SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 1998
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Commission File Number 1-8036
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THE WEST COMPANY, INCORPORATED
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-1210010
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 Gordon Drive, PO Box 645,
Lionville, PA 19341-0645
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code 610-594-2900
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N/A
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Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve
months, and (2) has been subject to such filing requirements for
the past 90 days. Yes X . No .
--- ---
September 30, 1998 -- 17,004,827
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Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Page 2
Index
Form 10-Q for the
Quarter Ended September 30, 1998
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Income for the Three
and Nine Months ended September 30, 1998 and
September 30, 1997 3
Condensed Consolidated Balance Sheets as of
September 30, 1998 and December 31, 1997 5
Condensed Consolidated Statements of Cash Flows
for the Nine Months ended September 30, 1998
and September 30, 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
Part II - Other Information
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
Index to Exhibits F-1
Page 4
Item 1. Financial Statements
The West Company, Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, 1998 Sept. 30,1997 Sept. 30, 1998 Sept. 30, 1997
---------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $113,900 100% $105,200 100% $ 334,900 100% $343,000 100%
Cost of goods sold 80,500 71 76,000 72 235,400 70 244,800 71
---------------------------------------------------------------------------------------------------
Gross profit 33,400 29 29,200 28 99,500 30 98,200 29
Selling, general and
administrative expenses 17,300 15 16,300 15 52,500 16 53,400 16
Restructuring charge 4,000 3 - - 4,000 1 - -
Acquired research and development - - - - 28,200 8 - -
Other (income), net (300) - (900) - (1,700) - (1,400) -
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Operating profit 12,400 11 13,800 13 16,500 5 46,200 13
Interest expense 1,800 2 1,400 1 4,900 1 4,200 1
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Income before income taxes
and minority interests 10,600 9 12,400 12 11,600 4 42,000 12
Provision for (recovery of)
income taxes 4,100 4 (4,600)(4) 15,300 5 6,700 2
Minority interests - - - - 100 - 100 -
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Income (loss) from consolidated
operations 6,500 5% 17,000 16% (3,800) (1)% 35,200 10%
--- --- --- ----
Equity in net income of
affiliated companies - 300 500 600
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Net income (loss) $ 6,500 $ 17,300 $ (3,300) $ 35,800
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Page 5
Net income (loss) per share:
Basic $ 0.38 $ 1.05 $ (0.20) $ 2.18
Assuming dilution $ 0.38 $ 1.05 $ (0.20) $ 2.17
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Average shares outstanding 17,003 16,481 16,867 16,447
Average shares outstanding
assuming dilution 17,078 16,594 16,867 16,513
</TABLE>
See accompanying notes to interim financial statements.
Page 6
The West Company, Incorporated and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Unaudited Audited
ASSETS Sept. 30, 1998 Dec. 31, 1997
--------------- -------------
<S> <C> <C>
Current assets:
Cash, including equivalents $ 50,000 $ 52,300
Accounts receivable, less allowance 71,200 60,400
Inventories 44,800 38,300
Current deferred income tax benefits 9,500 9,400
Other current assets 10,800 10,300
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Total current assets 186,300 170,700
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Net property, plant and equipment 213,800 202,200
Investments in affiliated companies 14,300 22,700
Goodwill 71,100 51,600
Intangibles and other assets 36,200 30,700
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Total Assets $521,700 $ 477,900
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 600 $ 700
Notes payable 17,200 900
Accounts payable 16,200 18,600
Accrued expenses:
Salaries, wages, benefits 18,900 13,400
Income taxes payable 11,500 5,400
Other current liabilities 27,100 19,000
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Total current liabilities 91,500 58,000
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Long-term debt, excluding current portion 94,900 87,400
Deferred income taxes 30,600 30,100
Other long-term liabilities 25,300 24,700
Shareholders' equity 279,400 277,700
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Total Liabilities and Shareholders' Equity $521,700 $477,900
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Page 7
See accompanying notes to interim financial statements.
</TABLE>
Page 8
The West Company Incorporated and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, 1998 Sept. 30, 1997
---------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income, plus net non-cash items $ 45,800 $ 46,200
Changes in assets and liabilities (3,000) 10,400
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Net cash provided by operating activities 42,800 56,600
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Cash flows from investing activities:
Property, plant and equipment acquired (27,900) (23,500)
Proceeds from sale of assets 900 200
Payments for acquisitions, net of cash acquired (19,500) -
Customer advances, net of repayments 900 -
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Net cash used in investing activities (45,600) (23,300)
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Cash flows from financing activities:
Net borrowings under revolving credit agreement 5,800 -
Repayment of long-term debt (1,900) (1,100)
Notes payable, net 700 (100)
Dividend payments (7,500) (6,900)
Sale of common stock, net 2,000 2,400
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Net cash used in financing activities (900) (5,700)
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Effect of exchange rates on cash 1,500 (1,800)
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Net (decrease) increase in cash, including equivalents $ (2,200) $25,800
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See accompanying notes to interim financial statements.
</TABLE>
Page 9
The West Company, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
The interim consolidated financial statements for the period
ended September 30, 1998 should be read in conjunction with the
consolidated financial statements and notes thereto of The West
Company, Incorporated appearing in the Company's 1997 Annual
Report on Form 10-K. The year-end condensed balance sheet data
was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting
principles. Interim results are based on the Company's accounts
without audit.
1. Interim Period Accounting Policy
---------------------------------
In the opinion of management, the unaudited Condensed
Consolidated Balance Sheet as of September 30, 1998 and the
related unaudited Consolidated Statement of Operations for
the three and nine month period then ended, and the unaudited
Condensed Consolidated Statement of Cash Flows for the nine
month period then ended and for the comparative period in
1997 contain all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the financial
position as of September 30, 1998 and the results of
operations and cash flows for the respective periods. The
results of operations for any interim period are not
necessarily indicative of results for the full year.
Operating Expenses
------------------
To better relate costs to benefits received or activity in an
interim period, certain operating expenses have been
annualized for interim reporting purposes. Such expenses
include depreciation due to use of the half year convention,
certain employee benefit costs, annual quantity discounts,
and advertising.
Income Taxes
-------------
The tax rate used for interim periods is the estimated annual
effective consolidated tax rate, based on the current
estimate of full year results except that the 1998 charge for
acquired research and development, the 1997 German tax
reorganization, and taxes applicable to operating results in
Brazil are recorded on a basis discrete to the period, and
prior year adjustments, if any, are recorded as identified.
Net Loss Per Share
---------------------
For the nine months ended September 30, 1998, because of the
reported net loss, the incremental shares from potential
issuance of common stock under the Company's stock option and
award plan are not included in average shares assuming
dilution.
Page 10
The West Company, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(Continued)
2. Inventories at September 30, 1998 and December 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands) 1998 1997
-------- --------
Finished goods $ 15,600 $ 15,800
Work in process 13,900 8,100
Raw materials 15,300 14,400
-------- --------
$ 44,800 $ 38,300
-------- --------
-------- --------
</TABLE>
3. The carrying value of property, plant and equipment at
September 30, 1998 and December 31, 1997 is determined as
follows:
(in thousands) 1998 1997
-------- --------
Property, plant and equipment $466,700 $428,600
Less accumulated depreciation 252,900 226,400
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Net property, plant and equipment $213,800 $202,200
-------- --------
-------- --------
4. In 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, Reporting Comprehensive
Income, which establishes standards for the disclosure of
comprehensive income and its components. Comprehensive
income is the total of net income and other revenue,
expenses, gains and losses for the period, which are
excluded from net income under generally accepted accounting
principles. For the three and nine months ended September
30, 1998 and 1997, the Company's comprehensive income (loss)
is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
9/30/98 9/30/97 9/30/98 9/30/97
(in thousands) ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) $6,500 $ 17,300 $(3,300) $35,800
Foreign currency
translation adjustments 4,100 (900) 1,400 (9,000)
-------- -------- -------- --------
Page 11
Comprehensive income
The West Company, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(Continued)
(loss) $10,600 $16,400 $(1,900) $26,800
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
In 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information". As required by the
standard, the Company will begin reporting under SFAS No.
131 in its 1998 Annual Report.
On June 16, 1998, the FASB issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activity". The
statement will be effective for the Company in the year
2000. The new standard requires companies to record
derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be
accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. The impact that
this accounting standard will have on the Company's
financial position and results of operations cannot be
determined at this time.
On March 4, 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for
Internal Use. This statement establishes standards for
determining the internal and external costs of developing
software for internal use which must be capitalized and
amortized over the useful life of the software. The Company
adopted this Statement, but the effect was not material on
the quarter or year-to-date financial statements.
5. Common stock issued at September 30, 1998 was 17,165,141
shares, of which 160,314 shares were held in treasury. A
dividend of $.15 per common share was paid in the third
quarter of 1998, and a dividend of $.16 per share payable on
November 4, 1998 to holders of record on October 21, 1998
was declared on August 11, 1998.
6. The Company has accrued the estimated cost of environmental
compliance expenses related to soil or ground water
contamination at current and former manufacturing
facilities. The ultimate cost to be incurred by the Company
and the timing of such payments cannot be fully determined.
However, based
Page 12
The West Company, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(Continued)
on consultants' estimates of the costs of remediation in
accordance with applicable regulatory requirements, the
Company believes the accrued liability of $1.3 million at
September 30, 1998 is sufficient to cover the future costs
of these remedial actions, which will be carried out over
the next two to five years. The Company has not anticipated
any possible recovery from insurance or other sources.
7. At September 30, 1998 the cumulative number of employees
terminated in accordance with the restructuring plan
announced on March 29, 1996 was 225 and total payout of
severance and benefits was $7.0 million. Restructuring
activities, except for the sale of one building and certain
excess equipment and payout of remaining severance, have
been completed.
On September 8, 1998, the Company recorded a pre-tax charge
of $4.0 million. The charge is related to employee
reductions associated with identified manufacturing and
other efficiencies. The charge covers severance and
benefits for 92 employees and other related charges. At
September 30, 1998, the total payout of severance and
benefits associated with this charge was $0.2 million.
8. On March 31, 1998, the Company acquired for approximately
BPS 20 million ($33.5 million at March 31, 1998) the
remaining 70% interest in DanBioSyst U.K. Ltd. ("DBS"),
making DBS a wholly-owned subsidiary. This transaction is
accounted for by the purchase method, and was financed with
cash of $9.4 million, 320,406 shares of restricted common
stock valued at $8.7 million, and short-term notes of $15.4
million. The preliminary allocation of the purchase price
follows:
(in thousands)
Current assets $1,300
Equipment and leasehold improvements 800
In-process research & development 28,200
Other intangibles 400
Goodwill 2,800
Estimated in-process research and development was written
off at the date of acquisition. Operating results of DBS
were consolidated beginning on April 1, 1998.
On July 1, 1998 the Company acquired Betraine, Ltd. for BPS
7.2 million ($11.8 million at July 1, 1998) Betraine
manufactures precision injection molded plastic components
for the healthcare and consumer products industries. The
Page 13
The West Company, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(Continued)
acquisition is accounted for as a purchase and results were
consolidated as of July 1, 1998. The acquisition was
financed from existing cash. The assets and liabilities
have been consolidated based on a preliminary allocation of
the purchase price; final allocation is expected by year end
1998. The excess of the purchase price over the net assets
acquired will be amortized over 20 years.
9. On September 9, 1998 the Company commenced a "Dutch Auction"
self-tender for up to 2,000,000 shares at a price range of
not less than $27.00 per share and not more than $31.00 per
share. The self-tender period expired on October 7, and on
October 8 the Company announced that it would purchase
approximately 2,000,000 shares at a price of $30.00 per
share in accordance with the terms of the tender offer. The
shares purchased represent approximately 11.8% of the shares
outstanding immediately prior to the offer. The Company
financed the purchase of the shares with funds borrowed
under available lines of credit.
Page 14
Item 2.
Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------
Results of Operations.
----------------------
Results of Operations for the Three and Nine Month Periods
---------------------------------------------------------
Ended September 30, 1998 Versus Comparable 1997 Periods
--------------------------------------------------
Net Sales
----------
Net sales for the third quarter of 1998 were $113.9 million, an
8% increase compared with net sales of $105.2 million for the
same quarter in 1997. Service sales to both healthcare and
consumer product markets in the U.S. increased sharply over 1997
because of strong demand for contract packaging and manufacturing
services. Product sales to healthcare customers were flat in
North and South American markets, but 11% higher in European
markets due to a combination of increased demand and the
acquisition of Betraine, Ltd. on July 1, 1998. In addition
product sales to consumer markets were 12% higher due largely to
the introduction of Procter & Gamble's new Crest Multicare
product and the acquisition of Betraine, Ltd. The total sales of
companies acquired in 1998 included in the third quarter 1998
consolidated sales was $2.7 million. The impact on reported
sales of foreign currency exchange rates was marginally favorable
in the quarter as the U.S. dollar was stronger versus Asian
currencies but weaker against European currencies.
Net sales for the first nine months of 1998 were $334.9 million,
a 2% decrease compared with $343.0 million for the first nine
months of 1997. Product sales to U.S. healthcare and consumer
markets were lower, a result of reduced sales to several key
healthcare market customers, in part due to reductions in
customers' inventory levels, and a combination of lower resin
prices and loss of business at two accounts to competitors,
respectively. Stronger sales in Europe due to demand and
acquisitions (Betraine and DanBioSyst U.K. Ltd) partially offset
this reduction. Other international markets had lower sales.
Also, the stronger U.S. dollar reduced reported sales by $4.0
million.
Gross Profit
-------------
Gross profit margins improved for the third quarter and for the
nine months. The gross profit margin for the third quarter was
29.2% of net sales compared with 27.7% for the same period in
1997. The gross profit margin for the nine month period was
29.7% up from 28.6% in 1997.
Page 15
The Company continues to benefit from efficiencies and
Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------
Results of Operations. (Continued)
-----------------------------------
cost saving programs. In addition, margins on sales of contract
services have improved due to mix, and margins on product sales
to consumer markets has improved in part due to resin price
decreases passed through to customers.
Selling, General and Administrative Expenses
--------------------------------------------
Selling, general and administrative (SG&A) expenses increased
$1.0 million compared with the third quarter 1998, but declined
as a percentage of sales from 15.4% in the third quarter 1997 to
15.2% in 1998. The impact of the stronger U.S. dollar and higher
income on pension plan assets did not offset increased selling
costs for contract services and the consolidation of SG&A
expenses associated with companies acquired in 1998.
In the nine month comparisons, SG&A expenses in 1998 decreased by
$0.9 million compared with 1997 and rose slightly as a percentage
of net sales. Higher income on pension plan assets, lower cost
for other employee benefits and the impact of the stronger U.S.
dollar more than offset SG&A expenses recorded by companies
acquired in 1998.
Restructuring Charge
--------------------
The information contained in Note 7 to the Consolidated Financial
Statements, which is incorporated herein by reference, describes
the Company's charge to earnings in the third quarter of 1998,
related to staff reductions, which are expected to reduce the
headcount by about 1%.
Acquired Research and Development
---------------------------------
The information contained in Note 8 to the Consolidated Financial
Statements, which is incorporated herein by reference, describes
the Company's acquisition of DanBioSyst and the allocation of the
purchase price based on an appraisal. Acquired in-process
research and development expense of $28.2 million was expensed,
as required, at the time of purchase.
Other (income) expense
----------------------
In the third quarter, provision for losses on certain investments
and disputed claims of former employees and losses on sale of
fixed assets, reduced third quarter other income by $0.6 million.
However, interest income was higher in the third quarter and for
the nine month period reflecting higher average temporary cash
investments during the periods. The interest income declined in
the third quarter due to the cashpurchase of Betraine on July 1,
Page 16
Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------
Results of Operations. (Continued)
-----------------------------------
1998.
Interest Expense and Equity in Affiliates
--------------------------------------------
Interest expense increased in the third quarter and nine month
period comparisons, due to additional debt associated with the
DanBioSyst acquisition.
Equity in net income of affiliated companies was lower in both
the quarter and nine months compared with the same periods in
1997. Lower income at Daikyo Seiko, Ltd., a Japanese company in
which the Company owns a 25% equity stake, resulted from a sharp
decline in third quarter sales, which drastically decreased
margins and offset prior year-to-date comparative increases.
Income at Mexican affiliates, in which the Company has a 49%
equity stake, were also lower in part due to unfavorable currency
exchange impacts.
Taxes
-----
The effective tax rate for the 1998 nine month period was 38.5%,
excluding the charge for the acquired research and development.
This rate is significantly higher than the full year 1997
effective tax rate of 23.2% which was affected by two, third-
quarter 1997 events: a tax reorganization of the Company's German
subsidiaries and repatriation of cash dividends from certain
subsidiaries. These two events resulted in a full year net tax
benefit of $7.9 million to the Company in 1997; excluding this
benefit, the 1997 effective tax rate was 37%. The expected
increase in the 1998 tax rate reflects the geographic mix of
earnings.
Net Income
----------
Net income for the third quarter 1998 was $6.5 million , or $.38
per share. Results include an after-tax restructuring charge of
$2.5 million, associated mainly with staff reductions. In the
third quarter of 1997, the Company reported net income of $17.3
million, or $1.05 per share, which included a net tax benefit of
$9.4 million, or $.57 per share, associated mainly with the legal
reorganization of German subsidiaries. Excluding these unusual
items in both periods, net income increased by 13% in the quarter
to $.53 per share from $.48 per share.
The Company reported a net loss for the nine-month period of $3.3
million, or $.20 per share. Results include the $28.2 million
charge relating to the in-process research and development
associated with the acquisition of DanBioSyst and a net
restructuring charge of $2.5 million.
Page 17
Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------
Results of Operations. (Continued)
-----------------------------------
In 1997, the year-to-date net income was $35.8 million, or $2.18
per share, which included a net tax benefit of $9.4 million
related mainly to the tax reorganization of the Company's German
subsidiaries. Excluding these unusual items in both periods,
1998 net income for the nine months increased by 4% to $1.62 per
share from $1.60 per share in 1997.
Financial Position
-------------------
Working capital at September 30, 1998 was $94.8 million compared
with $112.7 million at December 31, 1997. The working capital
ratio at September 30, 1998 was 2.0 to 1. Cash provided by
operations, was adequate to fund capital expenditures and make
dividend payments of $.45 per share. The cash portion of
acquisitions was financed using available cash and borrowings
totalling $6.9 million. The borrowings were used for a portion
of the cash required for the DanBioSyst acquisition, (see
disclosure on the acquisition in Note 8 to the Consolidated
Financial Statements).
In addition, sellers received a portion of the purchase price,
$15.4 million, in short-term notes and 320,406 shares of common
stock. The acquisition price of Betraine was all cash (see
disclosure on the acquisition in Note 8 to the Consolidated
Financial Statements).
Total debt as a percentage of total invested capital was 28.7% at
September 30, 1998, compared with 24.2% at December 31, 1997. At
September 30, 1998, the Company had available unused lines of
credit of $114.9 million. Net borrowings of $5.8 million under
a short-term line of credit were classified as long-term because
of the Company s intent to renew the borrowings using available
long-term credit facilities. On October 8, 1998, the Company
acquired 2,000,000 shares of Common Stock at $30.00 per share at
the close of a "Dutch Auction" tender offer. The Company funded
the stock purchase using available lines of credit, but is
currently negotiating long-term financing. Available lines of
credit and cash flow from operations are adequate, in the opinion
of management, to meet future cash requirements.
Page 18
YEAR 2000
---------
Background
----------
Many computer systems were designed and developed using two
digits, rather than four, to specify the year. As a result, such
systems will recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failure or
miscalculations.
Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------
Results of Operations. (Continued)
-----------------------------------
The Company's Year 2000 Program
-------------------------------
With the assistance of an independent consultant, the Company has
developed a comprehensive, centrally maintained, corporate-wide
Year 2000 project plan designed to manage and carry out
activities to address the Year 2000 issue. The Company's plan is
being implemented by a Project Team consisting of two-full-time
staff members, representatives from staff functions, and at least
one project manager from each of the Company's locations.
The plan calls for the Company to have completed modifications
necessary to address the Year 2000 issue by June 30, 1999. The
progress of the Company's Year 2000 efforts is reviewed monthly
by senior management and reports are provided to the Company's
Audit Committee and Board of Directors on a periodic basis
throughout the year.
The Company has completed a risk assessment of the impact of the
Year 2000. The assessment identified and prioritized critical
business processes and plant locations to be targeted for
remediation, replacement or other corrective action. The Company
has also substantially completed an inventory of all application
software, hardware, operating systems software, desktop software
and computer-controlled manufacturing and facility equipment from
all Company locations worldwide to identify potential Year 2000
problems.
The Company has made significant progress in remediating or
replacing critical information systems which support business
functions. Due to multiple geographical locations, discrete
computer systems exist in the U.S., Europe, South America and
Asia/ Pacific regions. The U.S. (other than Paco Pharmaceutical
Services) and European-based manufacturing, financial-reporting
and payroll systems have been completed, and other systems,
including Paco, are at various stages of completion, but are on-
schedule to be completed during the first half of 1999. Desktop
inventory and assessment audits are expected to be completed by
the end of the year, with corrective action expected to be
completed by July 1, 1999.
The assessment of research and development, manufacturing
processes and facility management systems is well underway at all
plant locations. Remediation and replacement, as necessary, of
all critical software-dependent systems are expected to be
completed by June 30, 1999. The Company is relying on a
combination of testing, replacement and certification letters
from
Page 19
Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------
Results of Operations. (Continued)
-----------------------------------
equipment and system vendors as part of its Year 2000 program.
The Company has received Year 2000 compliance certifications from
all of its major raw-materials suppliers and major service
providers to ensure that delivery of required supplies and
services continues uninterrupted.
Based on the progress to date, no contingency plans are
expected to be needed, and therefore none have been developed.
However, because the Company's Year 2000 program schedule is
expected to be substantially complete by June 30, 1999, the
Company believes adequate time will be available to address
deficiencies without a material impact on manufacturing and
operations, customer service and other critical business
functions. Nonetheless, if such deficiencies are not addressed
in a timely manner, the Year 2000 issue could have a material
impact on the operations of the Company.
Internal and external resources are being used to remediate or
replace non-compliant technology, and to appropriately test Year
2000 modifications. The program and related expenditures are
being funded through operating cash flows. The project to
address Year 2000 began in April 1997. The pretax costs incurred
to date for this effort were approximately $3.7 million and $1.0
million in 1998 and 1997, respectively. Generally, compliance
software is being implemented for its improved functionally. As
a result $3.3 million and $1.0 million have been capitalized in
1998 and 1997, respectively. The Company does not separately
track the cost and time that its own internal employees spend
on the Y2K project. Such costs are principally the related
payroll costs for its management information systems group.
The Company expects costs of approximately $5.0 million will be
incurred in 1999 to substantially complete the effort.
The cost of the Year 2000 project and the date on which the
Company believes it will substantially complete modifications are
based on management s best estimates. Such estimates were
derived using project-management software and information from
individual project team members. The estimates are based on
numerous assumptions of future events, including the continued
Page 20
availability of certain resources and other factors. Because
none of these estimates can be guaranteed, actual time and cost
to complete modifications could differ materially from those
anticipated. Specific factors that might cause such differences
include, but are not limited to, the reliability and timely
receipt of vendor certifications, the appropriateness and
effectiveness of testing and validation methods, the availability
and cost of trained personnel and the timely availability of
replacement hardware and software and similar uncertainties.
Item 3. Quantitative and Qualitative Disclosure about Market
Risk
------------------------------------------------------
Not applicable. This requirement will become effective for the
Company filings including annual financial statements for 1998.
Page 21
Part II - Other Information
Item 1. Legal Proceedings
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------
(a) See Index to Exhibits on pages F-1 and F-2 of this
Report.
(b) No reports on Form 8-K have been filed for the quarter
ended September 30, 1998.
Page 22
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE WEST COMPANY, INCORPORATED
-----------------------------------
(Registrant)
November 16, 1998 /s/ Steven A. Ellers
------------- ---------------------------------
Date (Signature)
Steven A. Ellers
Senior Vice President,
Finance and Administration
(Chief Financial Officer)
Page 23
INDEX TO EXHIBITS
Exhibit
Number
(3) (a) Amended Articles of Incorporation of the
Company.
(3) (b) Amended By-Laws of the Company.
(4) (a) Form of stock certificate for common stock
incorporated by reference to Exhibit (3) (b)
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1989 (File
No. 1-8036).
(4) (b) Flip-In Rights Agreement between the Company
and American Stock Transfer & Trust Company,
as Rights Agent, dated as of January 16,
1990, incorporated by reference to Exhibit 1
to the Company's Form 8-A Registration
Statement (File No. 1-8036).
(4) (c) Flip-Over Rights Agreement between the
Company and American Stock Transfer & Trust
Company, as Rights Agent, dated as of January
16, 1990, incorporated by reference to
Exhibit 2 to the Company's Form 8-A
Registration Statement (File No. 1-8036).
(9) None.
(11) Not Applicable.
(12) Not Applicable.
(15) None.
(16) Not applicable.
(18) None.
(19) None.
(22) None.
(23) None.
(24) None.
(27) Financial Data Schedule
(99) None.
F-1
Page 24
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF THE WEST COMPANY, INCORPORATED
1. The name of the Corporation is The West Company,
Incorporated.
2. The location and post office address of the
Corporation's registered office in Pennsylvania is c/o
Corporation Service Company, 319 Market Street, Harrisburg,
PA 17101.
3. The Corporation is incorporated under the
Pennsylvania Business Corporation Law and shall have
unlimited power to engage in and to do any lawful act
concerning any or all lawful business, including
manufacturing, processing, research and development, for
which corporations may be incorporated under the
Pennsylvania Business Corporation Law.
4. The term for which the Corporation is to exist is
perpetual.
5. Capital Stock. The aggregate number of shares of
capital stock which the Corporation shall have authority to
issue is 53,000,000 shares, consisting of (i) 3,000,000
shares of Preferred Stock, par value $.25 per share
("Preferred Stock") and (ii) 50,000,000 shares of Common
Stock, par value $.25 per share ("Common Stock").
The following is a statement of the designations,
preferences qualifications, limitations, restrictions and
the special or relative rights granted to or imposed upon
the shares of each such class:
Preferred Stock
(a) Issue in Series. Preferred Stock may be
issued from time to time in one or more series, each such
series to have the terms stated herein and in the resolution
of the board of directors providing for its issue. All
shares of any one series of Preferred Stock shall be
identical, but shares of different series of Preferred Stock
need not rank equally or be identical except insofar as
provided by law or hereunder.
(b) Creation of Series. The board of directors
shall have authority by resolution to cause to be created
one or more series of Preferred Stock, and to determine and
fix with respect to each series, prior to the issuance of
any shares of the series to which such resolution relates:
<PAGE>
(i) The distinctive designation of the
series and the number of shares which shall constitute the
series, which number may be increased or decreased (but not
below the number of shares then outstanding) from time to
time by action of the board of directors;
(ii) The dividend rate and the times of
payment of dividends on the shares of the series, whether
dividends shall be cumulative, and, if so, from what date or
dates;
(iii) The price or prices at which, and
the terms and conditions on which, the shares of the series
may be redeemed at the option of the Corporation;
(iv) Whether or not the shares of the series
shall be entitled to the benefit of a retirement or sinking
fund to be applied to the purchase or redemption of such
shares and, if so entitled, the annual amount of such fund
and the terms and provisions relative to the operation
thereof;
(v) Whether or not the shares of the series
shall be convertible into, or exchangeable for, shares of
any other series of the same or any other class or classes
of stock of the Corporation, and if so convertible or
exchangeable, the conversion price or prices, or the rates
of exchange, and any adjustments thereof, if any, at which
such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(vi) The rights of the shares of the series
in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(vii) Whether or not the shares of the
series shall have priority over or parity with or be junior
to the shares of any other series or class in any respect or
shall be entitled to the benefit of limitations restricting
the issuance of shares of any other series or class having
priority over or being on a parity with the shares of such
series in any respect, or restricting the payment of
dividends on, or the making of other distributions in
respect of shares of any other series or class ranking
junior to the shares of the series as to dividends or
assets, or restricting the purchase or redemption of the
shares of any such junior series or class, and the terms of
any such restrictions;
(viii) Whether the series shall have
voting rights, in addition to the voting rights provided by
law, and, if so, the terms of such voting rights; and
(ix) Any other preferences
<PAGE>
qualifications, privileges and other relative or special
rights and limitations of that series.
(c) Dividends. Holders of Preferred Stock shall
be entitled to receive, when and as declared by the board of
directors, out of funds legally available for the payment
thereof, dividends at the rates fixed by the board of
directors for the respective series, and no more, before any
dividends shall be declared and paid, or set apart for
payment, on Common Stock with respect to the same dividend
period.
(d) Preference on Liquidation. In the event of
the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, holders of each series of
Preferred Stock shall be entitled to receive the amount
fixed for such series plus, in the case of any series on
which dividends shall have been determined by the board of
directors to be cumulative, an amount equal to all dividends
accumulated and unpaid thereon to the date of final
distribution whether or not earned or declared. If the
assets of the Corporation are not sufficient to pay such
amounts in full, holders of all shares of Preferred Stock
shall participate ratably in the distribution of assets in
proportion to the full amounts to which they are entitled or
in such order or priority, if any, as shall have been fixed
in the resolution or resolutions providing for the issuance
of the series of Preferred Stock. Neither the merger nor
consolidation of the Corporation into or with any other
corporation, nor a sale, transfer or lease of all or part of
its assets, shall be deemed a liquidation of the Corporation
within the meaning of this paragraph.
(e) Redemption. The Corporation at the option of
the board of directors may redeem all or part of the shares
of any series of Preferred Stock on the terms and conditions
fixed for such series. In case of the redemption of less
than all outstanding shares of any series of Preferred
Stock, the shares to be redeemed shall be selected by lot or
in such other manner as the board of directors determines.
(f) Voting Rights. Except as otherwise required
by law or as otherwise provided in any certificate creating
any series of Preferred Stock, the holders of such of the
series of Preferred Stock, if any, as shall have been
granted such power pursuant to any certificate creating any
series of Preferred Stock shall, together with the holders
of Common Stock, exclusively possess voting power in the
election of directors and for all other purposes, and the
holders of the other series of Preferred Stock shall have no
voting power and shall not be entitled to any notice of any
meeting of shareholders.
Series A Junior Participating Preferred Stock
<PAGE>
(a) Designation and Amount. There shall be a
series of Preferred Stock designated as "Series A Junior
Participating Preferred Stock" and the aggregate number of
shares constituting such series shall be 50,000.
(b) Dividends and Distributions.
(i) Subject to the prior and superior rights
of the holders of any shares of any series of Preferred
Stock ranking prior and superior to the shares of Series A
Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior
Participating Preferred Stock shall be entitled to receive,
when, as and if declared by the board of directors out of
funds legally available for the purpose, quarterly dividends
payable in cash on March 31, June 30, September 30 and
December 31 in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A
Junior Participating Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a)
$10 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. In the event the
Corporation shall at any time after January 16, 1990 (the
"Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares
of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to
such event.
(ii) The Corporation shall declare a
dividend or distribution on the Series A Junior
Participating Preferred Stock as provided in paragraph (i)
above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend
<PAGE>
payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10 per share on the
Series A Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(iii) Dividends shall begin to
accrue and be cumulative on outstanding shares of Series A
Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of
such shares of Series A Junior Participating Preferred
Stock, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock
in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares
of Series A Junior participating Preferred Stock entitled to
receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
(c) Voting Rights. The holders of shares of
Series A Junior Participating Preferred Stock shall have the
following voting rights:
(i) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Junior
Participating Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of
the shareholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration
Date (a) declare any dividend on Common Stock payable in
shares of Common Stock, (b) subdivide the outstanding Common
Stock, or (c) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the number
of votes per share to which holders of shares of Series A
Junior Participating Preferred Stock were entitled
immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which
is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
<PAGE>
(ii) Except as otherwise provided herein or
by law, the holders of shares of Series A Junior
Participating Preferred Stock and the holders of shares of
common Stock shall vote together as one class on all matters
submitted to a vote of shareholders of the Corporation.
(iii) (A) If at any time dividends on
any Series A Junior Participating Preferred Stock shall be
in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period")
which shall extend until such time when all accrued and
unpaid dividends for all previous quarterly dividend periods
and for the current quarterly dividend period on all shares
of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart
for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior
Participating Preferred Stock) with dividends in arrears in
an amount equal to six (6) quarterly dividends thereon,
voting as a class, irrespective of series, shall have the
right to elect two (2) directors.
(B) During any default period, such
voting right of the holders of Series A Junior Participating
Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (C) of this
paragraph (c)(iii) or at any annual meeting of shareholders,
and thereafter at annual meetings of shareholders, provided
that neither such voting right nor the right of the holders
of any other series of Preferred Stock, if any, to increase,
in certain cases, the authorized number of directors shall
be exercised unless the holders of ten percent (10)% in
number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right. At any
meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing
default period, they shall have the right, voting as a
class, to elect directors to fill such vacancies, if any, in
the board of directors as may then exist up to two (2)
directors or, if such right is exercised at an annual
meeting, to elect two (2) directors. If the number which
may be so elected at any special meeting does not amount to
the required number, the holders of the Preferred Stock
shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by
them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect
directors in any default period and during the continuance
of such period, the number of directors shall not be
increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights
<PAGE>
of any equity securities ranking senior to or pari passu
with the Series A Junior Participating Preferred Stock.
(C) Unless the holders of Preferred
Stock shall, during an existing default period, have
previously exercised their right to elect directors, the
board of directors may order, or any shareholder or
shareholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred
Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred
Stock, which meeting shall thereupon be called by the
President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to
vote pursuant to this subparagraph (C) shall be given to
each holder of record of Preferred Stock by mailing a copy
of such notice to him at his last address as the same
appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than 20 days and not later
than 60 days after such order or request or in default of
the calling of such meeting within 60 days after such order
or request, such meeting may be called on similar notice by
any shareholder or shareholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding. Notwithstanding the provisions
of this subparagraph (C), no such special meeting shall be
called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the
shareholders.
(D) In any default period, the holders
of Common Stock, and other classes of stock of the
Corporation if applicable, shall continue to be entitled to
elect the whole number of directors until the holders of
Preferred Stock shall have exercised their right to elect
two (2) directors voting as a class, after the exercise of
which right (x) the directors so elected by the holders of
Preferred Stock shall continue in office until their
successors shall have been elected by such holders or until
the expiration of the default period, and (y) any vacancy in
the board of directors may (except as provided in
subparagraph (B) of this paragraph (c)(iii) be filled by
vote of a majority of the remaining directors theretofore
elected by the holders of the class of stock which elected
the director whose office shall have become vacant.
References in this subparagraph (D) to directors elected by
the holders of a particular class of stock shall include
directors elected by such directors to fill vacancies as
provided in clause (y) of the preceding sentence.
(E) Immediately upon the expiration of
a default period, (x) the right of the holders of Preferred
Stock as a class to elect directors shall cease, (y) the
<PAGE>
term of any directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of
directors shall be such number as may be provided for in the
Articles of Incorporation or Bylaws irrespective of any
increase made pursuant to the provisions of subparagraph (B)
of this paragraph (c)(iii) (such number being subject,
however, to change thereafter in any manner provided by law
or in the Articles of Incorporation or Bylaws). Any
vacancies in the board of directors effected by the
provisions of clauses (y) and (z) in the preceding sentence
may be filled by a majority of the remaining directors.
(iv) Except as set forth herein, holders of
Series A Junior participating Preferred Stock shall have no
special voting rights and their consent shall not be
required (except to the extend they are entitled to vote
with holders of Common Stock as set forth herein) for taking
any corporate action.
(d) Certain Restrictions
(i) Whenever quarterly dividends or other
dividends or distributions payable on the Series A Junior
Participating Preferred Stock as provided in paragraph (b)
are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on
shares of Series A Junior Participating Preferred Stock
outstanding shall have been paid in full, the Corporation
shall not
(A) declare or pay dividends on, make
any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(B) declare or pay dividends on or make
any other distributions on any shares of stock ranking on a
party (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably
on the Series A Junior Participating Preferred Stock and all
such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(C) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares
of any such parity stock in exchange for shares of any stock
<PAGE>
of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series A
Junior Participating Preferred Stock; or
(D) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity
with the Series A Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing
or by publication (as determined by the board of directors)
to all holders of such shares upon such terms as the board
of directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(ii) the Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise
acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph
(d)(i), purchase or otherwise acquire such shares at such
time and in such manner.
(e) Reacquired Shares. Any shares of Series A
Junior Participating Preferred Stock purchased or otherwise
acquired by the Corporation in any manner whatsoever shall
be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the board of
directors, subject to the conditions and restrictions on
issuance set forth herein.
(f) Liquidation, Dissolution or Winding Up.
(i) Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior
Participating Preferred Stock unless, prior thereto, the
holders of shares of Series A Junior Participating Preferred
Stock shall have received $10 per share, plus an amount
equal to accrued and unpaid dividends any distribution
thereon, whether or not declared, to the date of such
payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the
holders of shares of Series A Junior Participating Preferred
Stock unless, prior thereto, the holders of shares of Common
Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (a)
<PAGE>
the Series A Liquidation Preference by (b) 1,000 (as
appropriately adjusted as set forth in paragraph (iii) below
to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such
number in clause (b), the Adjustment Number ). Following
the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior participating
Preferred Stock and common Stock, respectively, holders of
Series A Junior Participating Preferred Stock and holders of
shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with
respect to such Preferred Stock and common Stock, on a per
share basis, respectively.
(ii) In the event, however, that there are
not sufficient assets available to permit payment in full of
the Series A Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Junior
Participating Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation
preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(iii) In the event the Corporation shall
at any time after the Rights Declaration Date (a) declare
any dividend on Common Stock payable in shares of Common
Stock, (b) subdivide the outstanding Common Stock, or (c)
combine the outstanding common Stock into a smaller number
of shares, then in each such case the Adjustment Number in
effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(g) Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any
such case the shares of Series A Junior Participating
Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to
1,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is
<PAGE>
changed or exchanged. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred
Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(h) No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
(i) Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of
Preferred Stock as to the payment of dividends and the
distribution of assets unless the terms of any such series
shall provide otherwise.
(j) Amendment. The Articles of Incorporation
of the Corporation shall not be further amended in any
manner which would materially alter or change the powers,
preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or
more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
(k) Fractional Shares. Series A Junior
Participating Preferred Stock may be issued in fractions of
a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights,
receive dividends participate in distributions and to have
the benefit of all other rights of holders of Series A
Junior Participating Preferred Stock.
Common Stock
(a) Dividends. Holders of Common Stock shall be
entitled to receive such dividends as may be declared by the
board of directors, except that the Corporation will not
declare, pay or set apart for payment any dividend on shares
of Common Stock (other than dividends payable in Common
Stock), or directly or indirectly make any distribution on,
redeem, purchase or otherwise acquire any such shares, if at
the time of such action the Corporation is in default with
respect to any dividend due and payable on, or any sinking
or purchase fund requirement relating to, any shares of
Preferred Stock.
<PAGE>
(b) Distribution of Assets. In the event of
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, holders of Common Stock shall be
entitled to receive pro rata all of the remaining assets of
the Corporation available for distribution to its
shareholders after all amounts to which the holders of
Preferred Stock are entitled have been paid or set aside in
cash for payment.
(c) Voting Rights. Except as otherwise required
by law or provided in any certificate creating any series of
Preferred Stock, the holders of Common Stock shall have the
exclusive right to vote in the election of directors and for
all other purposes, each such holder being entitled to one
vote for each share thereof held.
6. Vote Required for Certain Significant Transactions
(a) Higher Vote for Certain Significant
Transactions. In addition to any affirmative vote required
by law or these Articles of Incorporation, and except as
otherwise expressly provided in paragraph (b) of this
Article 6:
(i) any merger or consolidation of the
Corporation or any Subsidiary (as hereinafter defined) with
(a) any Related Person (as hereinafter defined), or (b) any
other corporation (whether or not itself a Related Person)
which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of a Related Person; or
(ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition(in one transaction or
a series of transactions) to or with any Related Person or
any Affiliate of any Related Person of any assets of the
Corporation or any Subsidiary having an aggregate Fair
Market Value (as hereinafter defined) of $1,000,000 or more;
or
(iii) the issuance or transfer by the
Corporation or any Subsidiary (in one transaction or a
series of transactions) of any securities of the Corporation
or any Subsidiary to any Related Person or any Affiliate of
any Related Person in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair
Market Value of $1,000,000 or more; or
(iv) the purchase by the Corporation or any
Subsidiary (in one transaction or a series of transactions
within a two year period) of any outstanding shares of
capital stock of the Corporation which entitles the holder
thereof to vote generally in the election of directors (the
"Voting Stock") in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair
<PAGE>
Market Value of $1,000,000 or more; or
(v) the adoption of any plan or proposal for
the liquidation or dissolution of the Corporation proposed
by or on behalf of a Related Person or any Affiliate of any
Related Person; or
(vi) any reclassification of securities
(including any reverse stock split), or recapitalization of
the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving a Related Person) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Related Person or any
Affiliate of any Related Person;
shall require the affirmative vote of the holders of at
least 80% of the voting power of the then-outstanding shares
of voting Stock, voting together as a single class. (For
purposes of this Article 6, each share of the Voting Stock
shall have the number of votes granted to it pursuant to
Article 5 of these Articles of Incorporation). Such
affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage
may be specified, by law or in any agreement with any
national securities exchange or otherwise.
The term Significant Transaction as used in this
Article 6 shall mean any transaction which is referred to in
any one or more of paragraphs (i) through (vi) of paragraph
(a) of this Article 6.
(b) When Higher Vote is Not Required. The
provisions of paragraph (a) of this Article 6 shall not be
applicable to any particular Significant Transaction, and
such Significant Transaction shall require only such action
as is required by law, the Bylaws of the Corporation, and
any other provision of these Articles of Incorporation, if
all of the conditions specified in either of the following
paragraphs (i) and (ii) are met:
(i) The Significant Transaction shall have
been approved by a majority of the continuing Directors (as
hereinafter defined) or
(ii) All of the following conditions shall
have been met:
(A) The aggregate amount of the cash
and the Fair Market Value as of the date of the consummation
of the Significant Transaction of consideration other than
<PAGE>
cash to be received per share by holders of Common Stock in
such Significant Transaction shall be at least equal to the
highest of the following:
(1) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Related Person for any
shares of Common Stock acquired by it (a) within the two-
year period immediately prior to the first public
announcement of the proposal of the significant Transaction
(the "Announcement Date"), or (b) in the transaction in
which it became a Related Person, whichever is higher; and
(2) the Fair Market Value per
share of Common Stock on the Announcement Date or on the
date on which the Related Person became a Related Person,
whichever is higher; and
(3) the earnings per share of
Common Stock for the four full consecutive fiscal quarters
immediately preceding the Announcement Date as to which
financial results have been published by the Corporation,
multiplied by the then highest price/earnings multiple (if
any) of such Related Person or any of its Affiliates as
customarily computed and reported in the financial
community; and
(4) the price per share equal to
the Fair Market Value per share of Common Stock determined
pursuant to subparagraph (A)(2) of this paragraph (b)(ii),
multiplied by a fraction the numerator of which is the
highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers fees)
paid by the Related Person for any shares of Common Stock
acquired by it within the two-year period immediately prior
to the Announcement Date and the denominator of which is the
Fair Market Value per share of Common Stock on the first day
in such two-year period upon which the Related Person
acquired any shares of Common Stock.
(B) the consideration to be received by
the holders of Common Stock in such Significant Transaction
shall be either cash or the same type of consideration used
by the Related Person in acquiring the largest portion of
its holdings of Common Stock prior to the first public
announcement of the proposed Significant Transaction.
(C) After such Related Person has
become a Related Person and prior to the consummation of
such Significant Transaction: (1) there shall have been (a)
no failure to pay nor reduction in the annual rate of
dividends paid on the Common Stock (as such rate may be
adjusted from time to time to reflect changes in the
Corporation s capitalization) unless such failure to pay or
<PAGE>
reduction is approved by a majority of the continuing
Directors; and (2) such Related Person shall not have become
the beneficial owner of any additional shares of Voting
Stock except as part of the transaction which results in
such Related Person becoming a Related Person.
(D) after such Related Person has
become a Related Person, such Related Person shall not have
received the benefit, directly or indirectly (except
proportionately as a shareholder of the Corporation), of any
loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or
in connection with such Significant Transaction or
otherwise.
(E) A proxy or information statement
describing the proposed Significant Transaction and
complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or
regulations) shall be mailed to public shareholders of the
Corporation at least 30 days prior to the consummation of
such Significant Transaction (whether or not such proxy or
information statement is required to be mailed pursuant to
such Act or subsequent provisions).
(c) Certain Definitions. For the purposes of
this Article 6:
(i) A "person" shall mean any individual,
firm, corporation or other entity.
(ii) "Related Person" shall mean any person
(other than the Corporation or any Subsidiary) who or which:
(A) is the beneficial owner, directly
or indirectly, of more than 10% of the voting power of the
outstanding Voting Stock; or
(B) is an Affiliate of the Corporation
and at any time within the two-year period immediately prior
to the date in question was the beneficial owner, directly
or indirectly, of 10% or more of the voting power of the
then-outstanding Voting Stock; or
(C) is an assignee of or has otherwise
succeeded to any shares of Voting Stock which were at any
time within the two-year period immediately prior to the
date in question beneficially owned by any Related Person,
if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not
involving a public offering within the meaning of the
Securities Act of 1993.
<PAGE>
If two or more person shall at any time be
"Related Persons," each Related Person whose involvement in
a transaction causes it to be a Significant Transaction
shall be treated as: (a) "the Related Person" for purposes
of the application of the requirements of paragraph (b) of
this Article 6 to such transaction, and (b) "the Related
Person in question" for purposes of determining whether a
person is a "Continuing Director" with respect to such
transaction.
(iii) A person shall be a "beneficial owner" of
any Voting Stock:
(A) which such person or any of its
Affiliates or Associates (as hereinafter defined)
beneficially owns, directly or indirectly; or
(B) which such person or any of its
Affiliates or Associates has (1) the right to acquire
(whether such right is exercisable immediately or only after
the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (2)
the right to vote pursuant to any agreement, arrangement or
understanding; or
(C) which is beneficially owned, directly or
indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(iv) For the purposes of determining whether a
person is a Related Person pursuant to paragraph (c)(ii),
the number of share of Voting Stock deemed to be outstanding
shall include shares deemed owned through application of
paragraph (c)(iii) but shall not include any other shares of
Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(v) "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulation under the Securities
Exchange Act of 1934, as in effect on May 5, 1983.
(vi) "Subsidiary" means any corporation of which
a majority of any class of equity security is owned,
directly or indirectly, by the Corporation; provided,
however, that for the purposes of the definition of Related
Person set forth in paragraph (c)(ii), the term "Subsidiary"
shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly,
by the Corporation.
<PAGE>
(vii) "Continuing Director" means any member of
the board of directors of the Corporation (the "Board") who
(a) was a member of the Board as of May 5, 1983, or (b) is
not affiliated with the Related Person and was a member of
the Board prior to the time that the Related Person became a
Related Person, or (c) is a successor of a Continuing
Director who is unaffiliated with the Related Person and is
recommended to succeed a Continuing Director by a majority
of Continuing Directors then on the Board.
(viii) "Fair Marker Value" means: (a) in the
case of stock, the highest closing sale price during the 30-
day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock
Exchange--Listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange, or, if
such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to
a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities
Deals, Inc. Automated Quotations System or any system then
in use, or if no such quotations are available, the fair
market value on the date in question of a share of such
stock as determined by the Board in good faith; and (b) in
the case of property other than cash or stock, the fair
market value of such property on the date in question as
determined by the Board in good faith.
(ix) In the event of any Significant Transaction
in which the Corporation survives, the phrase "consideration
other than cash to be received" as used in subparagraph (A)
of paragraph (b)(ii) of this Article 6 shall include the
shares of Common Stock, and/or the shares of any other class
of outstanding Voting Stock retained by the holders of such
shares.
(x) The Continuing Directors of the Corporation
shall have the power and duty to determine for the purposes
of this Article 6, on the basis of information known to them
after reasonable inquiry, (a) whether a person is a Related
Person, (b) the number of shares of Voting Stock
beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, and (d) whether the
assets which are the subject of any Significant Transaction
have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any
Subsidiary in any Significant Transaction has an aggregate
Fair Market Value of $1,000,000 or more.
(d) No Effect on Fiduciary Obligations of
Related Persons. Nothing contained in this Article 6 shall
<PAGE>
be construed to relieve any Related Person from any
fiduciary obligation imposed by law.
7. Evaluation of Certain Proposals by the Board of
Directors. The board of directors of the Corporation, when
evaluating any proposal from another party to (a) make a
tender offer for securities of the Corporation, (b) merge or
consolidate the Corporation with another corporation, (c)
purchase or otherwise acquire substantially all of the
properties or assets of the Corporation, (d) engage in any
transaction of the sort specified in paragraph (a) of
Article 6 of these Articles of Incorporation, or (e) engage
in any other transaction having a similar effect upon the
properties, operations or control of the Corporation, shall,
in connection with the exercise of its judgment in
determining what is the best interests of the Corporation
and its shareholders, give due consideration to the
following:
(i) the character, integrity, business
philosophy and financial status of the other party or
parties to the transaction;
(ii) the consideration to be received by the
Corporation or its shareholders in connection with such
transaction, as compared to: (a) the current market price
or value of the Corporation's properties or securities; (b)
the estimated future value of the Corporation, its
properties or securities; and (c) such other measures of the
value of the Corporation, its properties or securities as
the directors may deem appropriate.
(iii) the projected social, legal and
economic effects of the proposed action or transaction upon
the Corporation, its employees, suppliers and customers and
the communities in which the Corporation does business;
(iv) the general desirability of the
Corporation's continuing as an independent entity; and
(v) such other factors as the board of
directors may deem relevant.
8. Directors
(a) Number, Election and Term. The number
of the directors of the Corporation shall be fixed from time
to time by or pursuant to the Bylaws of the Corporation.
The directors shall be classified with respect to the time
for which they severally hold into three classes, as nearly
their equal in number as possible, as shall be provided in
the manner specified in the bylaws of the Corporation. At
the annual meeting of shareholders held in 1990, one class
shall be originally elected for a term expiring at the
<PAGE>
annual meeting of shareholders to be held in 1991, another
class shall be originally elected for a term expiring at the
annual meeting of shareholders to be held in 1992, and
another class shall be originally elected for a term
expiring at the annual meeting of shareholders to be held in
1993, with the members of each class to hold office until
their successors are elected and qualified. At each
succeeding annual meeting of the shareholders of the
Corporation, the successors of the class of directors whose
term expires at that meeting shall, subject to paragraph (c)
of this Article 8, be elected by plurality vote of all votes
cast at such meeting to hold office for a term expiring at
the annual meeting of shareholders held in the third year
following the year of their election.
(b) Vacancies. Vacancies in the board of
directors, including vacancies resulting from an increase in
the number of directors, shall be filled only by a majority
of the directors then in office, though less than a quorum,
and each person so elected shall be a director to serve for
the balance of the unexpired term and until his successor is
duly elected and qualified.
(c) Cumulative Voting in Certain Circumstances
(i) Except as and to the extent otherwise
provided in this paragraph (c) shareholders of the
Corporation shall not be entitled to cumulative voting
rights in any election of directors of the Corporation.
(ii) There shall be cumulative voting in any
election of directors of the Corporation on or after the
occurrence of both of the following events:
(A) the public announcement (which, for
purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), by the Corporation or a 40% Shareholder
that a 40% Shareholder has become such.
and
(B) such 40% Shareholder makes, or in any
way participates in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are defined or
used in Regulation 14A under the Exchange Act) or becomes a
"participant" in any "election contest" (as such terms are
defined or used in Rule 14a-11 of the Exchange Act) with
respect to the Corporation; seeks to advise or influence any
person (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to the voting of any securities
of the Corporation: or executes any written consent in lieu
of a meeting of holders of the Voting Stock.
<PAGE>
"40% Shareholder" shall mean any Person who or which,
together with all Affiliates and Associate of such Person,
shall be the Beneficial Owner of 40% or more of the Voting
Stock but shall not include (i) the Corporation, (ii) any
wholly owned Subsidiary, (iii) any employee benefit plan of
the Corporation or of any Subsidiary, or (iv) any Person
holding securities of the Corporation for or pursuant to the
terms of any such plan.
Notwithstanding the foregoing, no Person shall become a "40%
Shareholder" as the result of an acquisition of Common Stock
by the Corporation which, by reducing the number of shares
outstanding, increases the proportionate number of shares
beneficially owned by such Person to 40% or more of the
Voting Stock; provided, however, that if a Person who would
otherwise be a 40% Shareholder but for the provisions of
this sentence shall, after such share purchases by the
Corporation, become the Beneficial Owner of any additional
Voting Stock then such Person shall be deemed to be a "40%
Shareholder."
(ii) Certain Definitions. For purposes of
this Article 8:
"Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in rule 12b-2 of the General
Rules and Regulations under the Exchange Act as in effect on
May 3, 1990.
A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(A) which such Person or any such Persons's
affiliates or Associates beneficially owns, directly or
indirectly:
(B) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire
(whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement
or understanding (whether or not in writing), or upon the
exercise of conversion rights, exchange rights, rights
(other than the Rights granted pursuant to the Flip-In
Rights Agreement and Flip-Over-Rights Agreement between the
Corporation and American Stock Transfer & Trust Company,
dated as of January 16, 1990), warrants or options, or
otherwise or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however,
that a Person shall not be deemed the Beneficial Owner of,
or to beneficially own, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person
or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange;
or
<PAGE>
(C) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or
any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any securities of
the Corporation.
"Person" shall mean any individual, firm, corporation
or other entity, and shall include any successor (by merger
or otherwise) of such entity.
"Subsidiary" shall mean any corporation or other entity
of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or
indirectly, by the Corporation.
"Voting Stock" means Common Stock and any other
securities of the Corporation entitled to vote generally for
the election of directors or any security convertible into
or exchangeable for or exercisable for the purchase of
Common Stock or other securities of the Corporation entitled
to vote generally for the election of directors.
9. Vote Required for Amendment of Articles 6, 7, 8 or
9. Any provision in these Articles of Incorporation or in
the Bylaws of the Corporation to the contrary
notwithstanding, no provisions of Articles 6, 7, 8 or 9 of
these Articles shall be altered, amended, supplemented or
repealed by the shareholders of the Corporation, and no
provision of the Bylaws or of these Articles of
Incorporation inconsistent with such provisions shall be
adopted by the shareholders of the Corporation, except by
the affirmative vote of the holders of at least 80% of the
outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors,
considered for this purpose as one class.
As Amended Through
October 27, 1998
THE WEST COMPANY, INCORPORATED
BYLAWS
ARTICLE I
SHAREHOLDERS
Section 1. Meetings.
(a) Annual Meeting. The annual meeting of the
shareholders for the election of directors and for other business
shall be held at such time as may be fixed by the board of
directors, on the first Thursday of May in each year (or, if such
is a legal holiday, on the next following day,) or on such other
day as may be fixed by the board of directors.
(b) Special Meetings. Special Meetings of the
shareholders may be called at any time by the Chairman of the
Board, the President, or a majority of the board of directors.
(c) Place. Meetings of the shareholders shall be held
at such place as may be fixed by the board of directors.
Section 2. Notice. Written notice of the time and place of all
meetings of shareholders and of the purpose of each special
meeting of shareholders shall be given to each shareholder
entitled to vote thereat at least five days before the date of
the meeting, unless a greater period of notice is required by law
in a particular case.
Section 3. Voting. Except as otherwise provided herein, or in
the Articles of Incorporation, or by applicable law, every
shareholder shall have the right at every shareholders' meeting
to one vote for every share standing in his name on the books of
the Company which is entitled to vote at such meeting. Every
shareholder may vote either in person or by proxy. No
shareholder shall be entitled to participate in any meeting of
shareholders by means of conference telephone or similar
communications equipment unless the Board of Directors shall have
provided by resolution for such participation.
Section 4. Quorum. The presence, in person or by proxy, of the
holders of a majority of the outstanding shares of stock of the
Company entitled to vote at a meeting shall constitute a quorum.
If a quorum is not present no business shall be transacted except
to adjourn to a future time.
<PAGE>
Section 5. Nomination of Directors.
(a) Notice Required. Nominations for election of
directors at a meeting of shareholders may be made by the Board
of Directors or by any shareholder entitled to vote for the
election of directors at such meeting; provided, however, that
such nominations made by such a shareholder shall be made by
written notice (the "Nomination Notice") of the shareholder's
intent to nominate a director at the meeting given to and
received by the Secretary of the Company in the manner and within
the time specified in this Section 5. The Nomination Notice
shall be delivered to the Secretary of the Company not less than
90 days prior to the anniversary date of the immediately
preceding meeting of shareholders called for the election of
directors; provided, however, that in the event less than 21
days' notice or prior public disclosure of the date of the
meeting is given to shareholders or made, the Nomination Notice
shall be delivered to the Secretary of the Company not later than
the earlier of (i) the seventh day following the day on which
notice of the date of the meeting was first mailed to
shareholders or such public disclosure was made, whichever occurs
first, or (ii) the fourth day prior to the meeting. In lieu of
delivery to the Secretary, the Nomination Notice may be mailed to
the Secretary by certified mail, return receipt requested, but
shall be deemed to have been given only upon actual receipt by
the Secretary.
(b) Contents of Notice. The Nomination Notice shall
be in writing and shall contain or be accompanied by:
(1) the name and address, as they appear on the
Company's books, of the shareholder giving the Nomination
Notice;
(2) a representation of the number and class of
the Company's securities that the shareholder giving the
Nomination Notice owns beneficially and that the shareholder
is the holder of record of the Company's shares and intends
to appear in person or by proxy at the meeting to nominate
the person or persons specified in the Nomination Notice;
(3) as to each proposed nominee, (i) his name,
age, business address and, if known, residence address,
(ii) his principal occupation or employment, (iii) the
number and class of the Company's securities beneficially
owned by him and (iv) such other information regarding such
nominee as would have been required to be included in a
proxy statement filed pursuant to the Securities and
Exchange Commission under the Securities Exchange Act of
1934, as amended, (or pursuant to any successor act or
regulation) had proxies been solicited with respect to such
nominee by the management or Board of Directors of the
Company;
(4) a description of all arrangements or
<PAGE>
understandings among the shareholder giving the Nomination
Notice and each proposed nominee and any other person or
persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the
shareholder; and
(5) the consent of each proposed nominee to serve
as a director of the Company if so elected.
The Company may require any proposed nominee to furnish such
other information as may reasonably be required by the Company to
determine the eligibility of the nominee to serve as a director.
(c) Determination of Compliance. If a judge or judges
of election shall not have been appointed pursuant to these
bylaws, the chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that any nomination made at
the meeting was not made in accordance with the procedures of
this Section 5 and, in such event, the nomination shall be
disregarded. Any decision by the chairman of the meeting shall
be conclusive and binding upon all shareholders of the Company
for any purpose.
(d) Exception. The procedures of this Section 5 shall
not apply to nominations with respect to which proxies shall have
been solicited pursuant to a proxy statement filed pursuant to
Regulation 14A of the rules and regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended (or pursuant to any successor act or
regulation).
Section 6. Notice of Business at Annual Meetings.
(a) Notice Required. At an annual meeting of
shareholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought
before an annual meeting, business must be (1) specified in the
notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (2) otherwise properly
brought before the meeting by or at the direction of the Board of
Directors or (3) properly brought before the meeting by a
shareholder. For business relating to the election of directors
of the Company, to be properly brought before an annual meeting
by a shareholder the procedures in Section 5 of this Article II
must be complied with. If such business relates to any other
matter, the shareholder must give written notice (the "Business
Notice") of the shareholder's intent to propose business at the
annual meeting to the Secretary of the Company in the manner and
within the time specified in this Section 6. The Business Notice
shall be delivered to the Secretary of the Company not less than
90 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; provided, however, that
in the event that less than 21 days' notice or prior public
disclosure of the date of the meeting is given to shareholders or
made, the Business Notice shall be delivered to the Secretary of
<PAGE>
the Company not later than the earlier of (i) the seventh day
following the day on which such notice of the date of the meeting
was first mailed to shareholders or such public disclosure was
made, whichever occurs first, or (ii) the fourth day prior to the
meeting. In lieu of delivering to the Secretary, the Business
Notice may be mailed to the Secretary by certified mail, return
receipt requested, but shall be deemed to have been given only
upon receipt by the Secretary.
(b) Content of Notice. The Business Notice shall be
in writing and shall contain or be accompanied by the following
as to each matter the shareholder proposes to bring before the
annual meeting: (1) a brief description of the business desired
to be brought before the annual meeting and the reasons for
conducting such business at the annual meting, (2) the name and
address, as they appear on the Company's books, of the
shareholder giving the Business Notice, (3) the number and class
of the Company's securities beneficially owned by him, and
(4) any material interest of the shareholder giving the Business
Notice in such business. Notwithstanding anything in these
bylaws to the contrary, no business shall be conducted at any
annual meeting except in accordance with the procedures set forth
in this Section 6, except that any shareholder proposal which
complies with Rule 14a-8 of the proxy rules (or any successor
provision) promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, and is to
be included in the Company's proxy statement for an annual
meeting of shareholders shall be deemed to comply with the
requirements of this Section 6.
(c) Determination of Compliance. If a judge or judges
of election shall not have been appointed pursuant to these
bylaws, the chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that any business brought
before the meeting was not done so in accordance with the
procedures of this Section 6 and, in such event, the business
shall be disregarded. Any decision by the chairman of the
meeting shall be conclusive and binding upon all shareholders of
the Company for any purpose.
ARTICLE II
DIRECTORS
Section 1. Number and Term. Subject to the provisions of the
Articles of Incorporation and of applicable law, the board of
directors shall have the authority to (i) determine the number of
directors to constitute the board, and (ii) fix the terms of
office of the directors and classify each director in respect of
the time for which he shall hold office.
Section 2. Powers. The business of the Company shall be managed
by the board of directors which shall have all powers conferred
by applicable law and these bylaws. The board of directors shall
<PAGE>
elect, remove or suspend officers, determine their duties and
compensations, and require security in such amounts as it may
deem proper.
Section 3. Committees. The board of directors shall establish
and maintain a Compensation Committee and an Audit Committee and
may establish such other committees as it shall deem appropriate.
Each such committee shall consist of one or more directors and
shall have such powers and duties as the board of directors shall
determine.
<PAGE>
Section 4. Meetings.
(a) Regular Meetings. Regular meetings shall be held
at such times as the board shall designate by resolution. Notice
of regular meetings need not be given.
(b) Special Meetings. Special meetings of the board
may be called at any time by the Chairman of the Board or the
President and shall be called by him upon the written request of
one-third of the directors. Notice of the time, place and
general nature of the business to be transacted at each special
meeting shall be given to each director at least 24 hours (in the
case of notice by telephone) or two days (in the case of notice
by other means) before such meeting.
(c) Place. Meetings of the board of directors shall
be held at such place as the board may designate or as may be
designated in the notice calling the meeting.
(d) Participation. One or more directors may
participate in a meeting of the board or a committee of the board
by means of conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other.
Section 5. Quorum. A majority of all the directors in office
shall constitute a quorum for the transaction of business at any
meeting and, except as provided in Article VI, the acts of a
majority of the directors present at any meeting at which a
quorum is present shall be the acts of the board of directors.
Section 6. Vacancies. Vacancies in the board of directors,
including vacancies resulting from an increase in the number of
directors, shall be filled only by a majority of the directors
then in office, though less than a quorum, and each person so
elected shall be a director to serve for the balance of the
unexpired term and until his successor is duly elected and
qualified.
Section 7. Independent Directors.
(a) Definition of Independent Director. For purposes
of these bylaws, the term "Independent Director" shall mean a
director who: (i) is not employed by the Company or its
subsidiaries (collectively, the "Company"); (ii) does not have
personal services contract(s) with the Company involving
significant payments; (iii) is not employed in an executive
capacity with a firm that does substantial business with the
Company; (iv) is not employed in an executive capacity with a
significant customer or supplier of the Company; and (v) is not a
spouse, parent, sibling or child of any person described by (i)
through (iv). Notwithstanding the foregoing, the ownership of
equity or debt securities of the Company, or derivatives thereof,
shall not by itself disqualify any person from being classified
as an Independent Director.
<PAGE>
(b) Interpretation and Application of This Bylaw. The
board of directors shall have the exclusive right and power to
interpret and apply provisions of this bylaw, including, without
limitation, the definitions of terms used in and guidelines for
the application of this bylaw. In the case of any such
interpretation or application to a specific person which results
in such person being classified as an Independent Director, the
board of directors shall have determined that such person is
independent of management and free from any relationship that, in
the opinion of the board of directors, would interfere with such
person's exercise of independent judgment as a board member.
Each director has a duty to disclose all circumstances that may
have a bearing on his or her classification as an Independent
Director.
(c) Duties of Independent Directors. Independent
Directors shall have the following special duties and
responsibilities:
(1) to evaluate, periodically and at least
annually, the performance of the chief executive officer of
the Company, including, among other things, a determination
of the manner in which he or she is fulfilling
responsibilities to directors, shareholders, employees,
customers and other constituencies.
(2) to assure that the chief executive officer
has appropriate leadership succession plans for the Company;
and
(3) to review and monitor achievement of the
chief executive officer's long-range strategic plans for the
Company.
(d) Chairman, Independent Directors. Immediately
after adoption of this bylaw, and thereafter at the first board
meeting after each annual meeting of shareholders, the
Independent Directors shall elect from their membership one
director to be chairman, whose term shall be annual, but who may
not be elected to serve more than four annual terms in
succession. The chairman shall preside at all meetings of
Independent Directors and, in addition, shall have the following
special duties and responsibilities:
(1) to confer with the chief executive officer in
advance of each board meeting to assure that (i) the board
agenda contains those items that the Independent Directors
believe are important to their understanding and evaluation
of the Company and its affairs, and (ii) the information
provided to and presentations made to the board, and other
communications are in keeping with the board's needs and
wishes; and
(2) to be available to call meetings of the
Independent Directors whenever he or she deems appropriate,
<PAGE>
and generally to be a focal point for Board discussion on
any subject where a board member believes the chief
executive officer would not be the appropriate person to
call such meeting.
Section 8. Limitation on Liability. A director shall not be
personally liable for monetary damages for any action taken on or
after January 27, 1987, or for the failure to take any action on
or after the date, unless (i) the director has breached or failed
to perform the duties of his office under Section 8363 of the
Pennsylvania Directors' Liability Act (Act 145 of 1986, P.L.
1458), relating to standard of care and justifiable reliance, and
(ii) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness. The provisions of this
Section 6 shall not apply to (i) the responsibility or liability
of a director pursuant to any criminal statute, or (ii) the
liability of a director for the payment of taxes pursuant to
local, state or federal law. Any repeal or modification of any
provision of this Section 8 of Article II shall be prospective
only and shall not affect, to the detriment of any director, any
limitation on the personal liability of a director of the Company
existing at the time of such repeal or modification.
ARTICLE III
OFFICERS
Section 1. Election. At its first meeting after each annual
meeting of shareholders, the board of directors shall elect a
chairman, a president, a treasurer, a secretary, a controller and
such other officers as it deems advisable. Any two or more
offices may be held by the same person.
Section 2. Chairman. The chairman shall preside at all meetings
of the board and of the shareholders. In the absence of the
chairman, a director selected by a majority of the board shall
discharge the duties of the chairman.
Section 3. President. Except as the board of directors may
otherwise prescribe by resolution, the president shall be the
chief executive officer of the Company and shall have general
supervision over the business and operations of the Company and
may perform any act and execute any instrument or other papers
for the conduct of such business and operations.
Section 4. Other Officers. The duties and powers of the other
officers shall be those usually related to their offices or as
may be designated by the president, except as otherwise
prescribed by resolution of the board of directors.
Section 5. General. In the absence of the president, the
chairman, or any other officer or officers designated by the
board shall exercise the powers and perform the duties of the
president. The president, or any officer or employee authorized
<PAGE>
by him, may appoint, remove or suspend agents or employees of the
Company, other than officers appointed by the Board, and may
determine their duties and compensation.
ARTICLE IV
INDEMNIFICATION
Section 1. Right to Indemnification. The Company shall
indemnify to the extent not prohibited by applicable law, any
person who was or is a party (which shall include for purposes of
this Article IV the giving of testimony or similar involvement)
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is
or was a director, officer, employee or agent of the Company or
is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, including an employee
benefit plan, against any liability, penalty, damages, excise tax
assessed with respect to an employee benefit plan, costs,
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, whether
or not the indemnified liability arises or arose from any
threatened, pending or completed action by or in the right of the
Company. The board of directors may, and on request of any such
person shall be required to, determine in each case whether
applicable law prohibits indemnification, or such determination
shall be made by independent legal counsel if the board so
directs or if the board is not empowered by law to make such
determination. If there has been a change in control (as such
term is used in Item 6(a) of Schedule 14A promulgated by the
Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended) of the Company between (1) the time of
the action or failure to act giving rise to the claim for
indemnification and (2) the time such claim is made, at the
option of the person seeking indemnification the permissibility
of indemnification shall be determined by independent legal
counsel selected jointly by the Company and the person seeking
indemnification. The fees and expenses of such counsel shall be
paid by the Company. The obligations of the Company to indemnify
a director, officer, employee or agent under this Article IV,
including the duty to advance expenses, shall be a contract
between the Company and such person, and no modification or
repeal of any provision of this Article IV shall affect, to the
detriment of the director, officer, employee or agent such
obligations of the Company in connection with a claim based on
any act or failure to act occurring before such modification or
repeal.
Section 2. Advancement of Expenses. Expenses (including
attorney's fees) incurred in defending an action, suit or
proceeding referred to in this Article IV shall be paid by the
<PAGE>
Company in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of
the indemnified person to repay such amount if it shall
ultimately be determined that such person is not entitled to be
indemnified by the Company as authorized in this Article IV or
otherwise.
Section 3. Indemnification Not Exclusive. The indemnification
and advancement of expenses provided by this Article IV shall not
be deemed exclusive of any other right to which one indemnified
may be entitled under any agreement, vote of shareholders or
otherwise, both as to action in his official capacity and as to
action in another capacity while holding that office, and shall
inure to the benefit of the heirs, executors and administrators
of any such person.
Section 4. Insurance, Security and Other Indemnification. The
board of directors shall have the power to (a) authorize the
Company to purchase and maintain, at the Company's expense,
insurance on behalf of the Company and others to the extent that
power to do so has not been restricted by applicable law, (b)
create any fund of any nature, whether or not under the control
of a trustee, or otherwise secure in any manner any of its
indemnification obligations and (c) give other indemnification to
the extent not prohibited by applicable law.
<PAGE>
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Share Certificates. Every shareholder of record
shall be entitled to a share certificate representing the shares
held by him. Every share certificate shall bear the corporate
seal and the signature (which may be a facsimile signature) of
the chairman, president or a vice president and the secretary or
an assistant secretary or treasurer of the Company.
Section 2. Transfers. Shares of stock of the Company shall be
transferable on the books of the Company only by the registered
holder or by duly authorized attorney. A transfer shall be made
only upon surrender of the share certificate.
ARTICLE VI
CERTAIN MATTERS RELATING TO
PENNSYLVANIA ACT NO. 36 OF 1990
In accordance with the provisions of Section
2571(b)(2)(i) of the Pennsylvania Associations Code, as amended,
Subchapter H, Disgorgement by Certain Controlling Shareholders
Following Attempts to Acquire Control, of Chapter 25 of the
Pennsylvania Associations Code shall not be applicable to the
Company.
ARTICLE VII
AMENDMENTS
Except as restricted by applicable law, the authority
to adopt, amend and repeal the bylaws of the Company is expressly
vested in the Board of Directors, subject to the power of the
shareholders to change such action. These bylaws may be changed
at any regular or special meeting of the board of directors by
the vote of a majority of all the directors in office.
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