving
Corporation and all stock options issued thereunder that are outstanding as of
the Effective Date, or that may be granted thereunder after the Effective Date,
shall become immediately exercisable if a Change of Control (as defined in the
ISP Incentive Plan) shall occur and at any time following such Change of
Control, the Surviving Corporation (or any successor thereto) terminates without
cause the employment of the holder of such stock option, such holder's
employment is terminated as a result of his death or permanent disability or
such holder terminates such employment for "good reason." See "THE MERGER
AGREEMENT---ISP Incentive Plan."
In addition to the assumption of the ISP Incentive Plan by the Surviving
Corporation, as a result of the Merger, the Holdings Preferred Stock Options and
the SARs will represent the right to receive, under certain circumstances, cash
and options under the ISP Incentive Plan to purchase shares of Surviving
Corporation Common Stock. See "THE MERGER AGREEMENT-- The Merger -- Treatment of
Holdings' Options and SARs." As a result of this treatment, the ISP Board is
seeking to amend the ISP Incentive Plan to increase the authorized number of
shares of Surviving Corporation Common Stock available for issuance under the
ISP Incentive Plan, from 7,000,000 shares of ISP Common Stock to 9,000,000
shares of Surviving Corporation Common Stock and to allow for the treatment as
set forth in the Merger Agreement with respect to the Holdings Preferred Stock
Options and SARs, notwithstanding the provision in the ISP Incentive Plan with
respect to the maximum number of shares for which stock options may be granted
thereunder to any eligible person during any calendar year.
The Federal income tax consequences of the issuance and exercise of
options pursuant to the ISP Incentive Plan, with respect to the holders of such
options and to the Surviving Corporation, will not change as a result of the
above amendment.
The following is a summary of the principal provisions of the ISP
Incentive Plan, as it exists without giving effect to the proposed amendments.
The ISP Board views stock options as an important component of its
long-term compensation philosophy, giving employees incentives based upon the
appreciation in value of the ISP Common Stock. Stock options issued under the
ISP Incentive Plan serve the interests of the Company and its stockholders by
aligning compensation with stockholder objectives and by encouraging and
rewarding performance.
Description of ISP Incentive Plan
The ISP Incentive Plan provides for (a) the granting of options to
purchase shares of ISP Common Stock to key employees of ISP, its subsidiaries
and parents and to non-employee directors of ISP and (b) the sale of ISP Common
Stock to key employees of ISP, its subsidiaries and parent. The ISP Incentive
Plan was adopted by the Board of Directors and approved by the sole stockholder
of ISP on June 28, 1991, before the initial public offering of the ISP Common
Stock. Under the ISP Incentive Plan, options may be granted from time to time
until June 28, 2000.
Approximately 1,900 persons are eligible to participate in the ISP
Incentive Plan. The ISP Incentive Plan is designed to encourage stock ownership
by key employees and directors. Its objectives are to provide an increased
incentive for employees and directors, to promote the well-being of the Company
and to facilitate the efforts of the Company to secure and retain employees and
directors of outstanding ability.
40
<PAGE>
Employees and Directors Who May Participate
Key employees of ISP, its subsidiaries or parents and non-employee
directors of ISP are eligible to receive options under the ISP Incentive Plan.
The selection of eligible employees to receive options is made by the
Compensation and Pension Committee of the ISP Board (the "Compensation
Committee"). The Compensation Committee is advised by the Company's management,
including the Company's Chief Executive Officer, as to whom options should be
granted. Awards of options generally are based upon the Compensation Committee's
evaluation of an employee's past or potential contribution to ISP, its
subsidiaries or parents, such employee's respective grade level and the
Company's stock price at the time of grant, as well as the recommendations of
the Company's management.
Grant of Options and Awards
The Compensation Committee determines the number of shares underlying
options to be granted to an employee, the date of the option grant, whether the
option is intended to be an incentive stock option or a non-qualified option,
and other terms governing the options. There is no stated maximum or minimum
number of options or shares which may be issued under the ISP Incentive Plan to
any one eligible person or group of persons, except that currently the number of
shares as to which options may be granted to any eligible person during any
calendar year is limited to 200,000 shares. If the proposed amendment to the ISP
Incentive Plan is approved, an exception will be added to the ISP Incentive Plan
to allow for the treatment set forth in the Merger Agreement with respect to the
Holdings Preferred Stock Options and SARs, notwithstanding that certain option
holders may receive more than 200,000 shares in 1998.
The ISP Incentive Plan also provides for an automatic grant to each
non-employee director of 5,000 non-qualified stock options upon the commencement
of service as a director and an automatic annual grant to 2,500 non-qualified
stock options on each anniversary of the initial grant during the period the
person serves as a director.
Currently, the maximum number of shares for which options may be granted
under the ISP Incentive Plan is 7,000,000. If the proposed amendment to the ISP
Incentive Plan is approved, the maximum number of shares for which options may
be granted under the ISP Incentive Plan will be 9,000,000.
The ISP Incentive Plan also authorizes the sale of up to 1,000,000 shares
subject to prescribed restrictions as to disposition or without such
restrictions.
Exercise of Options, Exercise Price and Duration
The exercise price of non-qualified options granted under the ISP
Incentive Plan is determined by the Compensation Committee in its discretion at
the time of grant, provided that the exercise price must be at least equal to
50% of the fair market value of the underlying shares on the date of grant. The
exercise price of incentive stock options must be at least equal to the fair
market value of the underlying shares on the date of grant; provided that if an
incentive stock option is granted to a participant (an "Over-Ten-Percent
Stockholder") who owns stock possessing more than 10% of the voting rights of
the Company's outstanding capital stock on the date of grant, the exercise price
of the option must be at least equal to 110% of the fair market value on the
date of the grant. The exercise price may be paid either in cash or, subject to
certain limitations, by surrender of shares of ISP Common Stock owned by the
optionee and valued at their then fair market value, or a combination thereof.
The term of each option granted to an employee and the vesting period
thereof is determined by the Compensation Committee in its discretion, except
that incentive stock options granted to an Over-Ten-Percent Stockholder may not
be exercised more than five years after the date of grant. There is no maximum
number of options that may be exercised in any one year.
41
<PAGE>
The term of each option granted to non-employee directors is nine years.
Initial grants vest as to one-third of the shares subject thereto on each of the
first through third anniversaries of the date of grant. Subsequent grants become
exercisable in full on the first anniversary of the date of grant.
Currently, the Compensation Committee may, in its discretion, accelerate
the vesting of options upon a "Change in Control" (as defined in the ISP
Incentive Plan). Upon the Effective Date, the ISP Incentive Plan will be amended
with the effect that all options will thereafter be accelerated automatically if
at any time following a Change in Control, the holder of such option's
employment is terminated as a result of his death or permanent disability or
such holder terminates such employment for "good reason."
Termination of Employment, Transferability
On termination of employment for any reason except death or disability, an
optionee may, at any time before the earlier to occur of the expiration of 90
days after the date of termination or the expiration date of an option, exercise
any option or portion thereof which was vested on the date of termination. If
any optionee's employment or service as a non-employee director is terminated as
a result to his death or disability, the optionee or the persons to whom the
option is transferred by will or the laws of descent and distribution may, at
any time within one year after the date of death or disability but no later than
the expiration date of the option, exercise the option to the extent the
optionee was entitled to do so on the date of death or disability. Subject to
the foregoing, non-employee directors have the right to exercise vested options
not later than the earlier to occur of the expiration date of the option or the
expiration of 60 days following the date service as a director ceases.
The ISP Incentive Plan permits option agreements to contain limited stock
appreciation rights ("Limited Rights"). Under the Limited Rights, should a
tender or exchange offer for the ISP Common Stock be made by a bidder other than
the Company, the optionee would be entitled to surrender any option or portion
thereof (regardless of the extent to which the option was then exercisable) and
to receive cash or ISP Common Stock (or a combination thereof), as determined by
the Compensation Committee, equal to the difference between the aggregate fair
market value of the shares subject to options on the date of surrender (as
determined in accordance with the Limited Rights) and the aggregate exercise
price.
Nothing in the ISP Incentive Plan or any option agreement executed in
accordance therewith confers on any employee any right to continue in the employ
of the Company (or any of its parents or subsidiaries) or affects the right of
the Company (or any parent or subsidiary) to terminate such employee's
employment at any time.
Federal Income Tax Effects of Plan Participation
The discussion below is based on Federal income tax law and authorities as
of the date hereof, which are subject to change at any time. The law is
technical and complex and the discussion represents only a general summary of
some of the applicable provisions of Federal income tax law.
Incentive Stock Options. Incentive stock options ("ISOs") granted under
the ISP Incentive Plan are intended to meet the definitional requirements of
Section 422(b) of the Code for "incentive stock options."
An employee who receives an ISO does not recognize any taxable income upon
the grant of such ISO. Similarly, the exercise of an ISO generally does not give
rise to federal income tax to the employee, provided that (i) the federal
"alternative minimum tax", which depends on the employee's particular tax
situation, does not apply and (ii) the employee is employed by the Company from
the date of grant of the option until three months prior to the exercise
thereof, except where such employment terminates by reason of disability (where
the three month period is extended to one year) or death (where this requirement
does not apply). If an employee exercises an ISO after these requisite periods,
the ISO will be treated as an NSO (as defined below) and will be subject to the
rules set forth below under the caption "Non-qualified Options".
42
<PAGE>
Further, if after exercising an ISO, an employee disposes of the ISP
Common Stock so acquired more than two years from the date of grant and more
than one year from the date of transfer of the common stock pursuant to the
exercise of such ISO (the "applicable holding period"), the employee will
normally recognize a capital gain or loss equal to the difference, if any,
between the amount received for the shares and the exercise price. If, however,
an employee does not hold the shares so acquired for the applicable holding
period -- thereby making a "disqualifying disposition" --the employee would
realize ordinary income on the excess of the fair market value of the shares at
the time the ISO was exercised over the exercise price and the balance, if any,
would be mid-term or long-term capital gain (provided the holding period for the
shares exceeded 12 or 18 months, respectively, and the employee held such shares
as a capital asset at such time).
The Company is not allowed a federal income tax deduction upon the grant
or exercise of an ISO or the disposition, after the applicable holding period,
of the common stock acquired upon exercise of an ISO. In the event of a
disqualifying disposition, however, the Company generally will be entitled to a
deduction in an amount equal to the ordinary income included by the employee,
provided that such amount constitutes an ordinary and necessary business expense
to the Company and is reasonable and the limitations of Sections 280G and 162(m)
of the Code (described below) do not apply.
Non-Qualified Options. Non-qualified stock options ("NSOs") granted under
the ISP Incentive Plan are options that do not qualify as ISOs. An employee who
receives an NSO does not recognize any taxable income upon the grant of such
NSO. However, the employee generally will recognize ordinary income upon
exercise of an NSO in an amount equal to the excess of (i) the fair market value
of the shares of ISP Common Stock at the time of exercise over (ii) the exercise
price.
The ordinary income recognized with respect to the receipt of shares upon
exercise of a NSO will be subject to both wage withholding and employment taxes.
In addition to the customary methods of satisfying the withholding tax
liabilities that arise upon the exercise of a NSO, upon the election of the
employee the Company may satisfy the liability in whole or in part by
withholding shares of ISP Common Stock from those that otherwise would be
issuable to the individual or by the employee tendering other shares owned by
him or her, valued at their fair market value as of the date that the tax
withholding obligation arises.
A federal income tax deduction generally will be allowed to the Company in
an amount equal to the ordinary income included by the individual with respect
to his or her NSO, provided that such amount constitutes an ordinary and
necessary business expense to the Company and is reasonable and the limitations
of Sections 280G and 162(m) of the Code (described below) do not apply.
If an individual exercises an NSO by delivering shares of ISP Common Stock
to the Company, other than shares previously acquired pursuant to the exercise
of an ISO which is treated as a "disqualifying disposition" as described above,
the individual will not recognize gain or loss with respect to the exchange of
such shares, even if their then fair market value is different from the
individual's tax basis. The individual, however, will be taxed as described
above with respect to the exercise of the NSO as if he or she had paid the
exercise price in cash, and the Company likewise generally will be entitled to
an equivalent tax deduction.
Change in Control. As described above, upon a "Change in Control" (as
defined in the ISP Incentive Plan, as amended), if certain subsequent events
occur, all the then outstanding stock options will immediately become
exercisable. In general, if the total amount of payments to an individual that
are contingent upon a "change of control" of the Company (as defined in Section
280G of the Code), including payments under the ISP Incentive Plan that vest
upon a "change in control," equals or exceeds three times the individual's "base
amount" (generally, such individual's average annual compensation for the five
complete years preceding the change in control), then, subject to certain
exceptions, the payments may be treated as "parachute payments" under the Code,
in which case a portion of such payments would be non-deductible to the Company
and the individual would be subject to a 20% excise tax on such portion of the
payments.
43
<PAGE>
ERISA
The ISP Incentive Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
Certain Limitations on Deductibility of Executive Compensation
Section 162(m) of the Code limits the Company's tax deduction to $1
million per year for compensation paid to the executive officers named in the
Summary Compensation Table herein unless certain requirements are met. The
Compensation Committee has carefully considered these requirements and the
regulations and has structured its programs so that bonus compensation and gains
from exercises of stock options granted under the ISP Incentive Plan generally
will be exempt from the deduction limitations. The Compensation Committee's
present intention is to structure compensation to be tax-deductible; provided,
however, that it retains the right to authorize compensation that does not
qualify for income tax deductibility.
Options to be Held by Certain Persons under the ISP Incentive Plan
Pursuant to the Merger Agreement, the ISP Incentive Plan will be assumed
by the Surviving Corporation and, by virtue of the Merger and without any action
on the part of the holders of options thereunder or holders of ISP Common Stock,
outstanding options as of the Effective Date to purchase shares of ISP Common
Stock thereunder will be converted into options to purchase an equal number of
shares of Surviving Corporation Common Stock. In addition, holders of Holdings
Preferred Stock Options and SARs will have the right to receive options under
the ISP Incentive Plan to purchase shares of Surviving Corporation Common Stock.
The following table sets forth for certain persons the number of shares of
Surviving Corporation Common Stock which, if the Merger were consummated as of
the date hereof, would underlie options which such holders of Holdings Preferred
Stock Options and SARs would be entitled to receive in accordance with the
Merger Agreement.
44
<PAGE>
ISP Incentive Plan
Number of Shares
Underlying Options
Name and Position Under the Plan
- ----------------- --------------
Samuel J. Heyman
Chairman of the ISP Board
and Chief Executive Officer..... (1)
Peter R. Heinze
President and Chief Operating Officer (1)
Carl R. Eckardt
Executive Vice President........ (1)
James P. Rogers
Executive Vice President and
Chief Financial Officer......... 550,124
Richard A. Weinberg
Senior Vice President, General
Counsel and Secretary........... 378,024
Charles M. Diker.................. (1)
Harrison J. Goldin................ (1)
Sanford Kaplan.................... (1)
Burt Manning...................... (1)
All current executive officers as a group 1,042,003
All non-employee directors as a group (1)
All employees (except executive officers)
as a group 621,447
- ---------------------
(1) The proposed amendment to the ISP Incentive Plan does not affect the
options held by this person or group.
- - - - - - - -
The ISP Board recommends a vote FOR adoption of the proposed amendment to the
ISP Incentive Plan.
45
<PAGE>
PROPOSAL 3 -- ELECTION OF DIRECTORS
Seven directors are to be elected to serve until the next Annual Meeting of
Stockholders and until their successors are elected and have qualified. The
persons designated in the enclosed proxy card will vote shares represented by a
valid unrevoked proxy FOR the election of each of the below-named nominees
unless instructions to the contrary are indicated in the proxy. If any such
nominees should be unable to serve for any reason, which the Company does not
anticipate, it is intended that proxies will be voted for the election of such
other persons as shall be designated by the ISP Board. The directors of ISP
serving immediately prior to the Effective Date will be the initial directors of
the Surviving Corporation.
Nominees
The following persons, all of whom are currently directors of ISP, have been
nominated for election as directors. Under ISP's By-Laws, each director
continues in office until the next Annual Meeting of Stockholders and until his
successor is elected and qualified. No family relationship exists between any of
the directors or executive officers of the Company. The information presented
below with respect to each nominee has been furnished by the nominee.
CHARLES M. DIKER
(63) Mr. Diker has been a director of ISP since February 1992. He
has been a non-managing principal of Weiss, Peck & Greer, an
investment management firm, since 1975. He also has been
Chairman of the Board of Cantel Industries Inc., a
manufacturer of medical diagnostics and infection control
products, since 1986. Mr. Diker is a director of
BeautiControl Cosmetics, a cosmetics company, Data
Broadcasting Corporation, a financial data broadcasting
company, Chyron Corporation, a designer and manufacturer of
digital equipment, software and systems, and AMF Bowling,
Inc., an owner and operator of, and manufacturer of
equipment for, commercial bowling centers.
CARL R. ECKARDT
(67) Mr. Eckardt has been a director of ISP since its formation
and Executive Vice President, Corporate Development, of ISP
since November 1996, which position he had held from ISP's
formation to January 1994. From January 1994 to November
1996, Mr. Eckardt was President and Chief Operating Officer
of ISP. He has been Executive Vice President of Holdings
since its formation. Mr. Eckardt also has been Vice Chairman
of GAF since November 1996 and a director of GAF since April
1987. He was Executive Vice President of GAF from April 1989
to November 1996 and held the same position with GAF's
predecessor from January 1987 to April 1989. Mr. Eckardt has
been Executive Vice President of G-I Holdings Inc. ("G-I
Holdings"), a subsidiary of GAF, since March 1993. Mr.
Eckardt joined GAF's predecessor in 1974.
HARRISON J. GOLDIN
(62) Mr. Goldin has been a director of ISP since its formation.
Mr. Goldin has been the senior managing director of Goldin
Associates, L.L.C., a consulting firm, since January 1990.
Mr. Goldin was the Comptroller of the City of New York from
1974 to 1989 and a New York State Senator from 1966 to 1973.
PETER R. HEINZE
(55) Dr. Heinze has been a director, President and Chief
Operating Officer of ISP since November 1996. He was Senior
Vice President, Chemicals of PPG Industries, Inc., a glass
products, coatings and resins, and chemicals manufacturer,
from April 1993 to November 1996 and Group Vice President,
Chemicals of PPG Industries, Inc. from August 1992 to April
1993. From January 1988 to August 1992, Dr. Heinze was
President, Chemicals Division, and an Executive Vice
President of BASF Corporation, a diversified chemical
manufacturing company.
46
<PAGE>
SAMUEL J. HEYMAN
(59) Mr. Heyman has been a director, Chairman and Chief Executive
Officer of ISP since its formation and has held the same
positions with Holdings since its formation. Mr. Heyman also
has been a director, Chairman and Chief Executive Officer of
GAF and certain of its subsidiaries since April 1989, prior
to which he held the same position with GAF's predecessor
from December 1983 to April 1989. Mr. Heyman has been a
director and Chairman of Building Materials Corporation of
America ("BMCA"), an indirect wholly-owned subsidiary of
GAF, since its formation, Chief Executive Officer of BMCA
since June 1996 and a director of U.S. Intec Inc. ("USI"), a
wholly-owned subsidiary of BMCA, since October 1995. He is
also the Chief Executive Officer, Manager and General
Partner of a number of closely held real estate development
companies and partnerships whose investments include
commercial real estate and a portfolio of publicly traded
securities.
SANFORD KAPLAN
(81) Mr. Kaplan has been a director of ISP since November 1992.
He has been a private investor and consultant since 1977
when he retired from Xerox Corporation, where he was a
Senior Vice President and a director. He is also a director
emeritus of Intel Corp., a computer hardware and component
manufacturer.
BURT C. MANNING
(66) Mr. Manning has been a director of ISP since November 1992.
Mr. Manning was Chairman of J. Walter Thompson Company, a
multinational advertising company, from July 1987 through
December 1997 and was Chief Executive Officer of such
company from July 1987 to December 1996. He has served as
Chairman Emeritus of such company since January 1998.
47
<PAGE>
EXECUTIVE OFFICERS
A brief biography of each executive officer of ISP (other than Messrs.
Heyman and Eckardt and Dr. Heinze, whose biographies are set forth above) is
provided below. Executive officers are typically elected by the Board of
Directors at its annual meeting and hold office until the next annual meeting of
the Board of Directors or until their successors have been duly elected and
qualified.
JAMES P. ROGERS
(47) Mr. Rogers has been Executive Vice President-Finance of ISP
and Executive Vice President and Chief Financial Officer of
Holdings since December 1996. He was Senior Vice President
and Chief Financial Officer of Holdings from its formation
to December 1996 and Senior Vice President-Finance of ISP
from November 1993 to December 1996. He was Treasurer of ISP
from March 1992 to December 1994 and from September 1995 to
December 1996. Mr. Rogers also has been Executive Vice
President and Chief Financial Officer of GAF, G-I Holdings
and certain of their subsidiaries and Executive Vice
President of BMCA and USI since December 1996. He was Senior
Vice President and Chief Financial Officer of GAF, G-I
Holdings and certain of their subsidiaries from November
1993 to December 1996 and of BMCA from its formation to
December 1996. Mr. Rogers has been a director of USI since
October 1995 and was Senior Vice President of USI from
October 1995 to December 1996. He has served as Treasurer of
GAF, G-I Holdings and certain of their subsidiaries since
March 1992 and was Vice President-Finance of such
corporations from March 1992 to October 1993. From August
1987 to March 1992, Mr. Rogers was Treasurer of Amphenol
Corporation, a manufacturer of electronic connectors.
ANDREW G. MUELLER
(55) Mr. Mueller has been Executive Vice President-Operations of
ISP since May, 1997. He was employed by BASF Corporation as
Group Vice President, Colorants & Textile/Leather Chemicals
from December 1995 to April 1997 and as Vice President,
Fiber Intermediates from April 1989 to November 1995.
RICHARD A. WEINBERG
(38) Mr. Weinberg has been Senior Vice President and General
Counsel of ISP and certain of its subsidiaries since May
1996 and of Holdings since its formation. He also has been
Senior Vice President and General Counsel of GAF, G-I
Holdings, BMCA and certain of their subsidiaries since May
1996. He was Vice President and General Counsel of BMCA from
September 1994 to May 1996, Vice President-Law of BMCA from
May 1994 to September 1994 and Vice President-Law of GAFBMC
from April 1993 to May 1994. Mr. Weinberg was employed by
Reliance Group Holdings Inc., a diversified insurance
holding company, as Staff Counsel from October 1987 to
January 1990 and as Assistant Vice President and Corporate
Counsel from January 1990 to April 1993.
RANDALL R. LAY
(43) Mr. Lay has been Vice President and Chief Financial Officer
of ISP since April 1995. From August 1993 to April 1995, he
served as Controller, Specialty Derivatives of ISP. From
March 1991 to August 1993, he was Director, Financial
Planning of Otis Elevator Company and from July 1989 to
March 1991 he was Director, Financial Planning of United
Technologies Corporation.
48
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
As of April 17, 1998, the ISP Common Stock was beneficially owned by the
Company's directors, the executive officers named in the Summary Compensation
Table below, directors and executive officers of the Company as a group and each
person or group known by the Company to be the beneficial owner of more than 5%
of the ISP Common Stock as follows:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SHARES
NAME(1) SHARES OWNED % BENEFICIALLY OWNED %
- ------- ------------ - ------------------ -
<S> <C> <C> <C> <C>
Samuel J. Heyman.......................... 125,000 * 80,715,000(2)(3) 83.8%(2)(3)(5)
Carl R. Eckardt........................... 1,000 * 103,832(3)(5) *
Peter R. Heinze........................... 0 -- 0 --
Charles M. Diker.......................... 12,000 * 41,000(3)(4) *
Harrison J. Goldin........................ 0 -- 15,000(3) *
Sanford Kaplan............................ 5,000 * 20,000(3) *
Burt Manning.............................. 7,000(3) * 22,000(3) *
James P. Rogers........................... 20,848(3) * 88,168(3) *
Richard A. Weinberg....................... 0 -- 5,600(3) *
Holdings.................................. 80,500,000 83.7% 80,500,000 83.7%
All directors and executive officers of ISP
as a group (11 persons).............. 173,039(3) * 81,013,191(2)(3)(5) 84%
</TABLE>
- ---------------------
* Less than 1%.
(1) The business address of each of the directors and executive officers
listed above is 1361 Alps Road, Wayne, New Jersey 07470.
(2) Includes 80,500,000 shares owned by Holdings, a corporation controlled by
Mr. Heyman. The business address of Holdings is 818 Washington Street,
Wilmington, Delaware 19801.
(3) Includes, with respect to Mr. Heyman, 90,000 shares; Mr. Eckardt, 102,832
shares; Mr. Diker, 15,000 shares; Mr. Goldin, 15,000 shares; Mr. Kaplan,
15,000 shares; Mr. Manning, 15,000 shares; Mr. Rogers, 67,320 shares; Mr.
Weinberg, 5,600 shares; and all directors and executive officers as a
group, 326,152 shares, subject to options granted under the ISP Incentive
Plan which are currently exercisable or will become exercisable within the
next 60 days. Also includes with respect to Mr. Rogers 7,848 shares and
for all directors and executive officers as a group 9,309 shares, which
were held in the GAF Capital Accumulation Plan as of December 31, 1997.
Includes with respect to Mr. Rogers 10,000 shares held jointly with his
spouse and with respect to Mr. Manning 7,000 shares held jointly with his
spouse.
(4) Includes 4,050 shares held by trusts for the benefit of Mr. Diker's
children of which Mr. Diker is trustee; 5,950 shares held by Mr. Diker's
spouse, as to which Mr. Diker disclaims beneficial ownership; and 4,000
shares over which Mr. Diker shares investment power, as to which Mr. Diker
disclaims beneficial ownership.
(5) The number of shares shown as being beneficially owned by all directors
and officers of the Company as a group attributes ownership of Holdings'
80,500,000 shares to Mr. Heyman. As of April 17, 1998, Messrs. Heyman and
Eckardt beneficially owned 97% and 1.7%, respectively, of the outstanding
capital stock of Holdings.
49
<PAGE>
Meetings, Committees and Directors' Fees
The ISP Board met six times in 1997.
The ISP Board has delegated certain of its functions and responsibilities
to committees of the ISP Board.
The Audit Committee reviews the integrity of the Company's financial
statements, internal controls, the internal audit function, the function and
fees of the independent public accountants, and other matters relating to
financial and accounting functions. Messrs. Diker, Goldin and Kaplan presently
constitute the Audit Committee. The Audit Committee met two times in 1997.
The Compensation Committee is responsible for the review and
administration of the Company's compensation practices, policies and plans.
Messrs. Diker, Goldin and Manning presently constitute the Compensation
Committee. The Compensation Committee met four times during 1997.
The ISP Board does not have a nominating committee. Mr. Kaplan attended
three ISP Board meetings and one Audit Committee meeting in 1997.
No directors who are employees of ISP or its affiliates receive
compensation for their services as directors. Outside directors receive an
annual fee of $18,000 and a fee of $750 per meeting of the Board of Directors.
Outside directors are compensated $250 per committee meeting held in connection
with a Board of Directors meeting and $750 per committee meeting held
independently. An additional fee of $3,000 per year is paid to outside directors
who chair a committee. If an outside director chairs more than one committee, no
additional compensation is paid. Under the ISP Incentive Plan, which will be
assumed by the Surviving Corporation in the Merger, each outside director is
granted a non-qualified stock option to purchase 5,000 shares of ISP Common
Stock (the "Initial Option") on the date such person becomes a director and an
additional non-qualified option to purchase 2,500 shares of ISP Common Stock (an
"Additional Option") on each anniversary of the date of grant of the Initial
Option. The term of each option granted is nine years. Initial Options are
subject to a three-year vesting period, commencing on the first anniversary of
the date of grant, and Additional Options are subject to a one-year vesting
period, becoming exercisable in full on the first anniversary of the date of
grant. The exercise price of the options is equal to the fair market value of
the underlying shares on the date of grant. The Company currently has four
non-employee directors, Messrs. Diker, Goldin, Kaplan and Manning, each of whom
was granted an Additional Option to purchase 2,500 shares of ISP Common Stock
during 1997. See "THE MERGER -- Background of the Merger."
Following consummation of the Merger, the Board of Directors of the
Surviving Corporation initially will have three committees (which be the same as
the three committees of the ISP Board). The principal responsibilities and
membership of each such committee initially will be the same as the principal
responsibilities and membership of the corresponding committee of the ISP Board.
50
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY
Report of the Compensation Committee of the Board of Directors
The Compensation Committee of the Board of Directors establishes the
compensation policies of the Company, evaluates and determines the specific
compensation levels for the Company's executive officers and other employees and
administers the Company's compensation plans. The Compensation Committee is
composed of three independent, non-employee directors who have no interlocking
relationships as defined by the rules promulgated by the Securities and Exchange
Commission.
Philosophy
The objectives of the Company's executive compensation program are to
support the Company's strategic goals, to provide compensation that will
attract, retain and motivate highly qualified executives and to align
executives' long-term interests with those of the Company's stockholders. The
Compensation Committee's philosophy is to compensate the Company's executive
officers based primarily on their performance and level of responsibility.
Generally, the Company seeks to maintain a competitive position in the executive
marketplace with companies identified by the Company, using external surveys, as
being of similar size and engaged in similar businesses, by establishing total
compensation levels for executive officers competitive with the median total
compensation earned by executives with comparable responsibilities in such
comparison group. These companies are not necessarily the same as those
comprising the peer group index in the performance graph included elsewhere in
this proxy statement.
Executive Compensation
The principal components of the Company's executive compensation program
are base salary, annual incentive compensation and long-term incentive
compensation primarily in the form of stock options.
Executive salary levels generally are adjusted annually based on an
evaluation of each executive's performance (such as individual managerial
accomplishments and current responsibilities of such executive officer) and the
Company's budgetary considerations.
Annual incentive compensation for executive officers is awarded under the
Company's Executive Incentive Compensation Program ("EIC") and is based on both
corporate and individual performance. In any year, the aggregate EIC pool, if
any, for all awards is based principally on the Company's operating income as a
percentage of the Company's budgeted operating income established at the
beginning of such year. The EIC pool for any year may vary in size depending
upon unusual factors affecting the Company's operating results. Individual award
targets for each participant in the EIC (including executive officers) are
computed as a percentage of base salary based on such participant's grade level.
Individual EIC awards may vary from the applicable percentage based on corporate
performance as described above or any executive officer's individual performance
as described below.
Specific performance-related targets and objectives for an executive
officer are established at the beginning of each year. These individual goals
relate to specific business, department or managerial objectives that support
the Company's overall business plan and other specific corporate goals and
strategic objectives established for the year. After considering the evaluations
and recommendations of the executive officer's supervisor and a senior
management committee comprised of the Company's Chief Executive Officer,
President or Chief Operating Officer and Senior Vice President, Human Resources,
the Compensation Committee determines an executive officer's individual EIC
award based on the Company's financial performance, such officer's achievement
of these pre-established targets and goals and such officer's contribution to
the Company's overall performance. It also exercises discretion in view of the
Company's compensation objectives and policies describes above to determine
total annual compensation. Based upon the foregoing
51
<PAGE>
criteria, the compensation committee determined that an aggregate of $1,028,269
in EIC awards should be paid to the Company's executive officers for the year
ended December 31, 1997.
The Compensation Committee believes that stock ownership by management
encourages management to enhance stockholder value. Accordingly, options to
purchase shares of ISP Common Stock are an important component of the Company's
performance-based compensation philosophy and provide a vehicle by which
executive officers can obtain a stake in the Company, thus motivating them to
increase the Company's profitability. The Compensation Committee generally has
granted options to executive officers under the ISP Incentive Plan on a regular,
periodic basis based upon the executive's individual performance, respective
grade level and the Company's stock price at the time of grant. The Compensation
Committee also may grant from time to time options to executives based on
individual merit, taking into account, among other things, an evaluation of the
executive's past or potential contribution to the Company, its parents or
subsidiaries and recommendations by the Company's management including the Chief
Executive Officer. In December 1997, such special option grants included options
granted under the ISP Future Leadership Program, which was adopted by the Board
of Directors in December 1995 as part of the ISP Incentive Plan. During 1997,
non-qualified stock options for an aggregate of 76,250 shares of ISP Common
Stock were granted to the Company's executive officers, including options for
7,500 shares granted under the ISP Future Leadership Program.
Compensation of the Chief Executive Officer
The Compensation Committee reviews and evaluates the Chief Executive
Officer's total compensation package annually. Although the Compensation
Committee's bases for determining the Chief Executive Officer's compensation are
substantially the same as discussed above with respect to the Company's other
executive officers, the Compensation Committee relies more heavily on the
Company's financial performance, overall financial condition and achievement of
annual and strategic corporate objectives in determining the total annual and
long-term compensation for Mr. Heyman. Among the criteria used in determining
Mr. Heyman's compensation are (i) the Company's financial performance compared
to its performance in the prior year, including the Company's operating income,
revenues, net income per shares and overall financial condition, and (ii) the
Company's actual financial performance compared to its annual business plan. In
recognition of the Company's performance during 1996 and the extent to which
certain financial and operational goals were met, the Compensation Committee
increased Mr. Heyman's annual base salary to $581,500, effective as of April 1,
1997.
Mr. Heyman also is eligible to participate in the EIC to the same extent
as other executive officers of the Company. Based on the Compensation Committee
evaluation of both corporate and individual achievement of performance-related
goals ars described above, Mr. Heyman was entitled to receive an EIC award of up
to approximately $648,950 for 1997. Mr. Heyman elected not to receive any award
so that the aggregate EIC pool for 1997 could be awarded in its entirety to the
other executives of the Company. The Compensation Committee also considers Mr.
Heyman's total compensation package relative to that of other chief executive
officers in the comparison group of companies of similar size and in similar
businesses to the Company described above. The Company believes that Mr.
Heyman's compensation is below average in comparison to that paid to chief
executive officers of such comparable companies.
Members of the Compensation Committee:
Charles M. Diker
Harrison J. Goldin
Burt C. Manning
52
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of ISP and the four other most highly compensated executive officers of
ISP who were employed by ISP as of December 31, 1997.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Name and Principal Fiscal Bonus Other Annual Underlying All Other
Position Year Salary($) ($)(1) Compensation($) Options/SARs(#)(2) Compensation($)
- ---------------------- ------ ------------ ---------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman........... 1997 $579,125 $ 0 $ 0 0 $ 20,579(3)
Chairman of the Board of 1996 572,000 200,000 0 89,200 (ISP-O) 14,739(3)
Directors and Chief 1995 553,666 200,000 0 150,000 (ISP-O) 9,848(3)
Executive Officer
Peter R. Heinze............ 1997 $379,725 $349,271 $ 31,774(4) 18,750 (ISP-O) $24,291(4)
President and Chief 1996 46,875(4) 40,000(4) 0 156,250 (ISP-O) 0(4)
Operating Officer 1995 (4) (4) (4) (4) (4)
Carl R. Eckardt............ 1997 $340,704 $156,277 $ 0 0 $8,500(5)
Executive Vice President, 1996 339,612 164,901 0 49,600 (ISP-O) 17,756(5)
Corporate Development 1995 325,500 300,000 0 41,600 (ISP-O) 10,095(5)
James P. Rogers............ 1997 $275,125 $250,000 $ 0 7,500 (ISP-O) $18,459(6)
Executive Vice President, 1996 263,467 225,000 0 39,210 (ISP-O)/ 14,258(6)
Finance(9) 24,095(ISPH-O)(6)(8)
1995 248,333 225,000 0 38,300 (ISP-O) 13,154(6)
Richard A. Weinberg........ 1997 $252,475 $250,000 $ 0 0 $15,118(7)
Senior Vice President, 1996 130,833(7) 125,014(7) 0 37,410 (ISP-0)/ 2,960(7)
General Counsel and 31,970 (ISPH-O)(7)(8)
Secretary(10) 1995 (7) (7) (7) (7) (7)
</TABLE>
(1) Bonus amounts are payable pursuant to ISP's Executive Incentive Compensation
Program, except that in respect of the bonus amounts paid to certain
executive officers in 1997. ISP was reimbursed under a management agreement
for a portion of the bonus amounts earned by such executive officers. See
"CERTAIN TRANSACTIONS -- Management Agreement."
(2) The ISP options (ISP-O) are for shares of ISP Common Stock and the Holdings
options (ISPH-O) are for shares of redeemable convertible preferred stock of
Holdings. See "COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY -- Options
and Stock Appreciation Rights."
(3) Included in "All Other Compensation" for Mr. Heyman are: $18,116, $12,989
and $8,598 for the premiums paid by the Company for a life insurance policy
in 1997, 1996 and 1995, respectively; and $1,963, $1,250 and $1,250 for the
premiums paid by the Company for a long-term disability policy in 1997, 1996
and 1995, respectively.
(4) Included in "Other Annual Compensation" for Dr. Heinze are $25,043 in
payment of moving related expenses and a "tax gross-up" of $6,731 in 1997.
Included in "All Other Compensation" for Dr. Heinze are $10,792,
representing the Company's contribution under the GAF Capital Accumulation
Plan in 1997; $11,536 for the premium paid by the Company for a life
insurance policy in 1997; and $1,963 for the premium paid by the Company for
a long-term disability policy in 1997. Dr. Heinze commenced employment with
ISP in November 1996.
53
<PAGE>
(5) Included in "All Other Compensation" for Mr. Eckardt are: $6,537, $16,506
and $8,845 for the premiums paid by the Company for a life insurance policy
in 1997, 1996 and 1995, respectively; and $1,963, $1,250 and $1,250 for the
premiums paid by the Company for a long-term disability policy in 1997, 1996
and 1995, respectively.
(6) Included in "All Other Compensation" for Mr. Rogers are: $11,450, $11,198
and $10,963, representing the Company's contribution under the GAF Capital
Accumulation Plan in 1997, 1996 and 1995, respectively; $5,046, $1,810 and
$978 for the premiums paid by the Company for a life insurance policy in
1997, 1996 and 1995, respectively; and $1,963, $1,250 and $1,213 for the
premiums paid by the Company for a long-term disability policy in 1997, 1996
and 1995, respectively. Excluded are the stock appreciation rights relating
to shares of Holdings common stock referred to in Note (2) under the second
table under "COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY -- Options
and Stock Appreciation Rights."
(7) Mr. Weinberg commenced service as Senior Vice President, General Counsel and
Secretary of the Company on May 15, 1996. Prior to that time, he served as
Vice President and General Counsel of BMCA. Excluded are amounts paid to Mr.
Weinberg by BMCA prior to May 15, 1996. Included in "All Other Compensation"
for Mr. Weinberg are: $11,300 and $2,158, representing the Company's
contribution under the GAF Capital Accumulation Plan in 1997 and 1996,
respectively; $1,914 and $277 for the premiums paid by the Company for a
life insurance policy in 1997 and 1996, respectively; and $1,904 and $525
for the premiums paid by the Company for a long-term disability policy in
1997 and 1996, respectively.
(8) Excluded are the stock appreciation rights relating to shares of GAF common
stock referred to in Note (4) under the second table under "COMPENSATION OF
EXECUTIVE OFFICERS OF THE COMPANY -- Options and Stock Appreciation Rights."
(9) If the Merger were consummated on the date hereof, James P. Rogers would
receive, subject to satisfaction of future vesting requirements through
December 2003 and subject to his remaining an employee of the Company at
such vesting periods, $5.3 million and options to purchase 550,124 shares of
Surviving Corporation Common Stock. These options would have an exercise
price of $16.125 per share. See "THE MERGER AGREEMENT -- Treatment of
Holdings' Options and SARs."
(10) If the Merger were consummated on the date hereof, Richard A. Weinberg
would receive, subject to satisfaction of future vesting requirements
through December 2003 and subject to his remaining an employee of the
Company at such vesting periods, $3.2 million and options to purchase
378,024 shares of Surviving Corporation Common Stock. These options would
have an exercise price of $16.125 per share. See "THE MERGER AGREEMENT --
Treatment of Holdings' Options and SARs."
54
<PAGE>
Options and Stock Appreciation Rights
The following tables summarize options to acquire ISP Common Stock ("ISP
Options") granted during 1997 to the executive officers named in the Summary
Compensation Table above, the potential realizable value of such options and the
value of the unexercised ISP Options, Holdings Preferred Stock Options and SARs
held by such persons on December 31, 1997. No Options or SARs were exercised by
such persons, and no Holdings Preferred Stock Options or SARs relating to common
stock of Holdings were granted, during 1997.
ISP COMMON STOCK OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO MARKET OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE/ PRICE ON FOR OPTION TERM
OPTIONS IN FISCAL BASE PRICE DATE OF EXPIRATION -------------------------------
NAME GRANTED 1997 ($/SH) GRANT DATE 0% 5% 10%
---- ------- ---- ------ ----- ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman....... -- -- -- -- -- -- -- --
Peter R. Heinze........ 18,750(ISP-O)(1) 3.6% $9.9375 $14.9375 12/31/03 $93,750 $189,003 $309,847
Carl R. Eckardt........ -- -- -- -- -- -- -- --
James P. Rogers........ 7,500 (ISP-O)(1) 1.5% $9.9375 $14.9375 12/31/03 $37,500 $75,601 $123,939
Richard A. Weinberg.... -- -- -- -- -- -- -- --
</TABLE>
(1) The ISP Options were granted under the ISP Incentive Plan. The ISP Options
set forth in the foregoing table will become fully vested 2-1/2 years
after the date of grant, and, to the extent vested, are exercisable for
six years from the date of grant. The Compensation Committee may, on a
case by case basis, accelerate the vesting of unvested options in the
event of a "Change of Control" (as therein defined). See "PROPOSAL 2 --
AMENDMENT OF ISP INCENTIVE PLAN."
55
<PAGE>
VALUE OF ISP COMMON STOCK OPTIONS/HOLDINGS PREFERRED STOCK
OPTIONS/HOLDINGS STOCK APPRECIATION RIGHTS AT DECEMBER 31, 1997(4)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED ISP OPTIONS (ISP-O)/ IN-THE-MONEY ISP OPTIONS/HOLDINGS
HOLDINGS OPTIONS (ISPH-O)/HOLDINGS OPTIONS/HOLDINGS SARS
SARS(S) AT 12/31/97 AT 12/31/97(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
Samuel J. Heyman...... 60,000/179,200(ISP-O) $ 476,250/$987,550
Peter R. Heinze....... 0/175,000(ISP-O) $ 0/$826,172
Carl R. Eckardt....... 93,784/ 92,656(ISP-O) $ 492,907/$457,621
James P. Rogers(4).... 61,320/ 83,690(ISP-O) $ 310,208/$471,329
7,455/1,864(S)(2) $ 834,967/$208,742(2)
0/24,095(ISPH-O)(3) $ 0/$240,727(3)
Richard A. Weinberg(4) 2,800/34,610(ISP-O) $ 8,925/$107,393
0/31,970(ISPH-O)(3) $ 0/$560,168(3)
</TABLE>
- ------------------
(1) All ISP Options, Holdings Preferred Stock Options and Holdings SARs were
in-the-money at December 31, 1997.
(2) The Holdings SARs represent the right to receive a cash payment based upon
the appreciation in value of the specified number of shares of Holdings
common stock over the sum of the determined initial Book Value (as
defined) per share of common stock of Holdings, plus interest on such Book
Value at a specified rate. The Holdings SARs vest over a five-year period,
subject to earlier vesting under certain circumstances including in
connection with a change of control, and have no expiration date. The
Holdings SARs were issued on January 1, 1997 to holders of stock
appreciation rights relating to shares of GAF common stock ("GAF SARs").
The grant date of each Holdings SAR is deemed to be the grant date of such
GAF SARs. See "COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY --
Summary Compensation Table."
(3) The Holdings Preferred Stock Options represent options to purchase shares
of redeemable convertible preferred stock of Holdings (the "Holdings
Preferred Stock"). Each share of Holdings Preferred Stock is convertible,
at the holder's option, into shares of common stock of Holdings at a
formula price based on the sum of the determined initial Book Value (as
defined in the option agreements) plus interest on such Book Value at a
specified rate. The Holdings Preferred Stock Options are exercisable at a
price of $111.44 per share and vest over seven years, subject to earlier
vesting under certain circumstances including in connection with a change
of control. Dividends will accrue on the Holdings Preferred Stock from the
date of issuance at the rate of 6% per annum. Holdings Preferred Stock is
redeemable, at Holdings' option, for a redemption price equal to the
exercise price per share plus accrued and unpaid dividends. The common
stock of Holdings issuable upon conversion of the Holdings Preferred Stock
is subject to repurchase by Holdings under certain circumstances at a
price equal to current Book Value (as defined). The exercise price of the
Holdings Preferred Stock Options is equal to the fair value per share of
the Holdings Preferred Stock at the date of grant. The Holdings Preferred
Stock Options have no expiration date. The Holdings Preferred Stock
Options were issued on January 1, 1997, to holders of similar options to
purchase redeemable convertible preferred stock of GAF granted during
1996, which GAF options were exchanged for GAF SARs. See Note (4) below.
The grant date of each Holdings Preferred Stock Option is deemed to be the
grant date of such GAF options. See Notes 9 and 10 under "COMPENSATION OF
EXECUTIVE OFFICERS OF THE COMPANY -- Summary Compensation Table."
(4) Excluded are GAF SARs as follows: Mr. Rogers--7,455 exercisable and 10,473
unexercisable GAF SARs, all of which were in-the-money and had a value of
$72,640 in respect of the exercisable and $187,437 in respect of the
unexercisable GAF SARs at December 31, 1997; and Mr. Weinberg--12,320
unexercisable GAF SARs, all of which were in-the-money and had a value of
$225,286 at December 31, 1997.
56
<PAGE>
Pension Plans
Non-Qualified Retirement Plan. The Company has a non-qualified retirement
plan for the benefit of certain key employees (the "Retirement Plan"). The
benefit payable under the Retirement Plan, which vests in accordance with a
10-year schedule, consists of an annual payment commencing at age 65 equal to
25% of a covered employee's last full year's base salary. The benefit continues
for the longer of 15 years or the joint lifetimes of the employee or his or her
spouse. If a covered employee dies while employed by the Company or a
subsidiary, a death benefit of 36% of the employee's base salary at the date of
death is payable for a term of 15 years to the employee's beneficiary.
No new participants have been admitted to the Retirement Plan since
January 1989 and it is not anticipated that any new participants will be
admitted hereafter. Of the executive officers named in the Summary Compensation
Table, only Messrs. Heyman and Eckardt participate in the Retirement Plan.
The following table shows, for the salary levels and years of service
indicated, the annual pension benefit, payable commencing at age 65 to
participants in the Retirement Plan.
Non-Qualified Retirement Plan
Annual Payments at Age 65
<TABLE>
<CAPTION>
Years of Service
---------------------------------------------------------------------------------------------------------
Salary 5 10 15 20 25 30 35
-------- ------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$250,000 $31,250 $62,500 $62,500 $62,500 $62,500 $62,500 $62,500
300,000 37,500 75,000 75,000 75,000 75,000 75,000 75,000
350,000 43,750 87,500 87,500 87,500 87,500 87,500 87,500
400,000 50,000 100,000 100,000 100,000 100,000 100,000 100,000
450,000 56,250 112,500 112,500 112,500 112,500 112,500 112,500
500,000 62,500 125,000 125,000 125,000 125,000 125,000 125,000
550,000 68,750 137,500 137,500 137,500 137,500 137,500 137,500
600,000 75,000 150,000 150,000 150,000 150,000 150,000 150,000
650,000 81,250 162,500 162,500 162,500 162,500 162,500 162,500
700,000 87,500 175,000 175,000 175,000 175,000 175,000 175,000
</TABLE>
The years of service covered by the Retirement Plan are twelve years for
each of Mr. Heyman and Mr. Eckardt. Current salaries covered by the Retirement
Plan are the amounts set forth under the "salary" column of the Summary
Compensation Table for the above-named executive officers. The annual pension
benefit is not subject to reduction for Social Security and other benefits and
is computed on a straight-life annuity basis.
Additional Arrangements. ISP has agreed to provide Mr. Eckardt, at age 67,
a $200,000 annuity comprising two pieces: (1) the benefits payable under the
Retirement Plan described above, and (2) a supplemental retirement benefit
representing the difference between $200,000 per year and the benefit payable
under the Retirement Plan. The supplemental retirement benefit vests at 20% per
year over a five-year period beginning March 1994. In the event Mr. Eckardt
should die without a surviving spouse, no supplemental retirement benefit will
be payable. In the event Mr. Eckardt should die prior to the termination of his
employment, leaving a surviving spouse, his spouse will be entitled to receive
for her life an annual payment of the portion of the supplemental retirement
benefit in which he was vested on the date of his death. If Mr. Eckardt's
employment is terminated involuntarily other than for cause (as defined), or in
the event Mr. Eckardt becomes totally and permanently disabled, he will be
entitled to receive payment of the portion of the supplemental retirement
benefit in which he is vested on the date of termination or the onset of such
disability. If Mr. Eckardt's employment is terminated for cause, the Company in
its sole discretion may declare all or any portion (whether vested or unvested)
of the supplemental retirement benefits forfeited.
57
<PAGE>
Other Agreements
In connection with his becoming President and Chief Operating Officer of
ISP in November 1996, Dr. Heinze and ISP entered into a letter agreement that
provides, among other things, that Dr. Heinze will receive an initial base
salary of $375,000 per year, certain stock options and other benefits. In
accordance with the letter agreement, on December 9, 1996, Dr. Heinze was
granted under the ISP Incentive Plan 125,000 ISP Options at an exercise price of
$11.25 per share, which options vest in full on December 9, 1999 and expire nine
years from the date of grant, and 31,250 ISP Options at an exercise price of
$6.25 per share, which options vest in full on June 9, 1999 and expire six years
from the date of grant, in each case subject to earlier vesting in the event of
a "Change of Control" (as defined in the ISP Incentive Plan). He is also
eligible to participate in ISP's Executive Incentive Compensation Program and
the ISP Incentive Plan. The letter agreement also provides that if Dr. Heinze's
employment is terminated by ISP other than for cause, ISP will continue to pay
Dr. Heinze his then base salary for a severance period of up to 18 months
depending upon when such termination occurs. In addition, in the event of a
Change of Control of ISP and either (i) the termination of Dr. Heinze's
employment by ISP (or its successor) or other than for cause within twelve
months after such Change in Control or (ii) the termination of employment by Dr.
Heinze under certain circumstances, Dr. Heinze will continue to receive his base
salary in lieu of any other severance for 24 months following such termination.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires ISP's directors, executive
officers and persons who beneficially own more than 10 percent of a registered
class of ISP's equity securities ("10% Owners") to file reports of beneficial
ownership of ISP's securities and changes in such beneficial ownership with the
Commission. Directors, executive officers and 10% Owners are also required by
rules promulgated by the Commission to furnish ISP with copies of all forms they
file pursuant to Section 16(a).
Based solely upon a review of the copies of the forms filed pursuant to
Section 16(a) furnished to ISP, or written representations that no year-end Form
5 filings were required for transactions occurring during fiscal 1997, ISP
believes that its directors, executive officers and 10% Owners complied with
Section 16(a) filing requirements applicable to them during fiscal 1997, except
that Andrew G. Mueller, Executive Vice President, Operations, inadvertently
filed on an untimely basis an initial report of ownership on Form 3.
58
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of ISP Common Stock with the
performance of the Standard & Poor's 500 Index and the Standard & Poor's
Specialty Chemicals Index for the period from January 1, 1993 through the end of
1997. The graph assumes that the value of the investment in the ISP Common Stock
and in each index was $100 on December 31, 1992 and that all dividends were
reinvested.
STOCK PRICE PERFORMANCE
TOTAL RETURN ON $100 INVESTMENT
DIVIDENDS REINVESTED
[PERFORMANCE GRAPH]
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
S&P 500 100 114 112 153 189 252
S&P SPEC CHEM 100 110 100 131 134 166
ISP 100 71 75 115 130 158
The foregoing graph is not incorporated in any prior or future filings of
ISP under the Securities Act or the Exchange Act, directly or by reference to
the incorporation of proxy statements of ISP, unless ISP specifically
incorporates the graph by reference, and the graph shall not otherwise be deemed
filed under such Acts.
59
<PAGE>
CERTAIN TRANSACTIONS
Holdings was a wholly-owned subsidiary of GAF until January 1, 1997, when
all of its capital stock was distributed to the stockholders of GAF in a series
of transactions involving GAF's subsidiaries (the "Separation Transactions"). As
a result, Holdings and ISP are no longer direct or indirect subsidiaries of GAF
or its subsidiary, G-I Holdings.
Management Agreement
Pursuant to a Management Agreement (the "Management Agreement") which
expires at the end of 1998, the Company provides certain general management,
administrative, legal, telecommunications, information and facilities services
to Holdings and certain of its affiliates, including GAF, BMCA, G-I Holdings and
GAF Fiberglass Corporation. Charges by the Company for providing such services
aggregated $5.6 million in 1997. Such charges consist of management fees and
other reimbursement expenses attributable to, or incurred by the Company for the
benefit of, the respective parties, which are based on an estimate of the costs
the Company incurs to provide such services. Effective January 1, 1998, the term
of the Management Agreement was extended through the end of 1998, and the
management fees payable under the agreement were adjusted, including an
adjustment to reflect the direct payment by BMCA of the costs of certain
services rendered by third paries that were previously included in the
management fees payable to the Company. The Company and BMCA further modified
the agreement to allocate a portion of the management fees payable by BMCA under
the Management Agreement to separate lease payments for the use of BMCA's
headquarters. Based on the services provided by the Company in 1997, after
taking into account the modifications to the agreement described above, the
aggregate amount payable to the Company under the Management Agreement for 1998
is expected to be approximately $5.6 million. BMCA also is expected to pay
directly certain third party costs which aggregated approximately $0.4 million
in 1997, that were previously included in the management fees. In addition, the
Company currently anticipates that in 1998 BMCA will require additional space
for its headquarters and will pay additional rent based on the square footage to
be occupied. Although, due to the unique nature of the services provided under
the Management Agreement, comparisons with third party arrangements are
difficult, the Company believes that the terms of the Management Agreement,
taken as a whole, are no less favorable to the Company than could be obtained
from an unaffiliated third party. Certain of the executive officers of the
Company perform services for affiliates of the Company pursuant to the
Management Agreement, and ISP is indirectly reimbursed therefor by virtue of the
management fees and other reimbursable expenses payable under the Management
Agreement. BMCA reimbursed ISP for a portion of the bonus amounts paid to
Messrs. Rogers and Weinberg in connection with services performed by them for
BMCA during 1997. See "COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY --
Summary Compensation Table." In connection with the execution of the Merger
Agreement, an amendment to the Management Agreement was executed pursuant to
which G-I Holdings agreed to reimburse the Surviving Corporation for any amounts
paid by the Surviving Corporation pursuant to the exercise of rights to receive
cash and options to purchase Surviving Corporation Common Stock granted to Mr.
Sunil Kumar, the President and Chief Operating Officer of BMCA, by the Surviving
Corporation in accordance with the terms of the Merger Agreement and in exchange
for SARs and Holdings Preferred Stock Options held by Mr. Kumar.
Tax Sharing Agreement
Effective January 1, 1997, the Company and each of its domestic
subsidiaries entered into an agreement (the "Tax Sharing Agreement") with
Holdings with respect to the payment of Federal income taxes and certain related
matters. During the term of the Tax Sharing Agreement, which extends as long as
the Company or any of its domestic subsidiaries, as the case may be, are
included in a consolidated Federal income tax return filed by Holdings or a
successor entity, the Company is obligated to pay to Holdings an amount equal to
those Federal income taxes the Company would have incurred if, subject to
certain exceptions, the Company (on behalf of itself and its domestic
subsidiaries) filed its own consolidated Federal income tax return. These
exceptions include, among others, that the Company may utilize certain favorable
tax attributes, i.e., losses, deductions and credits (except for a certain
amount of foreign tax credits and, in general, net operating losses), only at
the time such attributes reduce the Federal income tax liability of Holdings and
its consolidated subsidiaries (the "Holdings Group"); and that the Company may
carry back or carry forward its favorable tax attributes only after taking into
account current tax attributes of the Holdings Group. In general, subject to the
foregoing limitations, unused tax attributes carry forward for use in reducing
amounts payable by the Company to Holdings in future years. Subject to certain
exceptions, actual payment for
60
<PAGE>
such attributes will be made by Holdings to the Company only when Holdings
receives an actual refund of taxes from the Internal Revenue Service or, under
certain circumstances, the earlier of (i) the dates of the filing of Federal
income tax returns of the Company for taxable years of the Company following the
last taxable year in which it was a member of the Holdings Group, or (ii) when
Holdings no longer owns more than 50% of the Company. Foreign tax credits not
utilized by the Company in computing its tax sharing payments will be refunded
by Holdings to the Company, if such credits expire unutilized, upon the
termination of the statute of limitations for the year of expiration. The Tax
Sharing Agreement provides for analogous principles to be applied to any
consolidated, combined or unitary state or local income tax filings. Under the
Tax Sharing Agreement, Holdings makes all decisions with respect to all matters
relating to taxes of the Holdings Group. The provisions of the Tax Sharing
Agreement take into account both the Federal income taxes ISP would have
incurred if it filed its own separate Federal income tax return and the fact
that ISP is a member of the ISP Holdings Group for Federal income tax purposes.
ISP was a party to tax sharing agreements with members of the GAF
consolidated tax group (the "GAF Group"). As a result of the Separation
Transactions, ISP is no longer included in the consolidated Federal income tax
returns of GAF and, therefore, such tax sharing agreements are no longer
applicable with respect to the tax liabilities of ISP for periods subsequent to
the Separation Transactions. ISP remains obligated, however, with respect to tax
liabilities imposed or that may be imposed for periods prior to the Separation
Transactions. Among other things, those tax sharing agreements provide for the
sharing of the GAF Group's consolidated tax liability based on each member's
proportionate share of the tax as if such member filed on a separate basis.
Accordingly, ISP would be required to pay an amount equal to its allocable share
of any consolidated tax deficiency of the GAF Group and would be entitled to a
refund if losses or other attributes reduce the GAF Group's consolidated tax
liability. Moreover, foreign tax credits generated by ISP not utilized by GAF
will be refunded by GAF or its subsidiary to ISP, if such credits expire
unutilized upon termination of the statute of limitations for the year of
expiration. Furthermore, those tax sharing agreements provide for an
indemnification to ISP for any tax liability attributable to another member of
the GAF Group.
Sales to Affiliates
BMCA purchases from the Company all of its colored roofing granules
requirements (except for the requirements of BMCA's California roofing plant)
under a requirements contract. In addition, in December 1995, USI commenced
purchasing from the Company substantially all of its requirements for colored
roofing granules (except for the requirements of USI's Stockton, California and
Corvallis, Oregon plants) pursuant to a requirements contract. Each such
requirements contract was renewed for 1998 and is subject to annual renewal
unless terminated by either party to the agreement. In 1997, BMCA and USI
purchased a total of $51.1 million of mineral products from the Company,
representing approximately 7% of the Company's total net sales and approximately
62% of the Company's net sales of mineral products. The Company's supply
arrangements with BMCA and USI are at prices and on terms which the Company
believes are no less favorable to it than could be obtained from an unaffiliated
third party.
Affiliate Borrowings
Under the terms of its revolving credit facility, the Company and its
subsidiaries are permitted to make loans to affiliates, and provide letters of
credit issued for the benefit of such affiliates, up to an aggregate amount not
to exceed $75 million outstanding at any time. The largest amount of such loans
and letters of credit outstanding at any time during 1997 was $19.0 million.
Such loans and letters of credit were on terms which the Company believes were
no less favorable to the Company than could have been obtained from unaffiliated
third parties. As of March 29, 1998, no loans to affiliates or letters of credit
for the benefit of affiliates were outstanding.
During 1997, the Company and its subsidiaries also borrowed from Holdings
from time to time at the same rates available to the Company under its revolving
credit facility, which the Company believes were on terms no less favorable to
the Company than could be obtained from unaffiliated third parties. The largest
amount of such loans from Holdings outstanding at any time during 1997 was $68.6
million, and as of March 29, 1998 such borrowings outstanding were $50.0
million.
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Certain Other Transactions
For a discussion of certain arrangements with executive officers of the
Company, see "COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY -- Other
Agreements" and "Pension Plans -- Additional Arrangements."
The Company invests primarily in international and domestic arbitrage and
securities of companies involved in acquisition or reorganization transactions,
including, at times, common stock short positions which are offsets against long
positions in securities which are expected, under certain circumstances, to be
exchanged or converted into the short positions. The latter category of
investments is administered, at no cost or charge to the Company, by certain
investment partnerships controlled by Mr. Heyman and his family, and, when
purchased or sold on the same day as investments purchased or sold by members of
the GAF group of companies, other members of the Holdings group and certain
Heyman family enterprises, are effected at the same price as the investments of
such other entities.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
shares of Surviving Corporation Common Stock to be issued in the Merger will be
passed upon for Holdings by Weil, Gotshal & Manges LLP (a limited liability
partnership including professional corporations), New York, New York. Weil,
Gotshal & Manges LLP has from time to time represented, and may continue to
represent, the Company and certain of its affiliates in connection with certain
legal matters.
INDEPENDENT PUBLIC ACCOUNTANTS
No accounting firm has been selected to date to audit the accounts of the
Company for 1998. No such selection shall be made without the recommendation and
approval of ISP's Audit Committee.
Incorporation by Reference. The consolidated balance sheets and schedule
of ISP and Holdings as of December 31, 1997 and 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997 are incorporated by
reference in this Proxy Statement/Prospectus.
Experts. The consolidated financial statements and schedule of ISP and
Holdings incorporated by reference in this Proxy Statement/Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated by reference in
reliance upon the authority of said firm as experts in giving said reports.
1999 STOCKHOLDERS' PROPOSALS
Proposals of security holders intended for possible action at the 1999
Annual Meeting of the Company (or, if the Merger has been effected, the
Surviving Corporation) must be received by the Company (or by the Surviving
Corporation, as the case may be) at its principal executive offices prior to
____, 1998. All proposals received will be subject to the applicable rules of
the Securities and Exchange Commission.
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OTHER MATTERS
The cost of the solicitation will be borne by ISP. In addition to use of
the mails, proxies may be solicited by telephone, telegraph or personal
interview by employees of ISP without additional compensation.
ISP will reimburse brokerage firms, banks, trustees, nominees and other
persons authorized by ISP for their out-of-pocket expenses in forwarding proxy
material to the beneficial owners of ISP Common Stock.
By Order of the Board of Directors,
------------------------------
Richard A. Weinberg
Secretary
Wayne, New Jersey
_______________ __, 1998
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ANNEX A
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ISP HOLDINGS INC.
AND
INTERNATIONAL SPECIALTY PRODUCTS INC.
---------------------------------------
DATED as of MARCH 30, 1998
---------------------------------------
================================================================================
NYFS01...:\01\47201\0035\2377\AGR6187K.25L
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 30, 1998 (this
"Agreement"), by and between ISP Holdings Inc., a Delaware corporation ("ISP
Holdings"), and International Specialty Products Inc., a Delaware corporation
("ISP"). ISP Holdings and ISP are hereinafter sometimes collectively referred to
as the "Constituent Corporations."
WHEREAS, ISP has authorized capital stock consisting of (i)
300,000,000 shares of common stock, par value $.01 per share ("ISP Common
Stock"), of which 96,057,477 shares are issued and outstanding as of March 20,
1998, and (ii) 20,000,000 shares of preferred stock, par value $.01 per share,
none of which is issued and outstanding as of the date hereof; and
WHEREAS, ISP Holdings owns 80,500,000 shares of ISP Common Stock,
constituting approximately 84% of the outstanding shares of ISP Common Stock;
and
WHEREAS, ISP Holdings has authorized capital stock consisting of (i)
3,000,000 shares of common stock, par value $.01 per share ("ISP Holdings Common
Stock"), of which 1,754,374 shares are issued and outstanding as of March 20,
1998 and (ii) 800,000 shares of cumulative redeemable convertible preferred
stock, par value $.01 per share, none of which is issued and outstanding as of
the date hereof, and has outstanding options to purchase 121,658 shares of ISP
Holdings Series A Redeemable Convertible Preferred Stock and 27,748 stock
appreciation rights outstanding based on the value of ISP Holdings Common Stock;
and
WHEREAS, ISP intends to organize a new direct, wholly owned
subsidiary ("Newco"); and
WHEREAS, the respective Boards of Directors of ISP Holdings and ISP
believe it is in the best interest of each of ISP Holdings and ISP and their
respective stockholders to consummate the merger of ISP with and into ISP
Holdings (the "Merger") pursuant to the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL") and in accordance with the
terms and subject to the conditions of this Agreement, immediately following the
transfer by ISP (and at the request of ISP Holdings which
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request is deemed to be made by the execution of this Agreement) of all of ISP's
assets to Newco and, in connection therewith, Newco's assumption of all of ISP's
liabilities, other than ISP's rights and obligations under this Agreement (the
"Transfer");
WHEREAS, based upon the unanimous recommendation of the committee of
the Board of Directors of ISP comprised of members thereof who are not
stockholders, directors or officers of, or consultants to, ISP Holdings or its
affiliates (other than ISP and its subsidiaries (the "Committee")), pursuant to
the applicable provisions of the DGCL, the Board of Directors of ISP has
approved the Merger upon the terms and subject to the conditions set forth
herein and has recommended approval of this Agreement by the stockholders of
ISP.
WHEREAS, the Board of Directors of ISP Holdings has unanimously
approved the Merger upon the terms and subject to the conditions set forth
herein and has recommended approval of this Agreement by its stockholders; and
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. Surviving Corporation. Upon the terms and subject to
the conditions hereof, on the Effective Date (as defined in Section 1.06
hereof), ISP shall be merged with and into ISP Holdings in accordance with the
applicable provisions of the DGCL and the separate corporate existence of ISP
shall thereupon cease, and ISP Holdings, as the surviving corporation in the
Merger (hereinafter referred to for periods on and after the Effective Date as
the "Surviving Corporation"), shall continue its corporate existence under the
laws of the State of Delaware under the name "International Specialty Products
Inc." The Merger shall have the effects set forth in the DGCL. Without limiting
the generality of the foregoing, and subject to the provisions of the DGCL and
the terms of the documents evidencing the Transfer, at the Effective Date, all
property, real, personal and mixed, and all debts due to any of the Constituent
Corporations on whatever account, or belonging to each of the Constituent
Corporations, shall be
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vested in the Surviving Corporation; and all property, rights, privileges,
powers and franchises, and all and every other interest, shall be thereafter the
property of the Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or otherwise,
under the laws of the State of Delaware, in any of the Constituent Corporations,
shall not revert or be in any way impaired by reason of the DGCL; but all rights
of creditors and all liens upon any property of any of the Constituent
Corporations shall be preserved unimpaired, and, subject to the terms of the
documents evidencing the Transfer, all debts, liabilities and duties of the
respective Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
Section 1.02. Certificate of Incorporation. The Certificate of
Incorporation of ISP Holdings, as in effect immediately prior to the Effective
Date, shall be the Certificate of Incorporation of the Surviving Corporation,
but shall be amended, as of the Effective Date, to be identical to the
Certificate of Incorporation of ISP as in effect immediately prior to the
Effective Date, until thereafter amended as provided by law.
Section 1.03. By-Laws. The By-Laws of ISP, as in effect immediately
prior to the Effective Date, shall be the By-Laws of the Surviving Corporation
(with the corporate name thereon reflecting the name of the Surviving
Corporation) until thereafter amended as provided by law.
Section 1.04. Directors. The directors of ISP immediately prior to
the Effective Date shall be the directors of the Surviving Corporation and shall
hold office from the Effective Date until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided
by law.
Section 1.05. Officers. The officers of ISP immediately prior to the
Effective Date shall be the officers of the Surviving Corporation and shall hold
office from the Effective Date until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided
by law.
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Section 1.06. Effective Date. Subject to the terms and conditions
hereof, the effective date of the Merger (the "Effective Date") shall be the
date of filing of the Certificate of Merger with the Secretary of State of the
State of Delaware ("Certificate of Merger"), which shall be no later than the
second business day after satisfaction or waiver in accordance with the terms of
this Agreement of all conditions to the Merger specified in Articles VI, VII and
VIII hereto or such other day as shall be mutually agreeable to the parties
hereto.
ARTICLE II
CONVERSION OF SHARES AND OPTIONS
Section 2.01. Conversion of Shares. As of the Effective Date, by
virtue of the Merger and without any action on the part of the holders thereof:
(a) each issued and outstanding share of ISP Common Stock (other
than the shares owned of record by ISP Holdings) shall automatically be
converted into one share of common stock, par value $.01 per share ("New
ISP Common Stock"), of the Surviving Corporation;
(b) each issued and outstanding share of ISP Common Stock owned of
record by ISP Holdings immediately prior to the Effective Date shall be
cancelled and retired without payment of any consideration therefor and
shall cease to exist; and
(c) each issued and outstanding share of ISP Holdings Common Stock
shall automatically become a number of shares of New ISP Common Stock
equal to the quotient obtained by dividing 53,833,333 by the number of
outstanding shares of ISP Holdings Common Stock as of the Effective Date
(such quotient being the "Conversion Ratio").
Section 2.02. ISP Incentive Plan. As of the Effective Date, by
virtue of the Merger and without any action on the part of the holders thereof,
all outstanding stock options granted pursuant to ISP's 1991 Incentive Plan for
Key Employees and Directors (as amended, from time to time, the "ISP Incentive
Plan") shall be exercisable for shares of New ISP Common Stock at the same
prices and on the same terms and conditions as such options would have been
exercisable for ISP Common Stock immediately prior to the
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Merger. As of the Effective Date, the ISP Incentive Plan shall continue as the
ISP Incentive Plan of the Surviving Corporation and shall be amended to provide
that all stock options issued thereunder that are outstanding as of the
Effective Date, or that may be granted thereunder after the Effective Date,
shall become immediately exercisable if a Change of Control (as defined in the
ISP Incentive Plan) shall occur and at any time following such Change of
Control, the Surviving Corporation (or any successor thereto) terminates without
cause the employment of the holder of such stock option, such holder's
employment is terminated as a result of his death or permanent disability or
such holder terminates such employment for "good reason." The holder thereof
shall be deemed to terminate his employment for "good reason" if he does so as
result of a change or changes in the terms of his employment that are materially
adverse to the holder, including with respect to his salary and bonus, level of
responsibility or geographic location of employment.
Section 2.03. Treatment of ISP Holdings Options. (a) As of the
Effective Date, by virtue of the Merger and without any further action on the
part of the holders thereof (certain consents of which previously have been
obtained or will be obtained prior to the Effective Date), each outstanding
option (the "ISPH Preferred Stock Options") to purchase shares of ISP Holdings
Series A Cumulative Redeemable Convertible Preferred Stock that has not vested
prior to the Effective Date, will represent, subject to Section 2.03(f), the
right to receive cash from the Surviving Corporation on each vesting date (each,
a "Preferred Stock Vesting Date") prescribed by the applicable agreement
pursuant to which ISP Holdings granted such ISPH Preferred Stock Options (the
"Option Agreements"), in an amount equal to the excess of (i) the Option Price
with respect to the ISP Holdings Preferred Stock Options that vest on such
Preferred Stock Vesting Date, over (ii) the aggregate exercise price of such
vested ISPH Preferred Stock Options. The Option Price shall be equal to the (i)
the number of shares of New ISP Common Stock that would have been received in
the Merger in accordance with Section 2.01(c) if, immediately prior to the
Effective Date and subject to Section 2.03(e), the applicable ISPH Preferred
Stock Option had been exercised and the shares of preferred stock underlying the
ISPH Preferred Stock Options had been converted into shares of ISP Holdings
Common Stock multiplied by (ii) $16.125.
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(b) On the Effective Date, each holder of ISPH Preferred Stock
Options also will be granted (which grant shall be deemed to have been made as
of the date hereof), options under the ISP Incentive Plan (the "New Stock
Options") to purchase such number of shares of New ISP Common Stock as the
holder would have been entitled to receive in accordance with the conversion
rate described in Section 2.01(c), assuming such holder had exercised all of
such holder's ISPH Preferred Stock Options immediately prior to Effective Date
and converted such shares of preferred stock into ISP Holdings Common Stock and
subject to Section 2.03(e). The New Stock Options will have an exercise price
equal to $16.125, will vest, subject to the terms of the ISP Incentive Plan, in
accordance with the vesting schedule of such holder's Option Agreement and will
have such other terms as are prescribed by the ISP Incentive Plan and the
agreement pursuant to which the New Stock Options will be issued to such holder.
The term of expiration of the New Stock Options will be the same as the term of
expiration of the ISPH Preferred Stock Options. ISP agrees to take all action
necessary prior to the Effective Date, including presenting the matter for the
vote of the ISP stockholders as contemplated in Section 5.5, to ensure that
there is authorized under the ISP Incentive Plan a sufficient number of shares
of New ISP Common Stock to be issued upon the exercise of the New Stock Options.
(c) As of the Effective Date, with respect to stock appreciation
rights ("SARs") granted by ISP Holdings based upon the value of ISP Holdings
Common Stock that are vested as of the Effective Date and, with respect to SARs
that are not vested prior to the Effective Date, on each subsequent vesting date
(each a "SAR Vesting Date") prescribed by the agreement pursuant to which ISP
Holdings granted such holder SARs (the "SAR Agreements"), such SARs will
represent, subject to Section 2.03(f), the right to receive from the Surviving
Corporation cash in an amount equal to (i) the SAR Price with respect to SARs
that vest on such SAR Vesting Date, over (ii) the aggregate Appreciation Value
(as defined in the applicable SAR Agreement and as calculated as set forth in
Section 2.03(e)) of such SARs. The SAR Price shall be equal to the (i) the
number of shares of New ISP Common Stock that would have been received in the
Merger in accordance with Section 2.01(c) if, subject to Section 2.03(e), the
shares of ISP Holdings Common Stock underlying the SAR had been outstanding at
the Effective Date multiplied by (ii) $16.125.
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(d) On the Effective Date, each holder of an SAR also will be
granted (which grant shall be made as of the date hereof) options under the ISP
Incentive Plan (the "New SAR Options") to purchase such number of shares of New
ISP Common Stock as is equal to the number of shares of ISP Holdings Common
Stock underlying the SAR multiplied by the conversion rate set forth in Section
2.01(c) above. The New SAR options will have an exercise price equal to $16.125,
will vest, subject to the terms of the ISP Incentive Plan, in accordance with
the existing vesting schedule of such holder's SAR Agreement and will have such
other terms as are prescribed by the ISP Incentive Plan and the agreement
pursuant to which the New SAR Options will be issued to such holder. The term of
expiration of the New SAR Options will be the same as the term of expiration of
the SARs. ISP agrees to take all action necessary prior to the Effective Date,
including presenting the matter for the vote of the ISP stockholders as
contemplated in Section 5.5, to ensure that there is authorized under the ISP
Incentive Plan a sufficient number of shares of New ISP Common Stock to be
issued upon the exercise of the New SAR Options.
(e) With respect to calculating (i) the number of shares of ISP
Holdings Common Stock that holders of ISPH Preferred Stock Options would have
received had they exercised their options and converted the underlying preferred
stock immediately prior to the Effective Date and (ii) the Appreciation Value of
the shares of ISP Holdings Common Stock underlying the SARs, (A) for purposes of
Section 2.03(a) and Section 2.03(c), it is assumed that each portion of the ISPH
Preferred Stock Options would have been exercised and the underlying preferred
stock would have been converted on, and that each portion of the SARs would have
been held until, the date such portion would have initially become vested (or,
if later, the Effective Date) and (B) for purposes of Section 2.03(b), it is
assumed that the ISPH Preferred Stock Options would have been exercised and the
underlying preferred stock would have been converted on the date that all of the
options (each grant to be treated separately) held by a holder would have become
vested, so that, in each case, the interest factor under the terms of the Option
Agreements and the SAR Agreements in respect of the shares of ISP Holdings
Common Stock underlying the preferred stock and SARs would be deemed to continue
to accrue until such time.
(f) The right of each holder to receive cash in accordance with
Sections 2.03(a) and (c) shall be subject to the terms of the applicable Option
Agreements and SAR
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Agreements regarding continued employment with ISP Holdings or its affiliates.
In addition, the right of each holder to receive cash in accordance with Section
2.03(a) and (c), and the right of each holder to exercise New Stock Options and
New SAR Options, shall become immediately exercisable if a Change of Control (as
defined in the ISP Incentive Plan) shall occur and at any time following such
Change of Control, the Surviving Corporation (or any successor thereto)
terminates without cause the employment of the holder of such ISPH Preferred
Stock Option or SAR, such holder's employment is terminated as a result of his
death or permanent disability or such holder terminates such employment for
"good reason." The holder shall be deemed to terminate his employment for "good
reason" if he does so as a result of a change or changes in the terms of his
employment that are materially adverse to the holder, including with respect to
his salary and bonus, level of responsibility or geographic location of
employment.
Section 2.04. Stock Certificates. (a) On the Effective Date, each
issued and outstanding share of ISP Common Stock (other than the shares owned of
record by ISP Holdings, which will be cancelled) shall automatically, by virtue
of the Merger and without any action on the part of the holder thereof, become
one share of New ISP Common Stock, and the certificates which represent such
shares of ISP Common Stock will automatically represent the shares of New ISP
Common Stock into which such shares of ISP Common Stock shall have been
converted in the Merger. After the Effective Date, as presently outstanding
certificates representing shares of ISP Common Stock (other than the shares
owned of record by ISP Holdings) are presented for transfer, new stock
certificates bearing the name of the Surviving Corporation and representing the
appropriate number of shares of New ISP Common Stock shall be issued.
(b) On the Effective Date, each issued and outstanding share of ISP
Holdings Common Stock shall automatically, by virtue of the Merger and without
any action on the part of the holder thereof, become a number of shares of New
ISP Common Stock equal to the Conversion Ratio, and the certificates which
represent such shares of ISP Holdings Common Stock will automatically represent
the shares of New ISP Common Stock into which such shares of ISP Holdings Common
Stock shall have been become in the Merger. After the Effective Date, as
presently outstanding certificates representing shares of ISP Holdings Common
Stock are presented for transfer, new stock certificates bearing the name of the
Surviving Corporation and
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representing the appropriate number of shares of New ISP Common Stock shall be
issued.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF ISP
ISP represents and warrants to ISP Holdings as follows:
Section 3.01. Organization. ISP is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted.
Section 3.02. Capitalization. The capitalization of ISP appearing in
the recitals to this Agreement is true and correct as of the date hereof. All of
the issued and outstanding shares of ISP Common Stock are validly issued, fully
paid and non-assessable and free from preemptive rights.
Section 3.03. Authority Relative to this Agreement. ISP has the
requisite corporate power to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of ISP and, except for the approval of this Agreement
in accordance with the DGCL by the stockholders of ISP, no other corporate
proceeding on the part of ISP is necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by ISP and constitutes a valid and binding obligation of ISP
enforceable against it in accordance with its terms, subject to (i) approval in
accordance with the DGCL of the stockholders of ISP and (ii) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
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Section 3.04. Consents and Approvals; No Violation. Except for
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), filings with various state blue sky authorities and filing and
recordation of appropriate merger documents as required by the DGCL and the
corporate law of the other states in which the Constituent Corporations are
qualified to do business, no filing with or notice to, and no permit,
authorization, consent or approval of, any public body or authority, the absence
of which could be reasonably expected to, either individually or in the
aggregate, have a material adverse effect on the business, operations or
financial condition of ISP and its subsidiaries, taken as a whole, is necessary
for the execution and delivery by ISP of this Agreement or the consummation by
ISP of the transactions contemplated by this Agreement. Except as set forth in
Schedule 3.04, neither the execution, delivery and performance by ISP of this
Agreement nor the consummation by ISP of the transactions contemplated hereby
nor compliance by ISP with any of the provisions hereof will (i) conflict with
or result in any breach of any provision of the Certificate of Incorporation or
By-Laws of ISP, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
lease agreement or other instrument or obligation to which ISP is a party or by
which ISP or any of its properties or assets may be bound or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to ISP
or any of its properties or assets, except with respect to clauses (ii) and
(iii), such violations, breaches or defaults which, either individually or in
the aggregate, could not be reasonably expected to have a material adverse
effect on the business, operations or financial condition of ISP and its
subsidiaries, taken as a whole.
Section 3.05. Proxy Statement/Prospectus. None of the information
supplied or to be supplied by ISP for inclusion in the proxy
statement/prospectus (the "Proxy Statement") to be mailed to the stockholders of
ISP in connection with the meeting of stockholders of ISP convened in accordance
with Section 5.05 or in the Registration Statement (as defined in Section 5.04)
will, (a) in the case of the Registration Statement, at the time it is filed
with the Securities and Exchange Commission (the "SEC") or any other regulatory
authority, at the time it becomes effective
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and at the Effective Date, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, or (b) in the case of the Proxy Statement, at the
time it is filed with the SEC or any other regulatory authority, at the time of
the mailing of the Proxy Statement or any amendment or supplement thereto, at
the time of the meetings of the stockholders to which the Proxy Statement
relates and at the Effective Date, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. If at any time prior to the Effective
Date any event with respect to ISP, its officers and directors or any of its
subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the Proxy Statement or the Registration Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, to the extent required by law, disseminated to the
stockholders of ISP. The Proxy Statement and any other SEC filing in connection
with the Merger will comply (with respect to ISP) in all material respects, as
to form, with the applicable requirements of each of the Securities Act and the
Exchange Act, and the respective rules and regulations thereunder.
Section 3.06. Fairness Opinion. Each of the Board of Directors and
the Committee has received an opinion of J.P. Morgan & Co., Inc. ("J.P.
Morgan"), financial advisor to ISP, that the terms of the Merger are fair, from
a financial point of view, to ISP and its stockholders (other than ISP Holdings)
(the "Unaffiliated Stockholders").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ISP HOLDINGS
ISP Holdings represents and warrants to ISP as follows:
Section 4.01. Organization. Each of ISP Holdings and Belleville
Realty Corp. ("Belleville") is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite corporate power and authority to own, lease and operate its
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properties and to carry on its business as now being conducted.
Section 4.02. Capitalization. The capitalization of ISP Holdings
appearing in the recitals of this Agreement is true and correct as of the date
hereof. All the issued and outstanding shares of ISP Holdings Common Stock are
validly issued, fully paid and non-assessable and free from preemptive rights.
Except for the stock options and stock appreciation rights described in the
recitals to this Agreement and in the agreements listed on Schedule 4.02 (true
and complete copies of which have been delivered to the Committee), (i) there
are no subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any equity security of ISP Holdings or Belleville,
including any rights of conversion or exchange under any outstanding securities
or other instruments and (ii) there are not any outstanding obligations of ISP
Holdings to repurchase, redeem or otherwise acquire any share of capital stock
of ISP Holdings or make any material investment (in the form of a loan, capital
contribution or otherwise) in any person.
Section 4.03. Subsidiaries. Except for its ownership of capital
stock of Belleville and ISP and investments in securities in accordance with
customary trading activities, ISP Holdings does not own any capital stock or
other equity securities of any corporation, has no direct or indirect equity or
ownership interest in, by way of stock ownership or otherwise, any corporation,
partnership, joint venture, association or business enterprise and is not
contemplating acquiring any such interest. All of the outstanding shares of
capital stock of Belleville have been validly issued and are fully paid and
nonassessable, and, except as set forth on Schedule 4.03, are owned by ISP
Holdings free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever.
Section 4.04. Authority Relative to this Agreement. ISP Holdings has
the requisite corporate power to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of ISP Holdings and, except for the approval of this
Agreement in accordance with the DGCL by the stockholders of ISP Holdings, no
other corporate proceeding on the part of ISP
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Holdings is necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by ISP
Holdings and constitutes a valid and binding obligation of ISP Holdings
enforceable against it in accordance with its terms, subject to (i) approval in
accordance with the DGCL of the stockholders of ISP Holdings and (ii) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
Section 4.05. Consents and Approvals; No Violation. Except for
applicable requirements of the Securities Act and the Exchange Act, filings with
various state blue sky authorities and filing and recordation of appropriate
merger documents as required by the DGCL and the corporate law of the other
states in which the Constituent Corporations are qualified to do business, no
filing with or notice to, and no permit, authorization, consent or approval of,
any public body or authority or any other person, the absence of which could
reasonably be expected to, either individually or in the aggregate, have a
material adverse effect on the business, operations or financial condition of
ISP Holdings and Belleville, taken as a whole (a "Material Adverse Effect"), is
necessary for the execution and delivery by ISP Holdings of this Agreement or
the consummation by ISP Holdings of the transactions contemplated by this
Agreement. Except as set forth in Schedule 4.05, neither the execution, delivery
and performance by ISP Holdings of this Agreement nor the consummation by ISP
Holdings of the transactions contemplated hereby nor compliance by ISP Holdings
with any of the provisions hereof will (i) conflict with or result in any breach
of any provision of the Certificate of Incorporation or By-Laws of ISP Holdings,
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, lease
agreement or other instrument or obligation to which ISP Holdings is a party or
by which ISP Holdings or any of its properties or assets may be bound or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to ISP Holdings or any of its properties or assets, except with
respect to clauses (ii)
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and (iii), such violations, breaches or defaults which, either individually or
in the aggregate, would not have a Material Adverse Effect.
Section 4.06. Proxy Statement. None of the information supplied or
to be supplied by ISP Holdings for inclusion or incorporation by reference in
the Proxy Statement or the Registration Statement will, (a) in the case of the
Registration Statement, at the time it is filed with the SEC or any other
regulatory authority, at the time it becomes effective and at the Effective
Date, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, or (b) in the case of the Proxy Statement, at the time it is filed
with the SEC or any other regulatory authority, at the time of the mailing of
the Proxy Statement or any amendment or supplement thereto, at the time of the
meetings of the stockholders to which the Proxy Statement relates and at the
Effective Date, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Date any event with
respect to ISP Holdings, its officers and directors or any of its subsidiaries
(other than ISP and its subsidiaries) should occur which is required to be
described in an amendment of, or a supplement to, the Proxy Statement or the
Registration Statement, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the stockholders of ISP. The Proxy Statement and any other
SEC filing will comply (with respect to ISP Holdings) in all material respects,
as to form, with the applicable requirements of each of the Exchange Act and the
Securities Act and the respective rules and regulations thereunder.
Section 4.07. SEC Documents. ISP Holdings has filed all forms,
reports and documents required to be filed by it with the Securities and
Exchange Commission ("SEC") since December 24, 1996 through the date hereof
(collectively, the "Company Reports"). As of their respective dates, the Company
Reports (i) complied as to form in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations
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thereunder and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of ISP Holdings
included in or incorporated by reference into the Company Reports (including the
related notes and schedules) fairly present the consolidated financial position
of ISP Holdings as of its date, and each of the consolidated statements of
income, retained earnings and cash flows of ISP Holdings included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly presents the results of operations, retained earnings or
cash flows, as the case may be, of ISP Holdings for the periods set forth
therein, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein. The unaudited, unconsolidated balance sheet of ISP Holdings as of
February 22, 1998 attached hereto as Schedule 4.07 (the "Unconsolidated Balance
Sheet") fairly presents the unconsolidated financial position of ISP Holdings as
of such date in accordance with generally accepted accounting principles
consistently applied as of the date thereof, except as may be noted therein.
Section 4.08. Compliance with Laws. Each of ISP Holdings and
Belleville, and to the best knowledge of ISP Holdings, all of their respective
officers, directors, employees, consultants and agents have complied and are in
compliance in all material respects with all applicable statutes, regulations,
rules, orders, ordinances, judgments, decrees, permits, franchises, licenses and
other laws of the United States of America, all state, local and foreign
governments and other governmental bodies and authorities, and agencies of any
of the foregoing ("Governmental Authority") to which it is subject, except to
the extent noncompliance would not have a Material Adverse Effect. Neither ISP
Holdings nor Belleville has received any notice or other communication to the
effect that, or otherwise been advised or become aware that, it or any activity
conducted or monitored by it is not so in compliance with any of such statutes,
regulations and orders, ordinances, other laws or undertakings, and ISP Holdings
has no reason to anticipate that any presently existing circumstances are likely
to result in violations of any such regulations which would have a Material
Adverse Effect.
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Section 4.09. Litigation and Claims. Neither ISP Holdings nor
Belleville is subject to any continuing order of, or written agreement or
memorandum of understanding with, or continuing material investigation by any
Governmental Authority or any judgment, order, writ, injunction, decree, or
award of any Governmental Authority or any court or arbitrator, and there is no
claim, action, suit, litigation, proceeding, arbitration, investigation, or
controversy affecting ISP Holdings or Belleville or, to the knowledge of ISP
Holdings, threatened, nor is there any valid basis known to ISP Holdings for any
such claim, action, suit, litigation, proceeding, arbitration, investigation or
controversy except for matters which would not have a Material Adverse Effect.
Section 4.10. Taxes and Tax Returns.
(a) Definitions:
"Code" means the Internal Revenue Code of 1986, as amended.
All citations to provisions of the Code, or to the Treasury Regulations
promulgated thereunder, shall include any amendments thereto and any substitute
or successor provisions thereto.
"Taxes" means all taxes, charges, fees, levies or other
assessments, including income, gross receipts, employment, excise, withholding,
property, sales, use, transfer, license, payroll and franchise taxes, including
under Treasury Regulation ss. 1.1502-6 or any similar provision under state or
local law, pursuant to any agreement to share taxes, or as a transferee of
assets, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, imposed by the United States, or any
state, local or foreign government or subdivision or agency thereof.
"Taxable Period" means any taxable year or any other period
that is treated as a taxable year (or other period, or portion thereof, in the
case of a Tax imposed with respect to such period or portion thereof, e.g., a
quarter) with respect to which any Tax may be imposed under any applicable
statute, rule, or regulation.
"Tax Return" shall mean any report, return, election, notice
or other information required to be supplied to a taxing authority in connection
with Taxes.
(b) All material Tax Returns required to be filed by or with respect
to ISP Holdings or Belleville for all
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Taxable Periods ending on or before the date hereof or the Effective Date have
been or will be timely filed. All such Tax Returns (i) were (or, to the extent
not yet filed, will be) prepared in the manner required by applicable law, (ii)
are (or, to the extent not yet filed, will be) true, correct, and complete in
all material respects, and (iii) except to the extent that a proper reserve for
Taxes (without regard to deferred Taxes) has been reflected on the
Unconsolidated Balance Sheet in accordance with GAAP, reflect (or, to the extent
not yet filed, will reflect) the liability for Taxes of ISP Holdings and
Belleville. No adjustment to any such Tax Return has been proposed or threatened
formally or informally by any Taxing authority.
(c) ISP Holdings and Belleville have made (or there has been made on
its behalf) all required current estimated Tax payments sufficient to avoid any
material underpayment penalties.
(d) ISP Holdings and Belleville have (i) timely paid or caused to be
paid or will cause to be timely paid all Taxes that are or were due on or prior
to the date hereof or the Effective Date, whether or not such Taxes are or were
shown (or required to be shown) on a Tax Return, except to the extent that a
proper reserve for Taxes (without regard to deferred Taxes) has been reflected
on the Unconsolidated Balance Sheet, in accordance with GAAP, and (ii) provided
a sufficient reserve for the payment of all Taxes not yet due and payable on the
Unconsolidated Balance Sheet, except, in the case of clauses (i) or (ii), for
Taxes incurred in the ordinary course of business after the date of the
Unconsolidated Balance Sheet which Taxes are not material. There are no Taxes
that would be due with respect to ISP Holdings or Belleville if asserted either
by a Taxing authority or by a party to one of the tax sharing agreements
referred to in Section 4.10(g), except with respect to which ISP Holdings is
maintaining adequate reserves (without regard to deferred Taxes) on such
Unconsolidated Balance Sheet.
(e) No material claim has ever been made in writing by any Taxing
authority with respect to ISP Holdings in a jurisdiction where ISP Holdings or
Belleville do not file reports or returns that ISP Holdings or Belleville is or
may be subject to Tax by that jurisdiction. Except for liens for real and
personal property Taxes that are not yet due and payable, there are no liens for
any Tax upon any asset of ISP Holdings.
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(f) Neither ISP Holdings nor Belleville has agreed nor is required
to include in income or make any material adjustment under either Section 481(a)
or Section 482 of the Code (or an analogous provision of state, local or foreign
law) by reason of a change in accounting or otherwise. Neither ISP Holdings nor
Belleville has disposed of any material property in a transaction being
accounted for under the installment method pursuant to Section 453 of the Code.
(g) Neither ISP Holdings nor Belleville is a party to any agreement
(other than the Tax Sharing Agreement, dated October 18, 1996, among GAF
Corporation ("GAF"), ISP Holdings and other affiliates of GAF, the
Indemnification Agreement, dated October 18, 1996, among GAF, ISP Holdings and
other affiliates of GAF and the Tax Sharing Agreement, dated January 1, 1997,
between ISP Holdings and ISP) to share Taxes with respect to any Taxable Period.
(h) There is no contract, agreement, plan or arrangement covering
any person that, individually or collectively, could, as a result of the Merger,
give rise to the payment of any amount that would not be deductible by ISP
Holdings or Belleville by reason of Section 280G of the Code.
Section 4.11. Environmental, Health and Safety ("EHS") Matters. (a)
Definitions:
"Contaminant" means any pollutant, hazardous substance, radioactive
substance, toxic substance, hazardous waste, medical waste, radioactive waste,
special waste, petroleum or petroleum-derived substance or waste product,
asbestos, PCBs, or any hazardous or toxic constituent thereof and includes any
waste product, or other substance defined in or regulated under EHS Requirements
of Law.
"EHS Liabilities" means all claims, judgments, damages (including
punitive damages), losses, penalties, fines, interest, fees, liabilities
(including strict liability), encumbrances, liens, costs, and expenses of
investigation and defense of any claim, whether or not such claim is ultimately
defeated, and of any good faith settlement of judgment, of whatever kind or
nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including reasonable attorneys' fees and disbursements and
consultants' fees, any of which are incurred at any time as a result of the
existence of Contaminants at any
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location or noncompliance with EHS Requirements of Law, including:
(i) Damages for personal injury or threatened personal injury
(including sickness, disease or death), or injury or threatened injury to
property or natural resources, foreseeable or unforeseeable, including the cost
of demolition and rebuilding of any improvements on real property;
(ii) Reasonable fees incurred for the services of attorneys,
consultants, contractors, doctors, experts, laboratories and all other
reasonable costs incurred in connection with any damages as described in
subparagraph (i) of this definition, and the investigation or remediation of
Contaminants or the suspected presence of Contaminants or the violation or
threatened violation of EHS Requirements of Law including the preparation of any
feasibility studies or reports or the performance of any investigations,
cleanup, treatment, remediation, removal, response, abatement, containment,
closure, storage, disposal, transport, restoration or monitoring work required
by any federal, state, local or foreign governmental agency or political
subdivision, or otherwise expended in connection with such conditions, and
including any reasonable attorneys' fees, costs and expenses incurred in
enforcing this Agreement or collecting any sums due hereunder; and
(iii) Liability to any third person or Governmental Authority to
indemnify such person or Governmental Authority for costs expended in connection
with the items referenced in subparagraphs (i) and (ii) of this definition.
"EHS Requirements of Law" means all federal, state, local and
foreign laws, statutes, codes, ordinances, rules, regulations, directives,
binding policies, EHS permits, or orders relating to or addressing the
environment, health or safety, including any law, statute, code, ordinance,
rule, regulation, directive, binding policy, EHS permit or order relating to (x)
the use, handling or disposal of any Contaminant or (y) workplace or worker
safety and health, as such requirements are promulgated by the specifically
authorized Governmental Authority responsible for administering such
requirements.
(b) Neither ISP Holdings nor Belleville is individually subject to
EHS Liabilities which alone or aggregated with those of the other entity, would
have a Material Adverse Effect.
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Section 4.12. Employees and Employee Plans. Except as referred to in
Section 4.02, neither ISP Holdings nor Belleville has any liability or
obligation, contingent or otherwise, to or in respect of any of their current or
former employees or independent contractors. Without limiting the generality of
the foregoing, neither ISP Holdings nor Belleville has any liability or
obligation, contingent or otherwise, to or in respect of any "employee benefit
plan" (within the meaning of Section 3(3) of ERISA), which is now or has at any
time in the past been maintained, sponsored or contributed by ISP Holdings or
Belleville or any entity that is treated as a single employer with any of the
foregoing (other than ISP and its subsidiaries) for purposes of Section 414 of
the Code other than those arising under plans maintained by ISP or its
subsidiaries.
Section 4.13. No Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of ISP Holdings or
Belleville.
Section 4.14. Absence of Certain Changes. Since December 24, 1996,
except as disclosed in the Company Reports, ISP Holdings has conducted its
business only in the ordinary course of such business, and there has not been
any change in or effect on the business, earnings, assets, liabilities,
financial or other condition or results of operations of ISP Holdings that has
had or would have a Material Adverse Effect and no fact or condition exists or
is reasonably contemplated or threatened which ISP Holdings believes has a
reasonable probability of resulting in any change in or effect on the business,
earnings, assets, liabilities, financial or other condition, results of
operations of ISP Holdings or Belleville.
Section 4.15. Absence of Undisclosed Liabilities. Neither ISP
Holdings nor Belleville has any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, whether due or to become due,
except (a) liabilities or obligations reflected or reserved against in the
Company Reports of ISP Holdings and (b) liabilities or obligations which would
not have a Material Adverse Effect.
Section 4.16. Title to Properties and Related Matters. Except as set
forth on Schedule 4.16, neither ISP Holdings nor Belleville owns or leases any
real property.
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All representations and warranties contained herein which refer to
ISP Holdings shall be deemed to relate to ISP Holdings alone, and not to ISP
Holdings consolidated with its subsidiaries.
ARTICLE V
COVENANTS
Section 5.01. Capitalization. Prior to the Effective Date, unless
the other party to this Agreement shall agree (provided, in the case of ISP,
that the Committee shall have concurred in the manner set forth in Section
11.10) in writing and except as otherwise expressly permitted or contemplated by
this Agreement:
(a) neither ISP Holdings nor ISP shall split, combine or reclassify
the outstanding shares of ISP Holdings Common Stock or ISP Common Stock,
respectively, or declare, set aside or pay any dividend payable in cash, stock
or property or make any distribution with respect to the outstanding shares of
ISP Holdings Common Stock or ISP Common Stock, respectively; or, except for the
repurchase of (i) ISP Holdings Common Stock in accordance with the agreements
listed on Schedule 4.02 and (ii) up to 105,000 shares of ISP Common Stock
pursuant to ISP's existing stock buy-back program, redeem, purchase or otherwise
acquire (or agree to redeem, purchase or otherwise acquire), directly or
indirectly, any shares of ISP Holdings Common Stock or ISP Common Stock,
respectively; and
(b) neither ISP Holdings nor ISP, or any of their respective
subsidiaries shall issue or agree to issue any additional shares of ISP Holdings
Common Stock or ISP Common Stock, respectively, or options, warrants or rights
of any kind to acquire any shares of ISP Holdings Common Stock or ISP Common
Stock, respectively, other than, in the case of ISP, (i) ISP Stock Options
issuable pursuant to the ISP Incentive Plan or (ii) shares issuable pursuant to
the exercise of ISP Stock Options outstanding on the date hereof or hereafter
granted pursuant to the ISP Incentive Plan.
Section 5.02. Certain Actions Pending Merger. Prior to the Effective
Date, neither ISP Holdings nor Belleville shall (i) grant any general increase
in compensation to its employees as a class, or to its officers or directors,
except in accordance with past practice or as required by law, or increases
which are not material, or the
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payment of year-end bonuses in accordance with past practice, (ii) effect any
change in retirement benefits to any class of employees or officers (unless any
such change shall be required by applicable law) which would increase its
retirement benefit liabilities, (iii) adopt, enter into, or amend or modify any
ISP Holdings benefit plan, (iv) enter into or amend any employment, severance or
similar agreements or arrangements with any directors or officers, (v) incur any
liabilities or obligations except in accordance with past practices, which
practices shall include borrowings from ISP and its subsidiaries, or (vi) engage
in any transaction other than (A) investments conducted in accordance with past
practices or (B) transactions with ISP and its subsidiaries conducted in
accordance with past practices.
Section 5.03. Conduct of Business by ISP Holdings and ISP Pending
the Merger. During the period from the date of this Agreement and continuing
until the Effective Date, ISP Holdings and ISP agree that (except as expressly
contemplated or permitted by this Agreement) neither ISP Holdings nor ISP shall
(a) knowingly take any action that would, or would be reasonably likely to,
result in any of the representations and warranties of ISP Holdings or ISP set
forth in this Agreement not being true in all material respects or in any of the
conditions to the Merger set forth in Articles VI, VII and VIII not being
satisfied or (b) take any action or omit to take any action which would be
reasonably likely to prevent either (i) the Transfer from constituting an
exchange governed by Section 351(a) of the Code or (ii) the Merger from
constituting a reorganization within the meaning of Section 368(a) of the Code.
Section 5.04. Registration Statement. ISP Holdings shall promptly
prepare and file with the SEC a registration statement (the "Registration
Statement") with respect to the shares of New ISP Common Stock to be issued to
the stockholders of ISP in the Merger and shall use all reasonable efforts to
have the Registration Statement declared effective by the SEC as promptly as
practicable. ISP Holdings also shall use its best efforts to take any reasonable
action required to be taken under state blue sky or securities laws
(collectively, "Blue Sky Laws") in connection with the issuance of shares of New
ISP Common Stock pursuant to the Merger, and ISP Holdings and ISP shall each
furnish all information concerning ISP Holdings and ISP and the holders of
shares of ISP Common Stock, as the case may be, and shall take such other action
as the other may be reasonably requested in connection with any such action.
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Section 5.05. ISP Stockholder Approval. (a) ISP shall take, subject
to the provisions of subsection (c) hereof, all steps necessary to call, give
notice of, convene and hold a special meeting of its stockholders (the "ISP
Stockholders Meeting"), and shall prepare, file with the SEC and, when and if
the Registration Statement is declared effective, mail to ISP's Stockholders the
Proxy Statement, for the purpose of adopting and approving this Agreement and
the transactions contemplated hereby (including adopting and approving an
amendment to the ISP Incentive Plan to increase the authorized number of shares
of New ISP Common Stock available for issuance thereunder as contemplated by
Section 2.03) and for such other purposes as may be necessary or desirable.
(b) ISP Holdings shall vote, or cause to be voted, all shares of ISP
Common Stock beneficially owned by ISP Holdings in favor of this Agreement and
the transactions contemplated hereby.
(c) The Committee has unanimously recommended to the Board of
Directors of ISP that the Merger is fair to and in the best interests of the
Unaffiliated Stockholders. Based upon the recommendation of the Committee, the
Board of Directors of ISP has determined that the Merger is advisable and in the
best interests of the Unaffiliated Stockholders and shall, subject to their
fiduciary duties under Delaware law, recommend to its stockholders the adoption
and approval of this Agreement and the transactions contemplated hereby and
shall, subject to their fiduciary duties under Delaware law, use its reasonable
efforts to obtain the necessary approvals by its stockholders of the Merger and
the transactions contemplated hereby.
Section 5.06. ISP Holdings Stockholder Approval. ISP Holdings shall
take all steps necessary to call, give notice of, convene and hold a special
meeting, or in lieu thereof, obtain the written consent, of its stockholders
(the "ISP Holdings Stockholders Meeting"), and shall mail to its stockholders
prior to the ISP Holdings Stockholder Meeting information regarding the Merger
for the purpose of adopting and approving this Agreement and the transactions
contemplated hereby and for such other purposes as may be necessary or desirable
in connection therewith.
Section 5.07. Reasonable Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be
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done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Effective Date any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each corporation which is a party to this
Agreement shall take all such necessary or desirable action.
Section 5.08. Exchange Listing. ISP Holdings shall use its best
efforts to effect, on or before the Effective Date, approval for listing on the
New York Stock Exchange (the "NYSE") upon official notice of issuance, the
shares of New ISP Common Stock to be issued pursuant to the Merger.
Section 5.09. Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses except as expressly provided herein;
provided, however, that in the event that the Merger is not consummated, all
costs and expenses incurred in connection with this Agreement by both parties
hereto, shall be paid exclusively by ISP Holdings.
Section 5.10. Inspection of Records. From the date hereof to the
Effective Date, each of ISP Holdings and ISP shall (i) allow all designated
officers, attorneys, financial advisors, accountants and other representatives
of the other reasonable access at all reasonable times to the offices, records
and files, correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs, of ISP Holdings and ISP and their
respective subsidiaries, as the case may be, (ii) furnish to the other, the
other's counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
persons may reasonably request and (iii) instruct the employees, counsel and
financial advisors of ISP Holdings and ISP, as the case may be, to cooperate
with the other in the other's investigation of the business of it and its
subsidiaries.
Section 5.11. Transfer of Assets. ISP shall take, no later than
immediately prior to the Effective Date and in accordance with the direction of
ISP Holdings herein made, all steps necessary to effect the Transfer.
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ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF
ISP HOLDINGS OR ISP
The respective obligations of each party to effect the Merger shall
be subject to the fulfillment on or prior to the Closing Date (as defined in
Section 9.01) of the following conditions:
Section 6.01. Stockholder Approval of Agreement. This Agreement and
the transactions contemplated hereby shall have been adopted by (i) the
affirmative vote of the holders of at least a majority of the outstanding shares
of ISP Common Stock at the ISP Stockholders Meeting and (ii) the affirmative
vote (or written consent in lieu thereof) of at least a majority of the
outstanding shares of ISP Holdings Common Stock.
Section 6.02. Certain Proceedings. No preliminary or permanent
injunction or restraining order or other order, decree or ruling issued by any
court of competent jurisdiction nor any statute, rule, regulation or order
entered, promulgated or enacted by any governmental, regulatory or
administrative agency or authority shall be in effect which would prevent the
consummation of the Merger or the other transactions contemplated by this
Agreement (each party agreeing to use its best efforts (as set forth in Section
6.05 hereof) to have any such injunction or restraining order or other order,
decree or ruling lifted) and no action, suit, claim or proceeding by a
governmental authority before any domestic court, governmental commission or
administrative or regulatory authority shall have been commenced and be pending
which seeks to restrain, prevent or materially delay or restructure the
transactions contemplated by this Agreement or which otherwise questions the
validity or legality of any such transaction, other than actions, suits, claims
and proceedings which, in the reasonable opinion of counsel to the relevant
party, are unlikely to result in an adverse judgment.
Section 6.03. Registration Statement. The Registration Statement
shall have been declared effective and no stop order suspending such
effectiveness shall have been issued or proceedings for that purpose shall have
been instituted.
Section 6.04. Tax Opinion. There shall have been delivered to ISP
and ISP Holdings an opinion of Weil,
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Gotshal & Manges LLP, which opinion shall be reasonably satisfactory to the
Committee, to the effect that for federal income tax purposes (i) the Transfer
and Merger will be treated as tax-free transactions pursuant to Sections 351 and
368 of the Code and (ii) no income, gain or loss will be recognized by ISP
Holdings, ISP, Newco, any of their respective subsidiaries or any Unaffiliated
Stockholder by reason of the Transfer and/or the Merger. In rendering such
opinion, Weil, Gotshal & Manges LLP shall receive and be entitled to rely upon
reasonable customary representations to be contained in certificates of ISP and
ISP Holdings.
Section 6.05. NYSE Listing. The shares of New ISP Common Stock
required to be issued in the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance.
Section 6.06. Blue Sky Laws. ISP Holdings shall have received all
Blue Sky Law authorizations necessary to issue the shares of New ISP Common
Stock in the Merger.
Section 6.07. Regulatory Approvals. All consents, approvals, permits
and authorizations required to be obtained prior to the Effective Date from
governmental and regulatory authorities in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by ISP Holdings and ISP shall have been obtained without restrictions,
except where the failure to obtain such consents, approvals, permits and
authorizations would not have a Material Adverse Effect.
Section 6.08. Transfer. The Transfer shall have been consummated to
the reasonable satisfaction of ISP Holdings and ISP.
ARTICLE VII
CONDITIONS TO THE OBLIGATION OF ISP
The obligation of ISP to effect the Merger shall be subject to the
satisfaction or waiver, on or before the Closing Date, of the following
conditions:
Section 7.01. Representations and Warranties True. The
representations and warranties of ISP Holdings contained herein shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date.
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Section 7.02. Performance of Obligations. ISP Holdings shall have
performed in all material respects its agreements contained in this Agreement
required to be performed by it on or prior to the Effective Date.
ARTICLE VIII
CONDITIONS TO THE OBLIGATION OF ISP HOLDINGS
The obligation of ISP Holdings under this Agreement to effect the
Merger shall be subject to the satisfaction or waiver, on or before the Closing
Date, of the following conditions:
Section 8.01. Representations and Warranties True. The
representations and warranties of ISP contained herein shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date.
Section 8.02. Performance of Obligations. ISP shall have performed
in all material respects its agreements contained in this Agreement required to
be performed by it on or prior to the Effective Date.
ARTICLE IX
CLOSING
Section 9.01. Time and Place. Subject to the provisions of Articles
VI, VII, VIII and X, the closing of the Merger (the "Closing") shall take place
at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New
York 10153, as soon as practicable but in no event later than two business days
after the date on which each of the conditions set forth in Articles VI, VII and
VIII has been satisfied or waived by the party or parties entitled to the
benefit of such condition; or at such other place, at such other time, or on
such other date as ISP Holdings and ISP may mutually agree. The date on which
the Closing actually occurs is herein referred to as the "Closing Date."
Section 9.02. Filings at the Closing. Subject to the provisions of
Articles VI, VII and VIII hereof, immediately after the Closing ISP Holdings and
ISP shall cause the Certificate of Merger to be filed and recorded in accordance
with the provisions of Section 251 of the DGCL, and
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shall take any and all other lawful actions and do any and all other lawful
things necessary to cause the Merger to become effective.
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.01. Termination. This Agreement may be terminated at any
time prior to the Effective Date, whether before or after approval by the
stockholders of ISP or the stockholders of ISP Holdings:
(a) by mutual consent of the Boards of Directors
of ISP Holdings and ISP;
(b) by ISP Holdings or ISP if, without fault of such terminating
party, the Merger shall not have been consummated on or before 180 days
from the date hereof, which date may be extended by the mutual consent of
the Boards of Directors of ISP Holdings and ISP;
(c) by ISP Holdings or ISP if any court of competent jurisdiction in
the United States shall have issued an order (other than a temporary
restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger or the other
transactions contemplated by this Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable; or
(d) by the Committee or ISP Holdings if the Committee determines in
good faith, after consultation with J.P. Morgan and outside counsel to the
Committee, that the Committee's fiduciary obligations under applicable law
require it to withdraw its recommendation of this Agreement and the
transactions contemplated hereby.
Section 10.02. Procedure and Effect of Termination. In the event of
the termination of this Agreement pursuant to Section 10.01(a), the Merger shall
be abandoned, without further action by any of the parties hereto. In the event
of termination and abandonment of the Merger by ISP Holdings or ISP pursuant to
Section 10.01(b) or (c), written notice thereof shall forthwith be given to the
other and this Agreement shall terminate and the Merger shall be
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abandoned, without further action by any of the parties hereto.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified or supplemented only by written
agreement of ISP Holdings and ISP at any time prior to the Effective Date with
respect to any of the terms contained herein; provided, however, that after this
Agreement is adopted by the ISP stockholders pursuant to Section 5.04 or by the
ISP Holdings stockholders pursuant to Section 5.05, no such amendment or
modification shall decrease the amount or change the form of consideration to be
delivered to the stockholders of ISP or ISP Holdings, as the case may be.
Section 11.02. Waiver of Compliance; Consents. Any failure of ISP,
on the one hand, or ISP Holdings, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by ISP
Holdings or ISP, respectively, only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
11.02.
Section 11.03. Indemnification by Surviving Corporation.
(a) From and after the Effective Date, the Surviving Corporation
shall indemnify, defend and hold harmless each person who is now an officer or
director of ISP against all losses, claims, damages, costs, expenses or
liabilities or in connection with any claim, action, suit, proceeding or
investigation arising out of the fact that such person is an officer or director
of ISP (or out of any action taken by any such person on behalf of ISP),
pertaining to any matter existing or occurring on or prior to the Effective Date
(including the transactions contemplated by this Agreement), whether asserted or
claimed
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prior to, or on or after, the Effective Date. In each case such indemnification
shall be to the full extent permitted under applicable law (and the Surviving
Corporation will pay expenses in advance of the final disposition of any such
action or proceeding to each such director or officer of ISP seeking
indemnification hereunder to the full extent permitted by law).
(b) For a period of six years after the Effective Date, the
Surviving Corporation shall maintain officers' and directors' liability
insurance for all persons currently covered under ISP's officers' and directors'
liability insurance policies, in their capacities as officers and directors, on
terms substantially no less advantageous to the covered persons than such
existing insurance, pertaining to any matter existing or occurring on or prior
to the Effective Date (including the transactions contemplated by this
Agreement), whether asserted or claimed prior to, or on or after the Effective
Date; provided, however, that the Surviving Corporation shall not be required to
maintain or procure such coverage to pay an annual premium in excess of 200% of
the current annual premium paid by ISP for its existing coverage (the "Cap");
and provided, further, that if equivalent coverage cannot be obtained, or can be
obtained only by paying an annual premium in excess of 200% of the Cap, the
Surviving Corporation shall only be required to obtain as much coverage as can
be obtained by paying an annual premium equal to 200% of the Cap.
(c) This Section 11.03 shall survive the consummation of the Merger.
The provisions of this Section 11.03 are intended to be for the benefit of, and
shall be enforceable by the present directors or officers of ISP, as the case
may be. The rights provided under this Section 11.03 shall be in addition to,
and not in lieu of, any rights to indemnity which any party may have under the
Certificate of Incorporation or By-Laws of ISP or the Surviving Corporation or
any other agreements. If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other corporation or entity and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties or assets
to any individual, corporation or any other entity, in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 11.03.
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Section 11.04. Non-Survival of Warranties. Each and every
representation and warranty contained herein shall expire with, and be
terminated and extinguished by, the Merger, or the termination of this Agreement
pursuant to Section 10.01 or otherwise; and thereafter neither ISP Holdings nor
ISP, nor any officer or director thereof shall be under any liability whatsoever
with respect to any such representation or warranty. This Section 11.04 shall
have no effect upon any other obligation of the parties hereto, whether to be
performed before or after the Closing.
Section 11.05. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice; provided, that notices of a change of address
shall be effective only upon receipt thereof):
(a) if to ISP Holdings, to
c/o ISP Management Company, Inc.
1361 Alps Road
Wayne, New Jersey 07470
Attention: General Counsel
with a copy to
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen E. Jacobs, Esq.
(b) if to ISP, to
International Specialty Products
1361 Alps Road
Wayne, New Jersey 07470
Attention: General Counsel
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019-6092
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Attention: Morton A. Pierce, Esq.
Section 11.06. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but, prior to the Effective
Date, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties, nor is this Agreement intended to confer
any rights or remedies hereunder upon any other person except the parties
hereto; provided, however, that the provisions of Section 11.03 shall inure to
the benefit of and be enforceable by the persons identified thereunder.
Section 11.07. Governing Law. This Agreement shall be governed by
the laws of the State of Delaware (without regard to its conflicts of law
provisions) as to all matters, including matters of validity, construction,
effect, performance and remedies.
Section 11.08. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.09. Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement. As used in this Agreement, the term (i)
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof and (ii)
"including" and words of similar import shall mean "including, without
limitation."
Section 11.10. Actions of ISP. Prior to the Effective Date, any
action, approval, authorization, waiver or consent of ISP (including the Board
of Directors of ISP) required or permitted by this Agreement shall be deemed to
have been taken or given only if such action, approval, authorization, waiver or
consent shall have received the approval of the Committee and shall be effective
with such approval.
Section 11.11. Entire Agreement. This Agreement, including the
documents and instruments referred to herein,
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embodies the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein and supersedes all prior agreements and
understandings of the parties hereto with respect to such subject matter. There
are no promises, representations, warranties, covenants, or undertakings, other
than those expressly set forth or referred to herein.
Section 11.12. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, ISP Holdings and ISP have caused this Agreement
to be signed by their respective duly authorized officers on the date first
above written.
ISP HOLDINGS INC.
By: /s/ Richard A. Weinberg
---------------------------------
Name: Richard A. Weinberg
Title: Senior Vice President &
General Counsel
INTERNATIONAL SPECIALTY PRODUCTS INC.
By: /s/ James P. Rogers
---------------------------------
Name: James P. Rogers
Title: Executive Vice President, Finance
33
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ANNEX B
JP Morgan
J.P. Morgan Securities Inc.
60 Wall Street
New York NY
10260-0060
March 30, 1998
Special Committee of the Board of Directors
International Specialty Products Inc.
1361 Alps Road
Wayne, New Jersey 07470
Attention: Mr. Charles M. Diker
Mr. Burt Manning
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders (other than ISP Holdings Inc. ("ISP")) of
International Specialty Products Inc. (the "Company") of the consideration
proposed to be paid to them in connection with the proposed merger (the
"Merger") of the Company with and into ISP. Pursuant to the Agreement and Plan
of Merger, dated as of March 30, 1998 (the "Agreement"), by and between the
Company and ISP, the Company will merge with and into ISP, (i) each issued and
outstanding share of common stock, par value $.01 per share (the "Company Common
Stock"), of the Company (other than the shares owned of record by ISP) will be
converted into one share of common stock, par value $.01 per share ("New ISP
Common Stock"), of the Surviving Corporation (as defined in the Agreement), (ii)
each issued and outstanding share of Company Common Stock owned by ISP will be
canceled and retired without payment of any consideration therefor and will
cease to exist and (iii) each issued and outstanding share of common stock of
ISP (the "ISP Common Stock") will become a number of stares of New ISP Common
Stock equal to the quotient obtained by dividing 53,833,333 by the number of
outstanding shares of ISP Common Stock as of the effective date of the Merger.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the business of the Company and of
certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies' securities
deemed comparable;
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(iii) current and historical market prices of the common stock of the Company;
(iv) the audited financial statements of the Company and the unaudited financial
statements of ISP for the fiscal year ended December 31, 1997, and the unaudited
financial statements of the Company for the period ended February 22, 1998 and
of ISP for the period ended March 27, 1998; (v) certain agreements with respect
to outstanding indebtedness or obligations of the Company and ISP; (vi) certain
public reports prepared by debt rating agencies; and (vii) certain internal
financial analyses and forecasts prepared by the Company and ISP and their
respective managements.
In addition, we have held discussions with certain members of the management of
the Company and ISP with respect to certain aspects of the Merger, the past and
current business operations of the Company and ISP, the financial condition and
future prospects and operations of the Company and ISP, the effects of the
Merger on the financial condition and future prospects of the Company, and
certain other matters we believed necessary or appropriate to our inquiry. We
have reviewed such other financial studies and analyses and considered such
other information as we deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company or ISP or otherwise reviewed by
us, and we have not assumed any responsibility or liability therefor. In relying
on financial analyses and forecasts provided to us, we have assumed that they
have been reasonably prepared based on assumptions reflecting the best currently
available estimates and judgments by management as to the expected future
results of operations and financial condition of the Company. We have also
assumed that the Merger will have the tax consequences described in discussions
with, and materials furnished to us by, representatives of the Company and ISP,
and that the other transactions contemplated by the Agreement will be
consummated as described in the Agreement. We have relied as to all legal
matters relevant to rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We are expressing no opinion herein as to the price at which the New ISP Common
Stock will trade at any future time.
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In addition, we were not requested to and did not provide advice concerning the
structure, the specific amount of the consideration, or any other aspects of the
Merger, or to provide services other than the delivery of this opinion. We were
not authorized to and did not solicit any expressions of interest from any other
parties with respect to the sale of all or any part of the Company or any other
alternative transaction.
We will receive a fee from the Company for the delivery of this opinion. Please
be advised that we have no other financial advisory or other relationships with
the Company or ISP. In the ordinary course of their businesses, our affiliates
may actively trade the debt and equity securities of the Company or ISP for
their own account or for the accounts of customers and, accordingly, they may at
any time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the consideration to be paid to the Company's stockholders (other
than ISP) in the proposed Merger is fair, from a financial point of view, to
such stockholders.
This letter is provided to the Board of Directors of the Company in connection
with and for the purposes of its evaluation of the Merger. This opinion does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger. This opinion may be
reproduced in full in any proxy or information statement mailed to stockholders
of the Company.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ James R. Elliott, III
----------------------------------
Name: James R. Elliott, III
Title: Managing Director
3
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ISP Holdings Inc. (the "Registrant") is a Delaware corporation. Subsection
(b)(7) of Section 102 of the Delaware General Corporation Law (the "DGCL")
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
the corporation or its stockholders for monetary damages for violations of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit. Article Seventh of the Registrant's Certificate of
Incorporation has eliminated the personal liability of directors to the fullest
extent permitted by Subsection (b)(7) of Section 102 of the DGCL.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding provided that such
director or officer acted in good faith in a manner reasonably believed to be
in, or not opposed to, the best interests of the corporation, and, with respect
to any criminal action or proceeding, provided further that such director or
officer has no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit
provided that such director or officer acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such director or officer shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that despite the adjudication of liability but in view of all
of the circumstances of the case, such director or officer is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
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Section 145 further provides that (i) to the extent a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith; and (ii) indemnification and advancement of expenses
provided for, by, or granted pursuant to, Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled. In
addition, Section 145 empowers the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
Article VIII of the Registrant's By-Laws states that the Registrant shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit or proceeding by reason of
the fact that he is or was a director, officer or employee of the Registrant, or
is or was serving at the request of the Registrant as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Registrant.
On the date on which the merger of International Specialty Products Inc.
("ISP") and the Registrant becomes effective, the By-Laws of ISP immediately
prior thereto will become the By-Laws of the Registrant, as the surviving
corporation in the merger, and the Certificate of Incorporation of the surviving
corporation will be amended to be identical, with certain exceptions which do
not concern indemnification, to the Certificate of Incorporation of ISP in
effect immediately prior to the merger.
Article 8 of the Certificate of Incorporation of ISP provides that
directors and officers of ISP shall not be personally liable to the corporation
or its stockholders for monetary damages if a director or officer acts in good
faith and in a manner he reasonably believes to be in or not opposed to the best
interests of ISP and provides for indemnification of the officers and directors
of ISP to the full extent permitted by applicable law.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
Exhibit
Number Description
- ------ -----------
*3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to
the Registration Statement on Form S-4 of the Registrant (Registration
No. 333-17827) (the "Holdings Registration Statement")).
4.1 9% Note Indenture, dated as of October 18, 1996, between the Registrant
and The Bank of New York, as trustee (incorporated by reference to
Exhibit 4.1 to the Holdings Registration Statement).
4.2 9 3/4% Note Indenture, dated as of October 18, 1996, between the
Registrant and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4.2 to the Holdings Registration Statement).
**5 Opinion of Weil, Gotshal & Manges LLP re: legality.
**8 Opinion of Weil, Gotshal & Manges LLP re: tax matters.
10.1 Management Agreement, dated as of March 3, 1992 ("Management
Agreement"), among GAF Corporation, G-I Holdings Inc., G Industries
Corp., ISP, GAF Building Materials Corporation and GAF Broadcasting
Co., Inc. (incorporated by reference to Exhibit 10.9 to the
Registration Statement on Form S-4 of G-I Holdings Inc. (Registration
No. 33-72220) (the "G-I Holdings Registration Statement")).
10.2 Amendment No. 1, dated as of January 1, 1994, to the Management
Agreement (incorporated by reference to Exhibit 10.10 to G-I Holdings
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1993).
10.3 Amendment No. 2, dated as of May 31, 1994, to the Management Agreement
(incorporated by reference to Exhibit 10.1 to G-I Holdings Inc.'s
Quarterly Report on Form 10-Q for the quarter ended July 3, 1994).
10.4 Amendment No. 3, dated as of December 31, 1994, to the Management
Agreement (incorporated by reference to Exhibit 10.4 to ISP's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.5 Amendment No. 4, dated as of December 31, 1995, to the Management
Agreement (incorporated by reference to Exhibit 10.6 to the
Registration Statement on Form S-4 of G-I Holdings Inc. (Registration
No. 333-2436)).
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10.6 Amendment No. 5, dated as of October 18, 1996, to the Management
Agreement (incorporated by reference to Exhibit 10.6 to the Holdings
Registration Statement).
10.7 Amendment No. 6, dated as of January 1, 1997, to the Management
Agreement (incorporated by reference to Exhibit 10.8 to Building
Materials Corporation of America's Registration Statement on Form S-4
(Registration No.333-20859)).
10.8 Amendment No. 7, dated as of December 31, 1997, to the Management
Agreement (incorporated by reference to Exhibit 10.10 to Building
Materials Corporation of America's Registration Statement on Form S-4
(Registration No.333-41531) (the "BMCA Registration Statement")).
10.9 Amendment No. 8, dated as of January 1, 1998, to the Management
Agreement (incorporated by reference to Exhibit 10.11 to the BMCA
Registration Statement).
*10.10 Amendment No. 9, dated as of March 30, 1998, to the Management
Agreement.
10.11 Indemnification Agreement, dated as of October 18, 1996, among GAF
Corporation, G-I Holdings Inc., the Registrant, G Industries Corp. and
GFC (incorporated by reference to Exhibit 10.7 to the Holdings
Registration Statement).
10.12 Tax Sharing Agreement, dated as of January 1, 1997, among the
Registrant, ISP and certain subsidiaries of ISP (incorporated by
reference to Exhibit 10.8 to the Holdings Registration Statement).
10.13 Non-Qualified Retirement Plan Letter Agreement (incorporated by
reference to Exhibit 10.11 to ISP's Registration Statement on Form S-1
(Registration No. 33-40337) (the "ISP Registration Statement")).
10.14 ISP Amended and Restated 1991 Incentive Plan for Key Employees and
Directors (the "ISP Incentive Plan") (incorporated by reference to
Exhibit 99 to ISP's Registration Statement on Form S-8 (Registration
No. 33-92518)).
10.15 Amendment No. 1 to the ISP Incentive Plan (incorporated by reference to
Exhibit 10.11 to ISP's Annual Report on Form 10-K for the year ended
December 31, 1996) (the "ISP 1996 Annual Report")).
10.16 Amendment No. 2 to the ISP Incentive Plan (incorporated by reference to
Exhibit 99.3 to ISP's Registration Statement on Form S-8 (Registration
No. 333-27505)).
10.17 Agreement, dated July 30, 1993, between ISP and Carl R. Eckardt
(incorporated by reference to Exhibit 10.16 to the G-I Holdings
Registration Statement).
10.18 Stock Appreciation Rights Agreement, dated January 20, 1994, between
GAF and James P. Rogers (incorporated by reference to Exhibit 10.20 to
G-I Holdings' Annual Report on Form 10-K for the year ended December
31, 1993).
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10.19 Letter Agreement, dated October 15, 1996, between GAF and Dr. Peter
Heinze (incorporated by reference to Exhibit 10.14 to the Holdings
Registration Statement).
10.20 Form of Option Agreement relating to Cumulative Redeemable Convertible
Preferred Stock of the Registrant (incorporated by reference to Exhibit
10.21 to the ISP 1996 Annual Report).
10.21 Form of the Registrant's Stock Appreciation Right Agreement
(incorporated by reference to Exhibit 10.22 to the ISP 1996 Annual
Report).
10.22 Indenture, dated as of March 1, 1992, relating to ISP's 9% Senior Notes
due March 1, 1999 (incorporated by reference to Exhibit 4 to ISP's
Registration Statement on Form S-1 (Registration No. 33-44862)).
*10.23 Compensation and Indemnification Agreement among Charles M. Diker, Burt
C. Manning and ISP, dated October 10, 1997.
10.24 Agreement and Plan of Merger between the Registrant and ISP dated as of
March 30, 1998 (incorporated by reference to Exhibit A to Amendment No.
2 to the Registrant's Schedule 13D with respect to the common stock of
ISP filed with the Securities and Exchange Commission on April 1,
1998).
21 Subsidiaries of the Registrant (incoporated by reference to Exhibit 21
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997).
*23.1 Consent of Arthur Andersen LLP.
**23.2 Consent of Weil, Gotshal & Manges LLP (to be included in Exhibits 5 and
8).
24 Power of Attorney (included on signature pages to Registration
Statement).
99.1 Certificate of Incorporation of ISP (incorporated herein by reference
to Exhibit 3.1 of the ISP Registration Statement).
*99.2 By-Laws of ISP, as amended.
(b) Financial Statement Schedule and Financial Statements (incorporated herein
by reference to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997).
(c) Opinion of J.P. Morgan Securities Inc. dated as of March 30, 1998 (Omitted
in accordance with Item 21(c) because it is furnished as a part of ISP's
Proxy Statement/Prospectus included in the Registration Statement).
- ------------------------------
* Filed herewith
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** To be filed by amendment
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ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) (1) The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
the use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a Registrant
of expenses incurred or paid by a director, officer or controlling person of
such Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, such Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(d) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the Township of Wayne,
State of New Jersey, on May 27, 1998.
ISP HOLDINGS INC.
By: /s/ James P. Rogers
------------------------------------------
Name: James P. Rogers
Title: Executive Vice President and
Chief Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose name appears below
hereby constitutes James P. Rogers such person's true and lawful attorney, with
full power of substitution to sign for such person and in such person's name and
capacity indicated below, any and all amendments to this Registration Statement,
and to file the same with the Securities and Exchange Commission, hereby
ratifying and confirming such person's signature as it may be signed by said
attorney to any and all amendments.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Samuel J. Heyman
- --------------------------- Chairman, Chief May 27, 1998
Samuel J. Heyman Executive Officer and
Director (Principal
Executive Officer)
/s/ James P. Rogers
- --------------------------- Executive Vice President, May 27, 1998
James P. Rogers Chief Financial Officer
and Director (Principal
Financial Officer)
/s/ Jonathan H. Stern
- --------------------------- Vice President and May 27, 1998
Jonathan H. Stern Controller (Principal
Accounting Officer)
/s/ Peter R. Heinze
- --------------------------- Director May 27, 1998
Peter R. Heinze
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
*3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to
the Registration Statement on Form S-4 of the Registrant (Registration
No. 333-17827) (the "Holdings Registration Statement")).
4.1 9% Note Indenture, dated as of October 18, 1996, between the Registrant
and The Bank of New York, as trustee (incorporated by reference to
Exhibit 4.1 to the Holdings Registration Statement).
4.2 9 3/4% Note Indenture, dated as of October 18, 1996, between the
Registrant and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4.2 to the Holdings Registration Statement).
**5 Opinion of Weil, Gotshal & Manges LLP re: legality.
**8 Opinion of Weil, Gotshal & Manges LLP re: tax matters.
10.1 Management Agreement, dated as of March 3, 1992 ("Management
Agreement"), among GAF Corporation, G-I Holdings Inc., G Industries
Corp., ISP, GAF Building Materials Corporation and GAF Broadcasting
Co., Inc. (incorporated by reference to Exhibit 10.9 to the
Registration Statement on Form S-4 of G-I Holdings Inc. (Registration
No. 33-72220) (the "G-I Holdings Registration Statement")).
10.2 Amendment No. 1, dated as of January 1, 1994, to the Management
Agreement (incorporated by reference to Exhibit 10.10 to G-I Holdings
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1993).
10.3 Amendment No. 2, dated as of May 31, 1994, to the Management Agreement
(incorporated by reference to Exhibit 10.1 to G-I Holdings Inc.'s
Quarterly Report on Form 10-Q for the quarter ended July 3, 1994).
10.4 Amendment No. 3, dated as of December 31, 1994, to the Management
Agreement (incorporated by reference to Exhibit 10.4 to ISP's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.5 Amendment No. 4, dated as of December 31, 1995, to the Management
Agreement (incorporated by reference to Exhibit 10.6 to the
Registration Statement on Form S-4 of G-I Holdings Inc. (Registration
No. 333-2436)).
<PAGE>
10.6 Amendment No. 5, dated as of October 18, 1996, to the Management
Agreement (incorporated by reference to Exhibit 10.6 to the Holdings
Registration Statement).
10.7 Amendment No. 6, dated as of January 1, 1997, to the Management
Agreement (incorporated by reference to Exhibit 10.8 to Building
Materials Corporation of America's Registration Statement on Form S-4
(Registration No.333-20859)).
10.8 Amendment No. 7, dated as of December 31, 1997, to the Management
Agreement (incorporated by reference to Exhibit 10.10 to Building
Materials Corporation of America's Registration Statement on Form S-4
(Registration No.333-41531) (the "BMCA Registration Statement")).
10.9 Amendment No. 8, dated as of January 1, 1998, to the Management
Agreement (incorporated by reference to Exhibit 10.11 to the BMCA
Registration Statement).
*10.10 Amendment No. 9, dated as of March 30, 1998, to the Management
Agreement.
10.11 Indemnification Agreement, dated as of October 18, 1996, among GAF
Corporation, G-I Holdings Inc., the Registrant, G Industries Corp. and
GFC (incorporated by reference to Exhibit 10.7 to the Holdings
Registration Statement).
10.12 Tax Sharing Agreement, dated as of January 1, 1997, among the
Registrant, ISP and certain subsidiaries of ISP (incorporated by
reference to Exhibit 10.8 to the Holdings Registration Statement).
10.13 Non-Qualified Retirement Plan Letter Agreement (incorporated by
reference to Exhibit 10.11 to ISP's Registration Statement on Form S-1
(Registration No. 33-40337) (the "ISP Registration Statement")).
10.14 ISP Amended and Restated 1991 Incentive Plan for Key Employees and
Directors (the "ISP Incentive Plan") (incorporated by reference to
Exhibit 99 to ISP's Registration Statement on Form S-8 (Registration
No. 33-92518)).
10.15 Amendment No. 1 to the ISP Incentive Plan (incorporated by reference to
Exhibit 10.11 to ISP's Annual Report on Form 10-K for the year ended
December 31, 1996) (the "ISP 1996 Annual Report")).
10.16 Amendment No. 2 to the ISP Incentive Plan (incorporated by reference to
Exhibit 99.3 to ISP's Registration Statement on Form S-8 (Registration
No. 333-27505)).
10.17 Agreement, dated July 30, 1993, between ISP and Carl R. Eckardt
(incorporated by reference to Exhibit 10.16 to the G-I Holdings
Registration Statement).
10.18 Stock Appreciation Rights Agreement, dated January 20, 1994, between
GAF and James P. Rogers (incorporated by reference to Exhibit 10.20 to
G-I Holdings' Annual Report on Form 10-K for the year ended December
31, 1993).
<PAGE>
10.19 Letter Agreement, dated October 15, 1996, between GAF and Dr. Peter
Heinze (incorporated by reference to Exhibit 10.14 to the Holdings
Registration Statement).
10.20 Form of Option Agreement relating to Cumulative Redeemable Convertible
Preferred Stock of the Registrant (incorporated by reference to Exhibit
10.21 to the ISP 1996 Annual Report).
10.21 Form of the Registrant's Stock Appreciation Right Agreement
(incorporated by reference to Exhibit 10.22 to the ISP 1996 Annual
Report).
10.22 Indenture, dated as of March 1, 1992, relating to ISP's 9% Senior Notes
due March 1, 1999 (incorporated by reference to Exhibit 4 to ISP's
Registration Statement on Form S-1 (Registration No. 33-44862)).
*10.23 Compensation and Indemnification Agreement among Charles M. Diker, Burt
C. Manning and ISP, dated October 10, 1997.
10.24 Agreement and Plan of Merger between the Registrant and ISP dated as of
March 30, 1998 (incorporated by reference to Exhibit A to Amendment No.
2 to the Registrant's Schedule 13D with respect to the common stock of
ISP filed with the Securities and Exchange Commission on April 1,
1998).
21 Subsidiaries of the Registrant (incoporated by reference to Exhibit 21
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997).
*23.1 Consent of Arthur Andersen LLP.
**23.2 Consent of Weil, Gotshal & Manges LLP (to be included in Exhibits 5 and
8).
24 Power of Attorney (included on signature pages to Registration
Statement).
99.1 Certificate of Incorporation of ISP (incorporated herein by reference
to Exhibit 3.1 of the ISP Registration Statement).
*99.2 By-Laws of ISP, as amended.
(b) Financial Statement Schedule and Financial Statements (incorporated herein
by reference to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997).
(c) Opinion of J.P. Morgan Securities Inc. dated as of March 30, 1998 (Omitted
in accordance with Item 21(c) because it is furnished as a part of ISP's
Proxy Statement/Prospectus included in the Registration Statement).
- ------------------------------
* Filed herewith
** To be filed by amendment
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
ISP HOLDINGS INC.
THE UNDERSIGNED, being a natural person for the purposes of
organizing a corporation under the General Corporation Law of the State of
Delaware, hereby certifies that:
FIRST: The name of the Corporation is ISP Holdings Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, City of Wilmington, County of New
Castle, State of Delaware. The name of the registered agent of the Corporation
in the State of Delaware at such address is The Prentice-Hall Corporation
System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as from time to time amended.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 1000, all of which shares shall be
Common Stock having a par value of $.001.
FIFTH: The name and mailing address of the incorporator is Shelley
A. Sorkin, c/o ISP Management Company, Inc., 1361 Alps Road, Wayne, New Jersey
07470.
SIXTH: In furtherance and not in limitation of the powers conferred
by law, subject to any limitations contained elsewhere in these articles of
incorporation, Bylaws of the Corporation may be adopted, amended or repealed by
a majority of the board of directors of the Corporation, but any By-laws adopted
by the board of directors may be amended or repealed by the stockholders
entitled to vote thereon. Election of directors need not be by written ballot.
SEVENTH: (a) A director of the Corporation shall not be personally
liable either to the Corporation or to any stockholder for monetary damages for
breach of fiduciary duty as a director, except (i) for any breach of the
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<PAGE>
director's duty of loyalty to the Corporation or its stockholders, or (ii) for
acts or omissions which are not in good faith or which involve intentional
misconduct or knowing violation of the law, or (iii) for any matter in respect
of which such director shall be liable under Section 174 of Title 8 of the
General Corporation Law of the State of Delaware or any amendment thereto or
successor provision thereto, or (iv) for any transaction from which the director
shall have derived an improper personal benefit. Neither amendment nor repeal of
this paragraph (a) nor the adoption of any provision of the Certificate of
Incorporation inconsistent with this paragraph (a) shall eliminate or reduce the
effect of this paragraph (a) in respect of any matter occurring, or any cause of
action, suit or claim that, but for this paragraph (a) of this Article, would
accrue or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to, or testifies in, any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative in nature, by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding to the full extent permitted
by law, and the Corporation may adopt By-laws or enter into agreements with any
such person for the purpose of providing for such indemnification.
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate of Incorporation on this 6th day of August, 1996.
/s/ Shelley A. Sorkin
----------------------------
Shelley A. Sorkin
Sole Incorporator
2
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
ISP HOLDINGS INC.
(Pursuant to Section 242 of the
General Corporation Law of Delaware)
------------------------------------
ISP Holdings Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), does hereby certify as follows:
1. The Certificate of Incorporation of the Corporation (the "Certificate")
was filed with the Secretary of State of Delaware on August 6, 1996.
2. Article FOURTH of the Certificate is hereby amended to read in its
entirety as follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is three million eight
hundred thousand (3,800,000) shares, consisting of:
(a) Three Million (3,000,000) shares of Common Stock, par
value $.001 (hereinafter referred to as "Common Stock"), and
(b) Eight hundred thousand (800,000) shares of Preferred
Stock, par value $.01 (hereinafter referred to as "Preferred
Stock").
A. PREFERRED STOCK: Shares of Preferred Stock may be issued from
time to time in one or more series, as may from time to time be
determined by the Board of Directors, each of said series to be
distinctly designated. All shares of any one series of Preferred
Stock shall be alike in every
NYFS01...:\01\47201\0035\1909\CRT5218T.570
<PAGE>
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph C of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(a) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the number
of shares thereof then outstanding) from time to time by like
action of the Board of Directors;
(b) The rate and times at which, and the terms and conditions
on which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if
any, of such dividends to the dividends payable on any other
class or classes or series of the same or other classes of
stock and whether such dividends shall be cumulative or
non-cumulative;
(c) The right, if any, of the holders of Preferred Stock of
such series to convert the same into, or exchange the same
for, shares of any other class or classes or of any series of
the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion or
exchange;
2
<PAGE>
(d) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices,
including, without limitation, cash, property, or rights
(including securities of the Corporation or any other
corporation), and the time or times at which, and the terms
and conditions on which, Preferred Stock of such series may be
redeemed;
(e) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up of the Corporation;
(f) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(g) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the generality
of the foregoing, include the right, voting as a series by
itself or together with other series of Preferred Stock or all
series of Preferred Stock as a class, to elect one or more
directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preferred Stock or under such other circumstances and on
such conditions as the Board of Directors may determine.
B. COMMON STOCK
1. After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the provisions
of Paragraph A of this Article FOURTH), if any, shall have been met and
after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the provisions
of Paragraph A of this Article FOURTH), and subject further to any other
conditions which may be fixed in
3
<PAGE>
accordance with the provisions of Paragraph A of this Article FOURTH, then
and not otherwise the holders of Common Stock shall be entitled to receive
such dividends as may be declared from time to time by the Board of
Directors.
2. After distribution in full of the preferential amount, if
any (fixed in accordance with the provisions of Paragraph A of this
Article FOURTH), to be distributed to the holders of Preferred Stock in
the event of voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the holders of the Common Stock, subject to
the rights, if any, of the holders of Preferred Stock to participate
therein (fixed in accordance with Paragraph A of this Article FOURTH),
shall be entitled to receive all the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common Stock
held by them, respectively.
3. Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted by the
Board of Directors pursuant to Paragraph A of this Article FOURTH, each
holder of Common Stock shall have one vote in respect of each share of
Common Stock held by him on all matters voted upon by the stockholders.
C. OTHER PROVISIONS:
1. No holder of any of the shares of any class or series of
stock or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation shall
have any preemptive right to purchase or subscribe for any unissued stock
of any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or
series of stock or securities convertible into or exchangeable for stock,
or carrying any right to
4
<PAGE>
purchase stock, may be issued and disposed of pursuant to a resolution of
the Board of Directors to such persons, firms, corporations or
associations, whether such holders or others, and upon such terms, as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
2. The relative powers, preferences and rights of each series
of Preferred Stock in relation to the powers, preferences and rights of
each other series of Preferred Stock shall, in each case, be as fixed from
time to time by the Board of Directors in the resolution or resolutions
adopted pursuant to authority granted in Paragraph A of this Article
FOURTH, and the consent, by class or series vote or otherwise, of the
holders of such of the series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the
powers, preferences and rights of such other series shall be fixed by the
Board of Directors as senior to, or on a parity with the powers,
preferences and rights of such outstanding series, or any of them;
provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to Paragraph A of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
3. Subject to the provisions of sub-paragraph 2 of this
Paragraph C, shares of any series of Preferred Stock may be issued from
time to time as the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be fixed by the
Board of Directors.
4. Shares of Common Stock may be issued from time to time as
the Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
5. The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be increased or
decreased from
5
<PAGE>
time to time by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote thereon.
3. The foregoing Amendment to the Certificate was duly adopted in
accordance with Section 242 of the General Corporation Law of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by its duly authorized officers this 24th day of
December, 1996.
By: /s/Mark A. Presto
---------------------------
Name: Mark A. Presto
Title: VICE PRESIDENT
6
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF ISP HOLDINGS INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------------
The undersigned, a Senior Vice President of ISP Holdings Inc. (the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "General Corporation Law"), in
accordance with the provisions of Section 151 thereof, do hereby certify that
the Board of Directors of the Corporation duly adopted the following resolutions
by unanimous consent dated as of March 28, 1997:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation of the Corporation, this Board of Directors hereby
creates and authorizes the issuance of a series of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $.01 per share, and hereby
fixes the designation, divided rate, redemption provisions, voting powers,
rights on liquidation, dissolution or winding up, and other preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations, or restrictions thereof, as follows:
1. Designation. The Preferred Stock created and authorized hereby
shall be designated as the "Series A Cumulative Redeemable Convertible Preferred
Stock" (the "Series A Preferred Stock"). The number of shares of Series A
Preferred Stock shall be 250,000. The liquidation preference of the Series A
Preferred Stock shall be $111.44 per share (the "Liquidation Preference").
2. Dividends.
(a) Each holder of the share of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the funds of the Corporation legally available therefor pursuant to the General
Corporation Law (the "Legally Available Funds"), cumulative cash dividend
payments of $1.6716 per share for each full Quarterly Dividend Period (as
defined in
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<PAGE>
Section 2(f) hereof) that such share of Series A Preferred Stock is outstanding;
provided, however, that if a share of Series A Preferred Stock is not
outstanding for a full Quarterly Dividend Period, the dividend payment per share
in respect of such partial Quarterly Dividend Period shall be equal to $1.6716
multiplied by a fraction, the numerator of which is the number of days such
share was outstanding (but not more than thirty (30) days for any calendar month
fully occurring in such portion), and the denominator of which is 90. Such
dividends, if and to the extend declared, shall be payable quarterly in arrears
on January 1, April 1, July 1 and October 1 of each year (each, a "Dividend
Payment Date"); provided, however, that if any such date is not a Business Day
(as defined in Section 2(f) hereof), then the applicable dividend shall be
payable, if and to the extent declared, on the next succeeding Business Day.
Such dividends shall be fully cumulative.
(b) Dividends shall accrue (whether or not declared or paid) on each
share of Series A Preferred Stock from the date on which such share is issued.
(c) Quarterly dividends, if and to the extent declared, shall be
paid to the holders of record of shares of Series A Preferred Stock as they
appear on the stock register of the Corporation on the record date therefor,
which record date shall be the December 15, March 15, June 15 and September 15
immediately preceding the Dividend Payment Date relating thereto.
(d) If dividends are not paid in full, or not declared in full and
sums set apart for the payment thereof, on the Series A Preferred Stock and any
Capital Stock (as defined in Section 2(f) hereof) of the Corporation ranking on
a parity with the Series A Preferred Stock as to the payment of dividends, all
dividends declared upon shares of Series A Preferred Stock and shares of such
other stock shall be declared pro rata so that in all cases the amount of
dividends declared per share on the Series A Preferred Stock and such other
stock share bear to each other the same ratio that accumulated, unpaid dividends
per share on the Series A Preferred Stock and such other stock shall bear to
each other. Except as provided in the preceding sentence, unless full cumulative
dividends on the Series A Preferred Stock have been paid or declared in full and
sums set aside for the payment thereof, no dividends shall be declared or paid
or set aside for payment, or other distribution made, on any Capital Stock of
the Corporation ranking on a parity with or junior to the Series A Preferred
Stock as to the
2
<PAGE>
payment of dividends, nor shall any such stock be purchased, redeemed or
otherwise acquired, except as provided in Section 2(e) hereof, for any
consideration (or any payment made to or available for a sinking fund for the
redemption of any such stock).
(e) Except as provided in Section 2(d) hereof, the Corporation may
not pay cash dividends or make cash distributions on, or repurchase, redeem or
otherwise acquire (except in exchange for shares of Capital Stock ranking junior
to the Series A Preferred Stock as to the payment of dividends and as to the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation or options, rights or warrants to acquire such shares) any of its
Capital Stock other than Capital Stock ranking senior to the Series A Preferred
Stock as to the payment of dividends, if, at such date, there are accumulated,
unpaid dividends on the Series A Preferred Stock; provided, however, that the
Corporation may purchase outstanding shares of Common Stock from the holders
thereof in accordance with the terms and conditions of the Employee Stockholder
Agreements (as defined in Section 2(f) hereof).
(f) The following terms shall have the meanings set forth below:
"Applicable Date," "Applicable Rate" and "Base Book Value" shall
have the respective meanings specified in each Stock Option Agreement entered
into between the Corporation and the optionee party thereto.
"Business Day" means any day other than a Saturday, a Sunday or any
other day on which commercial banking institutions in the City of New York are
authorized by law to be closed.
"Capital Stock" of any person means any and all shares, interests,
participations or other equivalents (however designated) of equity interests in
such person.
"Common Stock" means the Corporation's common stock, par value $.001
per share, and any securities or property into which the Corporation's Common
Stock may be converted or exchanged pursuant to a recapitalization, stock split,
combination, reorganization, merger, exchange or similar transaction.
"Corporation" means the party named as such in the
preamble to this Certificate.
3
<PAGE>
"Employee Stockholder Agreements" means the agreements among the
Company and holders of Common Stock, other than Samuel J. Heyman and his
affiliates, and the option agreements relating to the Series A Preferred Stock.
"person" means any individual, partnership, limited liability
company, joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or agency, department or
instrumentality thereof.
"Quarterly Dividend Period" means the applicable period from January
1 through the next March 31, from April 1 through the next June 30, from July 1
through the next September 30 or from October 1 through the next December 31.
3. Redemption.
(a) The Series A Preferred Stock shall be redeemable, at any time in
whole or from time to time in part, out of Legally Available Funds, at the
option of the Corporation, upon giving notice as provided in Section 3(b)
hereof, at the Liquidation Preference thereof plus accumulated but unpaid
dividends to the date of redemption.
(b) At least thirty (30) days but not more than sixty (60) days
prior to the date fixed for the redemption of shares of the Series A Preferred
Stock pursuant to Section 3(a) hereof (each a "Redemption Date"), written notice
of such redemption shall be mailed to each holder of record of shares of Series
A Preferred Stock to be redeemed in a postage prepaid envelope addressed to such
holder at his mailing address as shown on the records of the Corporation;
provided, however, that no failure of any holder of Series A Preferred Stock to
receive such notice nor any defect therein shall affect the validity of the
proceeding for the redemption of the shares of Series A Preferred Stock to be
redeemed. Each such notice shall state: (i) the Redemption Date; (ii) the number
of shares of Series A Preferred Stock to be redeemed and, if fewer than all of
the shares held by such holder are to be redeemed from such holder, the number
of shares to be redeemed from such holder; (iii) the cash redemption price being
paid; (iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that dividends on the
shares to be redeemed shall cease to accrue on the Redemption Date. On or after
the Redemption Date, each holder of shares of
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Series A Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Corporation at the place
designated in such notice and thereupon the redemption price of such shares
shall be paid to the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
cancelled. In case fewer than all of the shares represented by such certificate
are redeemed, a new certificate shall be issued representing the unredeemed
shares. From and after the Redemption Date (unless default shall be made by the
Corporation in payment of the redemption price) all dividends on the shares of
Series A Preferred Stock designated for redemption in such notice shall cease to
accrue and all rights of the holders thereof as stockholders of the Corporation,
except the right to receive the redemption price thereof, without interest, upon
the surrender of certificates representing the same, shall cease and terminate
and such shares shall not thereafter be transferred (except with the written
consent of the Corporation) on the books of the Corporation and such shares
shall not be deemed to be outstanding for any purpose whatsoever.
(c) If fewer than all of the shares of Series A Preferred Stock are
to be redeemed, the Board of Directors of the Corporation shall select the
shares to be redeemed on such basis as the Board of Directors shall determine in
its sole discretion. The Board of Directors shall not be required to redeem
shares of Series A Preferred Stock on a pro rata basis. The Board of Directors
may elect to redeem shares of Series A Preferred Stock held by one holder or
group of holders and elect not to redeem shares of Series A Preferred Stock held
by other holders. Regardless of the method used, the calculation of the number
of shares to be redeemed shall be based upon whole shares, such that the
Corporation shall in no event be required to issue fractional shares of Series A
Preferred Stock or cash in lieu thereof. In the event a method requiring
proration is used, the number of shares to be redeemed from a holder shall be
rounded downward to the nearest whole number of shares. The holders of Series A
Preferred Stock shall have no right to request the Corporation to redeem such
shares at any time, and the Corporation shall have no obligation to honor any
such request if made.
4. Voting Rights. The holders of Series A Preferred Stock shall be
entitled to one vote for each share held on all matters to be voted on by the
stockholders of the Corporation and shall vote together as a single class
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with the holders of Common Stock and the holders of any other class of stock
entitled to vote in such manner. The holders of Series A Preferred Stock shall
not, except as required by law, be entitled to vote as a separate class. Without
limiting the generality of the preceding sentence, a class vote or the consent
of the holders of the outstanding shares of Series A Preferred Stock as a
separate class shall not be required in connection with: (i) the creation of any
class or series of Capital Stock of the Corporation; (ii) any merger,
consolidation or transfer of all or substantially all the assets of the
Corporation or other transaction involving the Corporation and a third party in
which the Corporation is the survivor or in which the Corporation is not the
survivor and in which the Series A Preferred Stock shall (a) remain outstanding
as an equivalent security of the survivor with no adverse change to the powers,
preferences or special rights provided for in this Certificate or (B) be
redeemed for an amount per share equal to the Liquidation Preference plus
accrued and unpaid dividends; or (iii) any increase in the total number of
authorized or issued shares of Capital Stock of any class, including without
limitation Series A Preferred Stock.
5. Priority of Series A Preferred Stock in Event of Liquidation,
Dissolution or Winding Up. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, after
payment or provision for payment of the debts and other liabilities of the
Corporation, the holders of the Series A Preferred Stock shall be entitled to
receive, out of the remaining net assets of the Corporation, an amount per share
in cash equal to the Liquidation Preference plus all dividends accrued and
unpaid on each such share up to the date fixed for distribution before any
distribution shall be made to the holders of any Capital Stock of the
Corporation ranking junior to the Series A Preferred Stock as to the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets distributable among the holders of Series A Preferred
Stock and any Capital Stock of the Corporation ranking on a parity with the
Series A Preferred Stock as to the distribution of assets upon the liquidation,
dissolution or winding up of the Corporation shall be insufficient to permit the
payment in full to the holders of the Series A Preferred Stock and such other
stock of all preferential amounts payable to all such holders, then the assets
thus distributable shall be distributed ratably among the holders of the Series
A Preferred Stock and any Capital Stock of the Corporation
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ranking on a parity with the Series A Preferred Stock as to the distribution of
assets upon liquidation, dissolution or winding up of the Corporation in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full. Except as otherwise provided
in this Section 5, holders of Series A Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding up of the
affairs of the Corporation. For the purposes of this Section 5, neither the
voluntary sale, lease, conveyance, exchange or transfer (for cash, securities or
other consideration) of all or substantially all the property or assets of the
Corporation, nor the consolidation or merger of the Corporation with one or more
other corporations, shall be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary.
6. Conversion.
(a) The holders of shares of Series A Preferred Stock shall have the
right, at any time or from time to time, at their option, to convert all or any
portion of such shares into shares of Common Stock on the following basis: Each
share of Series A Preferred Stock shall be convertible into the number of shares
of Common Stock equal to 111.44 divided by the sum of (i) an amount equal to the
Base Book Value and (ii) the Interest Amount (as hereinafter defined). "Interest
Amount" means interest on such Base Book Value at the Applicable Rate per annum
from the Applicable Date to the date of conversion. The Corporation may, at its
option, pay to any holder cash in lieu of any fractional share of Common Stock
issuable upon conversion of shares of Series A Preferred Stock.
(b) In the case of a redemption pursuant to Section 3 hereof of any
shares of Series A Preferred Stock, the right of conversion under this Section 6
shall cease and terminate, as to the shares to be redeemed, at the close of
business on the second day preceding the date fixed for such redemption, unless
default shall be made in the payment of the Redemption Price for the shares to
be so redeemed.
(c) In order to convert shares of Series A Preferred Stock into
shares of Common Stock pursuant to the right of conversion set forth in Section
6(a), the holder thereof shall surrender the certificate or certificates
representing Series A Preferred Stock, duly endorsed to the Corporation or in
blank, at the principal office of the Corporation and shall give written notice
to the Corporation
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that such holder elects to convert the same. Within five (5) business days, the
Corporation shall deliver at said office to such holder of Series A Preferred
Stock a certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled as aforesaid. Shares of Series A Preferred
Stock shall be deemed to have been converted as of the date of the surrender of
such shares for conversion as provided above, and the person entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder of such shares of Common Stock on such date.
Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Series A Preferred Stock surrendered for
conversion, the Corporation shall issue and deliver to the holder of the
certificate so surrendered for conversion, at the expense of the Corporation, a
new certificate covering the number of shares of Series A Preferred Stock
representing the unconverted portion of the certificate so surrendered, which
new certificate shall entitle the holder thereof to the rights of the shares of
Series A Preferred Stock represented thereby to the same extent as if the
certificate theretofore covering such unconverted shares had not been
surrendered for conversion.
(d) The issuance of certificates for shares of Common Stock upon the
conversion of shares of Series A Preferred Stock shall be made without charge to
the converting stockholder for any original issue or transfer tax in respect of
the issuance of such certificates and any such tax shall be paid by the
Corporation.
(e) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of Series A Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series A Preferred Stock at the time outstanding.
The Corporation shall take at all times such corporate action as shall be
necessary in order that the Corporation may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the conversion of Series A
Preferred Stock in accordance with the provisions hereof, free from all taxes,
liens, charges and security interests with respect to the issue thereof. The
Corporation will, at its expense, use its best efforts to cause such shares to
be listed (subject to issuance or notice of issuance) on all stock
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exchanges, if any, on which the Common Stock may become listed.
7. Cancellation of Reacquired Series A Preferred Stock. Shares of
Series A Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed, shall (upon compliance with any
applicable provisions of the laws of the State of Delaware) have the status of
authorized and unissued shares of preferred stock undesignated as to series and
may be redesignated and reissued as part of any series of preferred stock.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be duly executed on its behalf, this 31st day of March, 1997.
ISP HOLDINGS, INC.
By: /s/ Richard A. Weinberg
--------------------------
Senior Vice President
Richard A. Weinberg
10
EXHIBIT 10.10
AMENDMENT No. 9, dated as of March 30, 1998, to AMENDED AND RESTATED
MANAGEMENT AGREEMENT dated as of March 3, 1992 (the "Agreement"), as previously
amended by Amendments dated as of January 1, 1994, May 31, 1994, December 31,
1994, December 31, 1995, October 18, 1996, January 1, 1997, December 31, 1997
and January 1, 1998, among GAF Corporation ("GAF"), ISP Holdings Inc. ("ISP
Holdings"), G-I Holdings Inc. ("G-I Holdings"), G Industries Corp.
("Industries"), Merick, Inc. ("Merick"), GAF Fiberglass Corporation, formerly
known as GAF Chemicals Corporation ("GFC"), GAF Building Materials Corporation
("Building Materials"), GAF Broadcasting Company, Inc. ("Broadcasting"),
Building Materials Corporation of America ("BMCA"), U.S. Intec, Inc. ("USI"),
and International Specialty Products Inc. (the "Company").
WHEREAS, the parties desire to amend the Agreement to allocate to
the entity for which certain employees of the Company render substantial
services certain costs associated with such employees.
NOW, THEREFORE, the parties hereby amend the Agreement as follows:
1. Section 3 of the Agreement is hereby amended to add the following
at the end thereof:
"Effective upon and subject to the merger (the "Merger") of
the Company with and into ISP Holdings pursuant to the
Agreement and Plan of Merger dated as of March 30, 1998 (the
"Merger Agreement") between the Company and ISP Holdings, G-I
Holdings shall reimburse the Surviving Corporation (as defined
in the Merger Agreement) for all amounts paid by the Surviving
Corporation pursuant to the exercise of rights to receive cash
and options to purchase shares of Common Stock of the
Surviving Corporation granted to Sunil Kumar by the Surviving
Corporation, in accordance with the Merger Agreement, and in
exchange for stock appreciation rights and options to purchase
shares of Series A Cumulative Redeemable Convertible Preferred
Stock of ISP Holdings held by such person. For purposes
hereof, the amount deemed paid by the Surviving Corporation
pursuant to the exercise of a stock option shall be equal to
NYFS01...:\01\47201\0035\0297\AMD3308L.080
<PAGE>
the amount by which the fair market value of the shares
received upon exercise exceeds the exercise price.
Reimbursement to the Surviving Corporation shall be made
promptly following receipt from the Surviving Corporation by
G-I Holdings of an invoice therefor."
2. In all other respects, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date and year first above written.
GAF CORPORATION INTERNATIONAL SPECIALTY
ISP HOLDINGS INC. PRODUCTS INC.
G-I HOLDINGS INC.
G INDUSTRIES CORP.
MERICK INC.
GAF FIBERGLASS CORPORATION
GAF BUILDING MATERIALS CORPORATION
GAF BROADCASTING COMPANY, INC.
BUILDING MATERIALS CORPORATION
OF AMERICA
U.S. INTEC, INC.
By: /s/ James P. Rogers By: /s/ James P. Rogers
--------------------------- ---------------------------
Name: James P. Rogers Name: James P. Rogers
Title: Executive Vice President Title: Executive Vice President
2
EXHIBIT 10.23
COMPENSATION AND INDEMNIFICATION AGREEMENT
This COMPENSATION AND INDEMNIFICATION AGREEMENT is made and entered
into as of the 10th day of October, 1997 (the "Agreement") among INTERNATIONAL
SPECIALTY PRODUCTS INC., a Delaware corporation (the "Company"), CHARLES M.
DIKER and BURT MANNING (each, a "Director" and together, the "Directors").
WHEREAS, the Company's Board of Directors, pursuant to a unanimous
written consent dated as of September 8, 1997, appointed the Directors as the
members of a Special Committee of the Board of Directors of the Company (the
"Special Committee") for the purpose of considering and making recommendations
to the Company's Board of Directors with respect to a possible transaction
between the Company and its parent corporation, ISP Holdings Inc.;
WHEREAS, in order to induce the Directors to serve as the members of
the Special Committee and to accept the additional duties, responsibilities and
burdens of such service, the Company wishes to provide them with the
compensation and indemnification arrangements set forth herein; and
WHEREAS, the Directors are willing to serve and continue to serve as
the members of the Special Committee on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the parties
hereto do hereby agree as follows:
1. SERVICE ON THE SPECIAL COMMITTEE. Each Director hereby agrees to
serve as a member of the Special Committee on the terms provided for herein so
long as such appointment by the Board shall remain in effect. Each Director may,
however, resign from such position at any time and for any reason and the
Special Committee may dissolve by recommending such dissolution to the Board.
The Company's obligation to indemnify each Director as set forth in this
Agreement shall continue in full force and effect notwithstanding any such
termination of appointment, resignation or dissolution.
NYFS01...:\01\47201\0035\0297\AGR5268R.030
<PAGE>
2. COMPENSATION AND EXPENSE REIMBURSEMENT. In return for his
services as a member of the Special Committee, each Director shall be entitled o
receive from the Company a fee of $50,000, plus $2,000 for each meeting of the
Special Committee. Such fees shall be payable to the Director upon submission to
the Company's General Counsel of a written statement setting forth the dates on
which such services were performed. In addition, each Director shall be
reimbursed by the Company for his reasonable out-of-pocket travel and other
expenses incurred in connection with his service on the Special Committee, in a
manner consistent with the Company's reimbursement of expenses for members of
its Board of Directors.
3. INDEMNITY. The Company hereby agrees to hold harmless and
indemnify each Director with respect to their service on, and any matter or
transaction considered by, the Special Committee to the full extent authorized
or permitted by law, as such may be amended from time to time, and Article
Eighth of the Certification of Incorporation, as such may be amended. In
furtherance of the foregoing indemnification, and without limiting the
generality thereof:
(a) Proceedings Other Than Proceedings by or in the Right of
the Company. Each Director shall be entitled to the rights of indemnification
provided in this Section 3(a) if, by reason of his Corporate Status (as
hereinafter defined), he is, or is threatened to be made, a party to or
participant in any Proceeding (as hereinafter defined) other than a Proceeding
by or in the right of the Company. Pursuant to this Section 3(a), each Director
shall be indemnified against all Expenses (as hereinafter defined), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such Proceeding or any claim, issue
or matter therein, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company and, with
respect to any criminal Proceeding, had no reasonable cause to believe his
conduct was unlawful.
(b) Proceedings by or in the Right of the Company. Each
Director shall be entitled to the rights of indemnification provided in this
Section 3(b) if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to or participant in any Proceeding brought by or in the right
of the Company to procure a judgment in its favor. Pursuant to this Section
3(b), each Director shall be
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<PAGE>
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection with such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company; provided, however, that, if applicable law so provides, no
indemnification against such Expenses shall be made in respect of any claim,
issue or matter in such Proceeding as to which such Director shall have been
finally adjudged to be liable to the Company unless and to the extent that the
Court of Chancery of the State of Delaware shall determine that such
indemnification may be made.
(c) Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement, to the
extent that a Director is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified to the maximum extent permitted by law against all Expenses actually
and reasonably incurred by him or on his behalf in connection therewith. If a
Director is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify such Director against
all Expenses actually and reasonably incurred by him or on his behalf in
connection with each successfully resolved claim, issue or matter. For purposes
of this Section and without limitation, the termination of any claim, issue or
matter in such a Proceeding by dismissal, with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.
4. ADDITIONAL INDEMNITY. In addition to, and without regard to any
limitations on, the indemnification provided for in Section 3, the Company shall
and hereby does indemnify and hold harmless each Director against all Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf if, by reason of his Corporate
Status he is, or is threatened to be made, a party to or participant in any
Proceeding (including a Proceeding by or in the right of the Company). The only
limitation that shall exist upon the Company's obligations pursuant to this
Agreement shall be that the Company shall not be obligated to make any payment
to a Director that is finally determined (under the procedures, and subject to
the presumptions, set forth in Sections 8 and 9 hereof) to be unlawful under
Delaware law.
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5. CONTRIBUTION IN THE EVENT OF JOINT LIABILITY.
(a) Whether or not the Indemnification provided in Sections 3
and 4 hereof is available, in respect of any threatened, pending or completed
action, suit or proceeding in which Company is jointly liable with any Director
(or would be if joined in such action, suit or proceeding), Company shall pay,
in the first instance, the entire amount of any judgment or settlement of such
action, suit or proceeding without requiring such Director to contribute to such
payment and the Company hereby waives and relinquishes any right of contribution
it may have against such Director. The Company shall not enter into any
settlement of any action, suit or proceeding in which the Company is jointly
liable with a Director (or would be if joined in such action. suit or
proceeding) unless such settlement provides for a full and final release of all
claims asserted against such Director.
(b) Without diminishing or impairing the obligations of the
Company set forth in the preceding subparagraph, if, for any reason, a Director
shall elect or be required to pay all or any portion of any judgment or
settlement in any threatened, pending or completed action, suit or proceeding in
which Company is jointly liable with such Director (or would be if joined in
such action, suit or proceeding), the Company shall contribute to the amount of
Expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by such Director in proportion to the
relative benefits received by the Company and all officers, directors or
employees of the Company other than such Director who are jointly liable with
him (or would be if joined in such action, suit or proceeding), on the one hand,
and the Director, on the other hand, from the transaction from which such
action, suit or proceeding arose; provided, however, that the proportion
determined on the basis of relative benefit may, to the extent necessary to
conform to law, be further adjusted by reference to the relative fault of the
Company and all officers, directors or employees of the Company other than such
Director who are jointly liable with the Director (or would be if joined in such
action, suit or proceeding), on the one hand, and the Director, on the other
hand, in connection with the events that resulted in such Expenses, judgments,
fines or settlement amounts, as well as any other equitable considerations which
the law may require to be considered. The relative fault of the Company and all
officers, directors or employees of the Company other than
4
<PAGE>
the Director who are jointly liable with him (or would be if joined in such
action, suit or proceeding), on the one hand, and the Director, on the other
hand, shall be determined by reference to, among other things, the degree to
which their actions were motivated by intent to gain personal profit or
advantage, the degree to which their liability is primary or secondary, and the
degree to which their conduct is active or passive.
(c) The Company hereby agrees to fully indemnify and hold each
Director harmless from any claims of contribution which may be brought by
officers, directors or employees of the Company who may be jointly liable with
such Director.
6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any
other provision of this Agreement, to the extent that a Director is, by reason
of his Corporate Status, a witness in any Proceeding to which such Director is
not a party, he shall be indemnified against all Expenses actually and
reasonable incurred by him or on his behalf in connection therewith.
7. ADVANCEMENT OF EXPENSES. Notwithstanding any other provision of
this Agreement, the Company shall advance all reasonable Expenses incurred by or
on behalf of a Director in connection with any Proceeding by reason of such
Director's Corporate Status within ten days after the receipt by the Company of
a statement or statements from such Director requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by the Director and shall include or be preceded or accompanied by an
undertaking by or on behalf of such Director to repay any Expenses advanced if
it shall ultimately be determined that such Director is not entitled to be
indemnified against such Expenses. Any advances and undertakings to repay
pursuant to this Section 7 shall be unsecured and interest free. Notwithstanding
the foregoing, the obligation of the Company to advance Expenses pursuant to
this Section 7 shall be subject to the condition that, if, when and to the
extent that the Company determines that a Director would not be permitted to be
indemnified under applicable law, the Company shall be entitled to be
reimbursed, within thirty (30) days of such determination, by him for all such
amounts theretofore paid; provided, however, that if such Director has commenced
or thereafter commences legal proceedings in a court of competent jurisdiction
to
5
<PAGE>
secure a determination that he should be indemnified under applicable law, any
determination made by the Company that such Director would not be permitted to
be indemnified under applicable law shall not be binding and such Director shall
not be required to reimburse the Company for any advance of Expenses until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed).
8. PROCEDURES AND PRESUMPTIONS FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION. It is the intent of this Agreement to secure for each Director
rights of indemnity that are as favorable as may be permitted under the law and
public policy of the State of Delaware. Accordingly, the parties agree that the
following procedures and presumptions shall apply in the event of any question
as to whether a Director is entitled to indemnification under this Agreement:
(a) To obtain indemnification (including, but not limited to,
the advancement of Expenses and contribution by the Company) under this
Agreement, a Director shall submit to the Company a written request, including
therein or therewith such documentation and information as is reasonably
available to such Director and is reasonably necessary to determine whether and
to what extent a Director is entitled to indemnification. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board of Directors in writing that such Director has requested
indemnification.
(b) Upon written request by a Director for indemnification
pursuant to the first sentence of Section 8(a) hereof, a determination, if
required by applicable law, with respect to a Director's entitlement thereto
shall be made in the specific case by one of the following three methods, which
shall be at the election of such Director: (1) by a majority vote of the
disinterested directors, even though less than a quorum, or (2) by independent
legal counsel in a written opinion, or (3) by the stockholders.
(c) If the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). The
Independent Counsel shall be selected by the Director (unless such Director
shall request that such selection be made by the Board of Directors). Such
Director or the Company, as the case may be, may, within 10 days after such
written notice of
6
<PAGE>
selection shall have been given, deliver to the Company or to the Director, as
the case may be, a written objection to such selection; provided, however, that
such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of "Independent Counsel" as defined
in Section 15(e) of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. Absent a proper and timely
objection, the person so selected shall act as Independent Counsel. If a written
objection is made and substantiated, the Independent Counsel selected may not
serve as Independent Counsel unless and until such objection is withdrawn or a
court has determined that such objection is without merit. If, within 30 days
after submission by a Director of a written request for indemnification pursuant
to Section 8(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or the Director may petition the Court of
Chancery of the State of Delaware or other court of competent jurisdiction for
resolution of any objection which shall have been made by the Company or such
Director to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the court or by such
other person as the court shall designate, and the person with respect to whom
all objections are so resolved or the person so appointed shall act as
Independent Counsel under Section 8(b) hereof. The Company shall pay any and all
reasonable fees and expenses of Independent Counsel incurred by such Independent
Counsel in connection with acting pursuant to Section 8(b) hereof, and the
Company shall pay all reasonable fees and expenses incident to the procedures of
this Section 8(c), regardless of the manner in which such Independent Counsel
was selected or appointed.
(d) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume (unless there is a preponderance of competent
evidence to the contrary) that a Director is entitled to indemnification under
this Agreement if such Director has submitted a request for indemnification in
accordance with Section 8(a) of this Agreement.
(e) A Director shall be deemed to have acted in good faith if
such Director's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to such
Director by the officers of the Enterprise in the course of
7
<PAGE>
their duties, or on the advice of legal counsel for the Enterprise or the
Special Committee or on information or records given or reports made to the
Enterprise or the Special Committee by an independent certified public
accountant, by a financial advisor or by an appraiser or other expert selected
with reasonable care by the Enterprise or the Special Committee. In addition,
the knowledge and/or actions, or failure to act, of any director, officer, agent
or employee of the Enterprise shall not be imputed to a Director for purposes of
determining the right to indemnification under this Agreement. Whether or not
the foregoing provisions of this Section 8(e) are satisfied, it shall in any
event be presumed (unless there is a preponderance of competent evidence to the
contrary) that each Director has at all times acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company.
(f) The Company acknowledges that a settlement or other
disposition short of final judgment may be successful if it permits a party to
avoid expense, delay, distraction, disruption and uncertainty. In the event that
any action, claim or proceeding to which a Director is a party is resolved in
any manner other than by adverse judgment against such Director (including,
without limitation, settlement of such action, claim or proceeding with or
without payment of money or other consideration) it shall be presumed (unless
there is a preponderance of competent evidence to the contrary) that such
Director has been successful on the merits or otherwise in such action, suit or
proceeding.
(g) If the person, persons or entity empowered or selected
under Section 8(b) to determine whether a Director is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and such
Director shall be entitled to such indemnification, absent (i) a misstatement by
such Director of a material fact, or an omission of a material fact necessary to
make such Director's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such 60 day period may be extended for a
reasonable time, not to exceed an additional fifteen (15) days, if the person,
persons or entity making the determination with respect to
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entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating documentation and/or information relating thereto;
provided, further, that the foregoing provisions of this Section 8(g) shall not
apply if the determination of entitlement to indemnification is to be made by
the stockholders pursuant to Section 8(b) of this Agreement and if within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors or the Disinterested Directors, if
appropriate, resolve to submit such determination to the stockholders for their
consideration at the next annual meeting thereof and such determination is made
thereat.
(h) Each Director shall cooperate with the person, persons or
entity making such determination with respect to such Director's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to such Director and reasonably necessary to such determination. Any
Independent Counsel, member of the Board of Directors, or stockholder of the
Company shall act reasonably and in good faith in making a determination under
the Agreement of a Director's entitlement to indemnification. Any costs or
expenses (including attorneys' fees and disbursements) incurred by a Director in
so cooperating with the person, persons or entity making such determination
shall be borne by the Company (irrespective of the determination as to such
Director's entitlement to indemnification) and the Company hereby indemnifies
and agrees to hold each Director harmless therefrom.
9. REMEDIES.
(a) In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that a director is not entitled to indemnification
under this Agreement, (ii) advancement of Expenses is not timely made pursuant
to Section 7 of this Agreement, (iii) no determination of entitlement to
indemnificatiOn shall have been made pursuant to Section 8(b) of this Agreement
within 90 days after receipt by the Company of the request for indemnification,
(iv) payment of indemnification is not made pursuant to this Agreement within
ten (10) days after receipt by the Company of a written request therefor, or (v)
payment of indemnification is not made within ten (10) days after a
determination has been made by a Director is entitled to
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indemnification or such determination is deemed to have been made pursuant to
Section 8 of this Agreement, such Director shall be entitled to an adjudication
in an appropriate court of the State of Delaware, or in any other court of
competent jurisdiction, of his entitlement to such indemnification. Such
Director shall commence such proceeding seeking an adjudication within 180 days
following the date on which such Director first has the right to commence such
proceeding pursuant to this Section 9(a). The Company shall not oppose a
Director's right to seek any such adjudication.
(b) In the event that a determination shall have been made
pursuant to Section 8(b) of this Agreement that a Director is not entitled to
indemnification, any judicial proceeding commenced pursuant to this Section 9
shall be conducted in all respects as a de novo trial, on the merits and such
Director shall not be prejudiced by reason of that adverse determination.
(c) If a determination shall have been made pursuant to
Section 8(b) of this Agreement that a Director is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding
commenced pursuant to this Section 9, absent a prohibition of such
indemnification under applicable law.
(d) In the event that a Director, pursuant to this Section 9,
seeks a judicial adjudication of his rights under, or to recover damages for
breach of, this Agreement, or to recover under any directors' and officers'
liability insurance policies maintained by the Company, the Company shall pay on
his behalf, in advance, any and all expenses (of the types described in the
definition of Expenses in Section 15 of this Agreement) actually and reasonably
incurred by him in such judicial adjudication, regardless of whether such
Director ultimately is determined to be entitled to such indemnification,
advancement of expenses or insurance recovery.
(e) The Company shall be precluded from asserting in any
judicial proceeding commenced pursuant to this Section 9 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court that the Company is bound by all the provisions of
this Agreement.
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10. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
(a) The rights of indemnification as provided by this
Agreement shall not be deemed exclusive of any other rights to which a Director
may at any time be entitled under applicable law, the Certificate of
Incorporation of the Company, the Bylaws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment, alteration or repeal
of this Agreement or of any provision hereof shall limit or restrict any right
of any Director under this Agreement in respect of any action taken or omitted
by such Director in his Corporate Status prior to such amendment, alteration or
repeal. To the extent that a change in the law, whether by statute or judicial
decision, permits greater indemnification than would be afforded currently under
the Certificate of Incorporation and this Agreement, it is the intent of the
parties hereto that each Director shall enjoy by this Agreement the greater
benefits so afforded by such change. No right or remedy herein conferred is
intended to be exclusive of any other right or remedy, and every other right and
remedy shall be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, or agents or fiduciaries of the Company or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Company, each Director shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director, officer,
employee or agent under such policy or policies.
(c) In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
or recovery of a Director, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
11
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(d) The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that a Director has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
11. EXCEPTION TO RIGHT OF INDEMNIFICATION. Notwithstanding any other
provision of this Agreement, a Director shall not be entitled to indemnification
under this Agreement with respect to any Proceeding brought by him, or any claim
therein, unless (a) the bringing of such Proceeding or making of such claim
shall have been approved by the Board of Directors or (b) such Proceeding is
being brought by such Director to assert his rights under this Agreement.
12. DURATION OF AGREEMENT. All agreements and obligations of the
Company contained herein shall continue during the period a Director is serving
as a member of the Special Committee or as an officer or director of the Company
(or is or was serving at the request of the Company as a director, officer
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise) and shall continue thereafter so long as such Director shall
be subject to any Proceeding (or any proceeding commenced under Section 8
hereof) by reason of his Corporate Status, whether or not he is acting or
serving in any such capacity at the time any liability or expense is incurred
for which indemnification can be provided under this Agreement. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), assigns, spouses,
heirs, executors and personal and legal representatives. This Agreement shall
continue in effect regardless of whether a Director continues to serve as a
member of the Special Committee or as an officer or director of the Company or
any other enterprise at the Company's request.
13. SECURITY. To the extent requested by a Director and approved by
the Board of Directors, the Company may at any time and from time to time
provide security to a Director for the Company's obligations hereunder through
an irrevocable bank line of credit, funded trust or other collateral. Any such
security, once provided to a Director, may not be revoked or released without
the prior written consent of such Director.
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14. ENFORCEMENT.
(a) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on it hereby in
order to induce the Director to serve as a member of the Special Committee, and
the Company acknowledges that such Director is relying upon this Agreement in
serving as a member of the Special Committee.
(b) This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the
parties hereto with respect to the subject matter hereof
15. DEFINITIONS. For purposes of this Agreement:
(a) "Corporate Status" describes the status of a person who is
or was a member of the Special Committee or was otherwise a director of the
Company.
(b) "Disinterested Director" means a director of the Company
who is not and was not a party to the Proceeding in respect of which
indemnification is sought by a Director.
(c) "Enterprise" shall mean the Company and any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise of which a Director is or was serving at the express written request
of the Company as a director, officer, employee, agent or fiduciary.
(d) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, participating, or being or preparing to
be a witness in a Proceeding.
(e) "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the Company or any Director in any matter material to either such party
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<PAGE>
(other than with respect to matters concerning any such Director under this
Agreement), or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or any Director in an action to determine such
Director's rights under this Agreement. The Company agrees to pay the reasonable
fees of the Independent Counsel referred to above and to fully indemnify such
counsel against any and all Expenses, claims, liabilities and damages arising
out of or relating to this Agreement or its engagement pursuant hereto.
(f) "Proceeding" includes any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the Company or
otherwise and whether civil, criminal, administrative or investigative, in which
a Director was, is or will be involved as a party or otherwise, by reason of the
fact that such Director is or was a member of the Special Committee or a
director of the Company, by reason of any action taken by him or of any inaction
on his part while acting as a member of the Special Committee, or by reason of
the fact that he is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise; in each case whether or not he is acting or serving
in any such capacity at the time any liability or expense is incurred for which
indemnification can be provided under this Agreement; and excluding one
initiated by a Director pursuant to Section 8 of this Agreement to enforce his
rights under this Agreement.
16. SEVERABILITY. If any provision or provisions of this Agreement
shall be held by a court of competent jurisdiction to be invalid, void, illegal
or otherwise unenforceable for any reason whatsoever: (a) the validity, legality
and enforceability of the remaining provisions of this Agreement (including
without limitation, each portion of any section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby and shall remain enforceable to the fullest extent permitted by law; and
(b)
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<PAGE>
to the fullest extent possible, the provisions of this Agreement (including,
without limitation, each portion of any section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.
17. MODIFICATION AND WAIVER. No supplement, modification,
termination or amendment of this Agreement shall be binding unless executed in
writing by the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
18. NOTICE BY DIRECTORS. Each Director agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification covered hereunder. The failure
to so notify the company shall not relieve the Company of any obligation which
it may have to such Director under this Agreement or otherwise.
19. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by and receipted for by the party to whom said notice or other
communication shall have been directed or if (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Mr. Diker, to:
Charles M. Diker
One New York Plaza
New York, New York 10004
with a copy to:
Morton A. Pierce, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
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<PAGE>
(b) If to Mr. Manning, to:
Burt Manning
J. Walter Thompson Company
466 Lexington Avenue
New York, New York 10017
with a copy to:
Morton A. Pierce, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
(c) If to the Company, to:
International Specialty Products Inc.
818 Washington Street
Wilmington, Delaware 19801
Attn: Senior Vice President, General
Counsel and Secretary
or to such other address as may have been furnished to the Directors by the
Company or to the Company by a Director, as the case may be.
20. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
21. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
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<PAGE>
22. GOVERNING LAW. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware without application of the conflict of laws principles
thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
INTERNATIONAL SPECIALTY PRODUCTS INC.
By: /s/ Richard A. Weinberg
------------------------------------
S.V.P. and G.C.
/s/ Charles M. Diker
------------------------------------
Charles M. Diker
/s/ Burt Manning
------------------------------------
Burt Manning
17
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 23, 1998
included in International Specialty Products Inc.'s and ISP Holdings Inc.'s Form
10-K for the year ended December 31, 1997 and all references to our firm
included in this registration statement.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
May 27, 1998
NYFS01...:\01\47201\0035\1909\DOC5218R.300
EXHIBIT 99.2
BY-LAWS
OF
INTERNATIONAL SPECIALTY PRODUCTS INC.
(A DELAWARE CORPORATION)
(As Amended)
ARTICLE I
Stockholders
SECTION 1. Annual Meetings. The annual meeting of stockholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year at such date and time,
within or without the State of Delaware, as the Board of Directors shall
determine.
SECTION 2. Special Meetings. Special meetings of stockholders for
the transaction of such business as may properly come before the meeting may be
called by order of the Board of Directors or by stockholders holding together at
least a majority of all the shares of the Corporation entitled to vote at the
meeting, and shall be held at such date and time, within or without the State of
Delaware, as may be specified by such order.
SECTION 3. Notice of Meetings. Written notice of all meetings of the
stockholders, stating the place, date and hour of the meeting and the place
within the city or other municipality or community at which the list of
stockholders may be examined, shall be mailed or delivered to each stockholder
not less than 10 nor more than 60 days prior to the meeting. Notice of any
special meeting shall state in general terms the purpose or purposes for which
the meeting is to be held.
SECTION 4. Stockholder Lists. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least 10 days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall
NYFS01...:\01\47201\0035\1909\ART5218K.510
<PAGE>
be open to the examination of any stockholder, for any purpose germane to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
SECTION 5. Quorum. Except as otherwise provided by law or the
Corporation's Certificate of Incorporation, a quorum for the transaction of
business at any meeting of stockholders shall consist of the holders of record
of a majority of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at the meeting, present in person or by proxy. At
all meetings of the stockholders at which a quorum is present, all matters,
except as otherwise provided by law or the Certificate of Incorporation, shall
be decided by the vote of the holders of a majority of the shares entitled to
vote thereat present in person or by proxy. If there be no such quorum, the
holders of a majority of such shares so present or represented may adjourn the
meeting from time to time, without further notice, until a quorum shall have
been obtained. When a quorum is once present it is not broken by the subsequent
withdrawal of any stockholder.
SECTION 6. Organization. Meetings of stockholders shall be presided
over by the Chairman, if any, or if none or in the Chairman's absence the Vice
Chairman, if any, or if none or in the Vice Chairman's absence the President, if
any, or if none or in the President's absence an Executive Vice President, in
order of seniority of election, or, if none, a Senior Vice President, in order
of seniority of election, or if none, a Vice President, in order of seniority of
election, or, if none of the foregoing is present, by a chairman to be chosen by
the stockholders entitled to vote who are present in person or by proxy at the
meeting. The Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the presiding officer of the
meeting shall appoint any person present to act as secretary of the meeting.
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SECTION 7. Voting; Proxies; Required Vote. (a) At each meeting of
stockholders, every stockholder shall be entitled to vote in person or by proxy
appointed by instrument in writing, subscribed by such stockholder or by such
stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted
or acted upon after three years from its date, unless the proxy provides for a
longer period), and, unless the Certificate of Incorporation provides otherwise,
shall have one vote for each share of stock entitled to vote registered in the
name of such stockholder on the books of the Corporation on the applicable
record date fixed pursuant to these By-laws. At all elections of directors the
voting may but need not be by ballot and a plurality of the votes cast there
shall elect. Except as otherwise required by law or the Certificate of
Incorporation, any other action shall be authorized by a majority of the votes
cast.
(b) Any action required or permitted to be taken at any meeting of
stockholders may, except as otherwise required by law or the Certificate of
Incorporation, be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of record of the issued and outstanding capital stock of
the Corporation having a majority of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted, and the writing or writings are filed with the permanent
records of the Corporation. Prompt notice of the taking of corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
(c) Where a separate vote by a class or classes, present in person
or represented by proxy, shall constitute a quorum entitled to vote on that
matter, the affirmative vote of the majority of shares of such class or classes
present in person or represented by proxy at the meeting shall be the act of
such class, unless otherwise provided in the Corporation's Certificate of
Incorporation.
SECTION 8. Inspectors. The Board of Directors, in advance of any
meeting, may, but need not, appoint one or more inspectors of election to act at
the meeting or any adjournment thereof. If an inspector or inspectors are not so
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors, if any, shall determine the number of shares of stock
outstanding and the voting power of
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<PAGE>
each, the shares of stock represented at the meeting, the existence of a quorum,
and the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by such inspector or inspectors
and execute a certificate of any fact found by such inspector or inspectors.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The business, property and affairs of the
Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. Qualification; Number; Term; Remuneration. (a) Each
director shall be at least 18 years of age. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number of directors constituting the entire Board shall be seven,
or such larger number as may be fixed from time to time by action of the
stockholders or Board of Directors, one of whom may be selected by the Board of
Directors to be its Chairman. The use of the phrase "entire Board" herein refers
to the total number of directors which the Corporation would have if there were
no vacancies.
(b) Directors who are elected at an annual meeting of stockholders,
and directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal.
(c) The Board of Directors shall have authority to fix the
compensation, including fees and reimbursement of expenses, of directors for
services to the Corporation in any capacity.
SECTION 3. Quorum and Manner of Voting. Except as otherwise provided
by law, a third of the entire Board shall constitute a quorum. A majority of the
directors present, whether or not a quorum is present, may adjourn a meeting
from time to time to another time and place without notice. The vote of the
majority
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<PAGE>
of the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
SECTION 4. Places of Meetings. Meetings of the Board of Directors
may be held at any place within or without the State of Delaware, as may from
time to time be fixed by resolution of the Board of Directors, or as may be
specified in the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of
stockholders, the newly elected Board of Directors shall meet for the purpose of
the election of officers and the transaction of such other business as may
properly come before the meeting. Such meeting may be held without notice
immediately after the annual meeting of stockholders at the same place at which
such stockholders' meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board of Directors shall
from time to time by resolution determine. Notice need not be given of regular
meetings of the Board of Directors held at times and places fixed by resolution
of the Board of Directors.
SECTION 7. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or the
President, or by a majority of the directors then in office.
SECTION 8. Notice of Meetings. A notice of the place, date and time
and the purpose or purposes of each meeting of the Board of Directors shall be
given to each director by mailing the same at least two days before the special
meeting, or by telegraphing or telephoning the same or by delivering the same
personally not later than the day before the day of the meeting.
SECTION 9. Organization. Meetings shall be presided over by the
Chairman of the Board of Directors, or in his absence, by one of the following
directors in the order named: (1) President, (2) Vice Chairman, (3) Executive
Vice Presidents who are members of the Board, in the order of seniority of
election, (4) the other Vice Presidents who are members of the Board, in the
order of seniority of election, and (5) such other director as may be selected
by the directors present. The Secretary of the Corporation shall act as
secretary at all meetings of the Board of Directors when present, and, in the
Secretary's absence, the presiding officer may appoint any person to act as
secretary.
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SECTION 10. Resignation. Any director may resign at any time upon
written notice to the Corporation and such resignation shall take effect upon
receipt thereof by the Secretary, unless otherwise specified in the resignation.
Any or all of the directors may be removed, with or without cause, by the
holders of a majority of the shares of stock outstanding and entitled to vote
for the election of directors.
SECTION 11. Vacancies. Unless otherwise provided in these Bylaws,
vacancies on the Board of Directors, whether caused by resignation, death,
disqualification, removal, an increase in the authorized number of directors or
otherwise, may be filled by the affirmative vote of a majority of the remaining
directors, although less than a quorum, or by a sole remaining director, or at a
special meeting of the stockholders, by the holders of shares entitled to vote
for the election of directors.
SECTION 12. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all the directors consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors.
SECTION 13. Telephonic Meeting. Unless restricted by the Certificate
of Incorporation, any one or more members of the Board of Directors may
participate in a meeting of the Board of Directors by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation by such means
shall constitute presence in person at a meeting.
ARTICLE III
Committees
SECTION 1. Appointment. From time to time the Board of Directors by
a resolution adopted by a majority of the entire Board may appoint any committee
or committees for any purpose or purposes, to the extent lawful, which shall
have powers as shall be determined and specified by the Board of Directors in
the resolution of appointment.
SECTION 2. Procedures; Quorum and Manner of Acting. Each committee
shall fix its own rules of procedure, and shall meet where and as provided by
such rules or by resolution of the Board of Directors. Except as otherwise
provided by law, the presence of a third (but in no event less than two) of the
then
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appointed members of a committee shall constitute a quorum for the transaction
of business by that committee, and in every case where a quorum is present the
affirmative vote of a majority of the members of the committee present shall be
the act of the committee. Each committee shall keep minutes of its proceedings,
and actions taken by a committee shall be reported to the Board of Directors.
SECTION 3. Action by Written Consent. Any action required or
permitted to be taken at any meeting of any committee of the Board of Directors
may be taken without a meeting if all the members of the committee consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the committee.
SECTION 4. Term; Termination. In the event any person shall cease to
be a director of the Corporation, such person shall simultaneously therewith
cease to be a member of any committee appointed by the Board of Directors.
SECTION 5. Telephonic Meeting. Unless restricted by the Certificate
of Incorporation, any one or more members of any committee may participate in a
meeting of such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation by such means shall constitute
presence in person at a meeting.
ARTICLE IV
Officers
SECTION 1. Officers. The executive officers of the Corporation shall
be a Chairman of the Board of Directors, a President, one or more Vice Chairmen,
each of whom shall be chosen from among the directors, one or more Executive
Vice Presidents, one or more Senior Vice Presidents, one or more Vice
Presidents, a Chief Financial Officer, a Treasurer and a Secretary, each of whom
shall be elected annually by the Board of Directors to hold office until his
successor shall have been chosen and shall have qualified. The Board of
Directors may elect or appoint one or more Assistant Treasurers, one or more
Assistant Secretaries, and such other officers as it may deem necessary or
desirable, each of whom shall have such authority or shall perform such duties
and shall hold office for such term as may be prescribed by the Board of
Directors from time to time. Any person may hold at one time more than one
office, but not more than two, provided the duties thereof can be consistently
performed by the same person; and provided further, that no person shall hold at
one time the offices of President and Secretary. In its discretion, the Board of
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Directors may leave unfilled any office except that of Chief Financial Officer
and Secretary.
SECTION 2. Chief Executive Officer. The Board of Directors may from
time to time, by a majority vote of the whole Board of Directors, designate
either the Chairman of the Board of Directors or the President as the Chief
Executive Officer of the Corporation. The Chief Executive Officer shall have
general and active supervision over the business and affairs of the Corporation,
subject, however, to the control of the Board of Directors. He shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
may sign, with the Chief Financial Officer or the Treasurer, or the Secretary or
Assistant Secretary, certificates of stock of the Corporation. He may sign,
execute and deliver in the name of the Corporation, all deeds, mortgages, bonds,
contracts or other instruments authorized by the Board of Directors, except in
cases where the signing, execution or delivery thereof shall be expressly
delegated by the Board or by these Bylaws to some other officer or agent of the
Corporation or where any of them shall be required by law or otherwise to be
signed, executed or delivered.
SECTION 3. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the stockholders and of the
Board, at which he is present, and shall perform such other duties as from time
to time may be prescribed by the Board of Directors.
SECTION 4. The President. The President may sign, with the Chief
Financial Officer, or the Treasurer, or the Secretary or an Assistant Treasurer
or Assistant Secretary, certificates of stock of the Corporation and in general,
he shall perform all duties incident to the office of President and such other
duties as from time to time may be assigned to him by the Board of Directors.
SECTION 5. Vice Chairman of the Board of Directors. Each Vice
Chairman of the Board of Directors shall perform such duties as from time to
time may be prescribed by the Board of Directors or the Chief Executive Officer.
SECTION 6. The Vice Presidents. Each Executive Vice President, each
Senior Vice President and each other Vice President shall have such powers and
perform such duties as the Board of Directors, the Chief Executive Officer or
the President may from time to time prescribe and shall perform such other
duties as may be prescribed by the By-laws. Any Executive Vice President, Senior
Vice President, or other Vice President may sign, with the Chief Financial
Officer or the Treasurer or the Assistant Treasurer or the Secretary or an
Assistant Secretary, certificates of stock of the Corporation. At the request of
the Chief Executive Officer or the President, or in case of either officer's
disability or other inability to act, the Board of Directors
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may, by a majority vote of the entire Board, designate any one of the Executive
Vice Presidents, Senior Vice Presidents or other Vice Presidents, to perform the
duties of the Chief Executive Officer or the President for such time and subject
to such conditions and limitations as the Board may determine.
SECTION 7. Chief Financial Officer. The Chief Financial Officer
shall
(a) have charge and custody of, and be responsible for, all the
funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositories as may be designated by the Board of Directors
or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of
Directors may require, an account of the financial condition of the Corporation;
(g) have active control of and shall be responsible for all matters
pertaining to the accounts of the Corporation and its subsidiaries, including:
the supervision of the auditing of all payrolls and vouchers of the Corporation
and its subsidiaries and the direction of the manner of certifying the same; the
supervision of the manner of keeping all vouchers for payments by the
Corporation and its subsidiaries, and all other documents relating to such
payments; the receiving, auditing and consolidation of all operating and
financial statements of the Corporation, its various departments, divisions and
subsidiaries; the supervision of the books of account of the Corporation and its
subsidiaries, their arrangement and classification; and the supervision of the
account and auditing practices of the Corporation and its subsidiaries; and
(h) shall perform such other duties as from time to time may be
assigned to him by the Chief Executive Officer or the Board of Directors.
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SECTION 8. Treasurer. The Treasurer shall in general have all duties
incident to the position of Treasurer and such other duties as may be assigned
by the Board of Directors or the President.
SECTION 9. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors and of the
stockholders, and, if requested, of the committees of the Board of Directors;
(b) see that all notices are duly given in accordance with the
provisions of the By-laws and as required by law;
(c) be custodian of the seal of the Corporation and affix and attest
the seal to all documents to be executed on behalf of the Corporation under its
seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors.
SECTION 10. Assistant Officers. Any assistant officer shall have
such powers and duties of the officer such assistant officer assists as such
officer or the Board of Directors shall from time to time prescribe.
SECTION 11. Compensation and Contracts of Employment. The
compensation of the elected officers of the Corporation shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving compensation by reason of the fact that he is also a director of the
Corporation.
An employment contract with an elected officer, if expressly
approved or specifically authorized by the Board of Directors, may fix a term of
employment thereunder and, if so approved and authorized, shall be valid and
binding upon the Corporation in accordance with the terms thereof; provided,
however, that this provision shall not limit, abrogate or restrict in any manner
the right of the Corporation at any time to remove from office, discharge or
terminate for any reason the employment of such officer prior to the expiration
of the term of employment under said contract, except that the Corporation shall
not thereby be relieved of any
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continuing liability for salary or other compensation provided for in said
contract, which it may have at law.
SECTION 12. Removal. Any officer of the Corporation may be removed,
either with or without cause, at any time, by resolution adopted by a majority
of the whole Board of Directors at any meeting, or, in the case of any appointed
officer, by any superior to whom he reports.
SECTION 13. Resignations. Any officer of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors, or to the Chairman, or to the President, or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time when it shall become effective shall not be specified
therein, then, it shall take effect immediately upon its receipt by the Board or
such Chairman or President or Secretary; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 14. Vacancies. A vacancy in any office due to death,
resignation, removal, disqualification, or any other cause, if filled, shall be
filled for the unexpired portion of the term in the manner prescribed in these
By-laws for regular appointments or elections to such office.
SECTION 15. Officers' Bonds or Other Security. If required by the
Board of Directors, any officer of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety as the Board of Directors may require.
ARTICLE V
Books and Records
SECTION 1. Location. The books and records of the Corporation may be
kept at such place or places within or outside the State of Delaware as the
Board of Directors or the respective officers in charge thereof may from time to
time determine. The record books containing the names and addresses of all
stockholders, the number and class of shares of stock held by each and the dates
when they respectively became the owners of record thereof shall be kept by the
Secretary as proscribed in the By-laws and by such officer or agent as shall be
designated by the Board of Directors.
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SECTION 2. Addresses of Stockholders. Notices of meetings and all
other corporate notices may be delivered personally or mailed to each
stockholder at the stockholder's address as it appears on the records of the
Corporation.
SECTION 3. Fixing Date for Determination of Stockholders of Record.
(a) In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
the Board of Directors may fix a record date, which record date shall not be
more than 60 nor less than 10 days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date which date shall not be more than 10 days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
this chapter, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date which record date
shall be not more than 60 days prior to such action. If no record date is fixed,
the record date for determining
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stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
ARTICLE VI
Certificates Representing Stock
SECTION 1. Certificates; Signatures. The shares of the Corporation
shall be represented by certificates, provided that the Board of Directors of
the Corporation may provide by resolution or resolutions that some or all of any
or all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate, signed by or in the name of the Corporation by
the Chairman or Vice Chairman of the Board of Directors, or the President or
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, representing the number of shares
registered in certificate form. Any and all signatures on any such certificate
may be facsimiles. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
The name of the holder of record of the shares represented thereby, with the
number of such shares and the date of issue, shall be entered on the books of
the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with
provisions restricting the transfer or registration of transfer of shares of
stock, if any, shares of capital stock shall be transferable on the books of the
Corporation only by the holder of record thereof in person, or by duly
authorized attorney, upon surrender and cancellation of certificates for a like
number of shares, properly endorsed, and the payment of all taxes due thereon.
SECTION 3. Fractional Shares. The Corporation may, but shall not be
required to, issue certificates for fractions of a share where necessary to
effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein
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provided for full shares, but such scrip shall not entitle the holder to any
rights of a stockholder except as therein provided.
The Board of Directors shall have power and authority to make all
such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The Corporation
may issue a new certificate of stock in place of any certificate, theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the Board of
Directors may require the owner of any lost, stolen or destroyed certificate, or
his legal representative, to give the Corporation a bond sufficient to indemnify
the Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate.
ARTICLE VII
Dividends
Subject always to the provisions of law and the Certificate of
Incorporation, the Board of Directors shall have full power to determine whether
any, and, if any, what part of any, funds legally available for the payment of
dividends shall be declared as dividends and paid to stockholders; the division
of the whole or any part of such funds of the Corporation shall rest wholly
within the lawful discretion of the Board of Directors, and it shall not be
required at any time, against such discretion, to divide or pay any part of such
funds among or to the stockholders as dividends or otherwise; and before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, thinks proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of Directors
shall think conducive to the interest of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
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ARTICLE VIII
Ratification
Any transaction, questioned in any lawsuit on the ground of lack of
authority, defective or irregular execution, adverse interest of director,
officer or stockholder, non-disclosure, miscomputation, or the application of
improper principles or practices of accounting, may be ratified before or after
judgment, by the Board of Directors or by the stockholders, and if so ratified
shall have the same force and effect as if the questioned transaction had been
originally duly authorized. Such ratification shall be binding upon the
Corporation and its stockholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned transaction.
ARTICLE IX
Corporate Seal
The corporate seal shall have inscribed thereon the name of the
Corporation and the year of its incorporation, and shall be in such form and
contain such other words and/or figures as the Board of Directors shall
determine. The corporate seal may be used by printing, engraving, lithographing,
stamping or otherwise making, placing or affixing, or causing to be printed,
engraved, lithographed, stamped or otherwise made, placed or affixed, upon any
paper or document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall be fixed, and shall be
subject to change, by the Board of Directors. Unless otherwise fixed by the
Board of Directors, the fiscal year of the Corporation shall be the calendar
year.
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ARTICLE XI
Waiver of Notice
Whenever notice is required to be given by these By-laws or by the
Certificate of Incorporation or by law, a written waiver thereof, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XII
Bank Accounts, Drafts, Contracts, Etc.
SECTION 1. Bank Accounts and Drafts. In addition to such bank
accounts as may be authorized by the Board of Directors, the Chief Financial
Officer or any person designated by said Chief Financial Officer, whether or not
an employee of the Corporation, may authorize such bank accounts to be opened or
maintained in the name and on behalf of the Corporation as he may deem necessary
or appropriate, payments from such bank accounts to be made upon and according
to the check of the Corporation in accordance with the written instructions of
said Chief Financial Officer, or other person so designated by the Treasurer.
SECTION 2. Contracts. The Board of Directors may authorize any
person or persons, in the name and on behalf of the Corporation, to enter into
or execute and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments. The
Chairman, the President or any other person designated by either of them shall
have the power and authority to execute and deliver proxies, powers of attorney
and other instruments on behalf of the Corporation in connection with the rights
and powers incident to the ownership of stock by the Corporation. The Chairman,
the President or any other person authorized by proxy or power of attorney
executed and delivered by either of them on behalf of the Corporation may attend
and vote at any meeting of stockholders of any company in which the Corporation
may hold stock, and may exercise on behalf of the Corporation any and all of the
rights and powers incident to the ownership of such stock at any such meeting,
or otherwise as specified in the proxy or power of attorney so authorizing any
such person. The Board of Directors, from time to time, may confer like powers
upon any other person.
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SECTION 4. Financial Reports. The Board of Directors may appoint the
Chief Financial Officer or other fiscal officer to cause to be prepared and
furnished to stockholders entitled thereto any special financial notice and/or
financial statement, as the case may be, which may be required by any provision
of law.
ARTICLE XIII
Amendments
The Board of Directors shall have power to adopt, amend or repeal
By-laws. By-laws adopted by the Board of Directors may be repealed or changed,
and new By-laws made, by the stockholders, and the stockholders may prescribe
that any By-law made by them shall not be altered, amended or repealed by the
Board of Directors.
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