SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-30270
CROMPTON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-2183153
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One American Lane, Greenwich, Connecticut 06831-2559
(Address of principal executive offices) (Zip Code)
(203) 552-2000
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
The number of shares of common stock outstanding is as follows:
Class Outstanding at April 28, 2000
Common Stock - $.01 par value 113,866,407
CROMPTON CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Accompanying Notes
Consolidated Statements of Operations (Unaudited) - First
quarter ended 2000 and 1999
Consolidated Balance Sheets - March 31, 2000 (Unaudited)
and December 31, 1999
Consolidated Statements of Cash Flows (Unaudited) - First
quarter ended 2000 and 1999
Notes to Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure of Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
CROMPTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
First quarter ended 2000 and 1999
(In thousands of dollars, except per share data)
2000 1999
Net sales $ 769,018 $ 396,292
Cost of products sold 517,716 247,295
Selling, general and administrative 112,444 60,590
Depreciation and amortization 45,764 18,837
Research and development 22,442 11,308
Equity income (7,545) (7,055)
Operating profit 78,197 65,317
Interest expense 28,221 13,154
Other expense (income) (a) 1,349 (40,706)
Earnings before income taxes 48,627 92,869
Income taxes 18,954 33,666
Net earnings $ 29,673 $ 59,203
Basic earnings per common share $ .26 $ .87
Diluted earnings per common share $ .26 $ .86
Dividends declared per common share $ .05 $ -
(a) 1999 includes a gain of $42,060 ($26,813 after-tax) from the sale of the
specialty ingredients business.
See accompanying notes to consolidated financial statements.
CROMPTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2000 (Unaudited) and December 31, 1999
(In thousands of dollars)
March 31, December 31,
2000 1999
ASSETS
CURRENT ASSETS
Cash $ 19,038 $ 10,543
Accounts receivable 424,956 411,536
Inventories 546,394 523,363
Other current assets 174,044 174,311
Total current assets 1,164,432 1,119,753
NON-CURRENT ASSETS
Property, plant and equipment 1,245,406 1,262,345
Cost in excess of acquired net assets 960,602 969,625
Other assets 344,887 374,895
$ 3,715,327 $ 3,726,618
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 41,807 $ 81,162
Accounts payable 286,504 330,591
Accrued expenses 385,776 422,252
Income taxes payable 96,525 121,366
Other current liabilities 30,906 22,599
Total current liabilities 841,518 977,970
NON-CURRENT LIABILITIES
Long-term debt 1,494,696 1,309,812
Postretirement health care liability 214,235 216,797
Other liabilities 431,076 462,127
STOCKHOLDERS' EQUITY
Common stock 1,194 1,191
Additional paid-in capital 1,051,809 1,047,518
Accumulated deficit (176,408) (200,374)
Accumulated other comprehensive income (72,733) (61,238)
Treasury stock at cost (70,060) (27,185)
Total stockholders' equity 733,802 759,912
$ 3,715,327 $ 3,726,618
See accompanying notes to consolidated financial statements.
CROMPTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
First quarter ended 2000 and 1999
(In thousands of dollars)
Increase (decrease) in cash 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 29,673 $ 59,203
Adjustments to reconcile net earnings to net
cash provided by (used in) operations:
Gain on sale of specialty ingredients - (42,060)
Depreciation and amortization 45,764 18,837
Equity income (7,545) (7,055)
Changes in assets and liabilities, net (58,916) (82,102)
Net cash provided by (used in) operations 8,976 (53,177)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of specialty ingredients - 103,000
Capital expenditures (29,858) (12,471)
Merger related expenditures (39,657) -
Other investing activities (16,977) 1,862
Net cash (used in) provided by investing activities (86,492) 92,391
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on senior notes 593,754 -
Proceeds (payments) on long-term borrowings (406,212) 39,843
Payments on short-term borrowings (39,361) (5,736)
Repurchases of accounts receivable (13,776) -
Treasury stock acquired (43,463) (67,516)
Dividends paid (5,707) -
Other financing activities 858 169
Net cash provided by (used in) financing activities 86,093 (33,240)
CASH
Effects of exchange rate changes on cash (82) 160
Change in cash 8,495 6,134
Cash at the beginning of period 10,543 12,104
Cash at the end of period $ 19,038 $ 18,238
See accompanying notes to consolidated financial statements.
CROMPTON CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
MERGER OF EQUALS
On September 1, 1999, the shareholders of Crompton and Knowles Corporation
(Crompton) and Witco Corporation (Witco) approved a tax-free stock-for-stock
merger of equals of Crompton and Witco (the "Merger"). The terms of the Merger
provided that (a) Crompton merge with and into Crompton Corporation, formerly
known as CK Witco Corporation (the "Company") and (b) immediately thereafter,
Witco merge with and into the Company, so that the Company is the surviving
corporation. Also, under the terms of the Merger, each share of Crompton's
common stock was automatically converted into one share of the Company's common
stock, and each share of Witco's common stock was exchanged for 0.9242 shares of
the Company's common stock.
The merger was accounted for as a purchase and accordingly, the results of
operations of Witco have been included in the consolidated financial statements
from the date of acquisition. An allocation of the purchase price resulted in
cost in excess of the estimated fair value of acquired net assets (goodwill) of
approximately $834 million. This is being amortized on a straight-line basis
over forty years.
As a result of the Merger, the Company recorded merger related accruals as a
component of goodwill, of which $110.7 million remained at December 31, 1999.
During the first quarter of 2000, these accruals were reduced by payments of
$39.7 million and non-cash charges of $2 million. The payments related
primarily to severance and related accruals.
Also, as a result of the Merger the Company recorded other accruals, of which
$20 million remained at December 31, 1999. During the first quarter of 2000,
payments of $1.3 million were made against these other accruals.
PRO FORMA FINANCIAL INFORMATION
The following pro forma unaudited results of operations for the first quarter
ended 1999 assumes the Merger had been consummated as of January 1, 1999.
(In thousands of dollars, except per share data) 1999
Net sales $ 891,066
Net earnings $ 66,973
Net earnings per common share: Basic $ 0.55
Net earnings per common share: Diluted $ 0.55
Weighted average shares outstanding: Basic 121,181
Weighted average shares outstanding: Diluted 122,683
PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The information in the foregoing consolidated financial statements is unaudited,
but reflects all of the adjustments which, in the opinion of management, are
necessary for a fair presentation of the results of operations for the interim
periods presented.
Included in accounts receivable are allowances for doubtful accounts of $26.2
million at March 31, 2000 and $23.4 million at December 31, 1999.
Accumulated depreciation amounted to $474.9 million at March 31, 2000 and $448.3
million at December 31, 1999.
Accumulated amortization of cost in excess of acquired net assets amounted to
$54.4 million at March 31, 2000 and $49.4 million at December 31, 1999.
It is suggested that the interim consolidated financial statements be read in
conjunction with the consolidated financial statements and notes included in the
Company's 1999 Annual Report on Form 10-K.
Effective with the Merger, the Company adopted a fiscal year ending on December
31. Prior to the Merger, Crompton's fiscal year ended on the last Saturday in
December.
COMMON STOCK
As of March 31, 2000, there were 119,372,359 common shares issued and
113,855,747 common shares outstanding at $.01 par value.
INVENTORIES
Components of inventories are as follows:
March 31, December 31,
(In thousands) 2000 1999
Finished goods $ 415,908 $ 410,513
Work in process 29,576 27,394
Raw materials and supplies 100,910 85,456
$ 546,394 $ 523,363
EARNINGS PER COMMON SHARE
The computation of basic earnings per common share is based on the weighted
average number of common shares outstanding. The computation of diluted earnings
per common share is based on the weighted average number of common and common
equivalent shares outstanding. The following is a reconciliation of the shares
used in the computations:
(In thousands) First quarter ended
2000 1999
Weighted average common shares outstanding 114,334 67,717
Effect of dilutive stock options and
other equivalents 1,815 1,502
Weighted average common and common equivalent
shares outstanding 116,149 69,219
BUSINESS SEGMENT DATA
(In thousands) First quarter ended
2000 1999
Net Sales
Polymer Products
Polymer Additives $ 257,833 $ 99,745
Polymers 81,416 78,735
Polymer Processing Equipment 69,081 88,147
Eliminations (3,544) -
404,786 266,627
Specialty Products
OrganoSilicones 127,035 -
Crop Protection 105,462 65,718
Other 131,735 63,947
364,232 129,665
Total Net Sales $ 769,018 $ 396,292
(In thousands) First quarter ended
2000 1999
Operating Profit
Polymer Products
Polymer Additives $ 22,337 $ 12,477
Polymers 19,319 22,303
Polymer Processing Equipment 4,252 11,169
45,908 45,949
Specialty Products
OrganoSilicones 21,768 -
Crop Protection 23,977 23,137
Other 7,034 6,947
52,779 30,084
General corporate expense including
amortization (20,490) (10,716)
Total Operating Profit $ 78,197 $ 65,317
COMPREHENSIVE INCOME (LOSS)
An analysis of the Company's comprehensive income follows:
First quarter ended
(In thousands)
2000 1999
Net earnings $ 29,673 $ 59,203
Other comprehensive income (expense):
Foreign currency translation adjustments (11,530) (11,904)
Other 35 -
Comprehensive income $ 18,178 $ 47,299
The components of accumulated other comprehensive income (loss) at March 31,
2000 and December 31, 1999 are as follows:
March 31, December 31,
(In thousands) 2000 1999
Foreign currency translation adjustments $ (71,132) $ (59,602)
Other (1,601) (1,636)
Accumulated other comprehensive
income (loss) $ (72,733) $ (61,238)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FIRST QUARTER RESULTS
Overview
Consolidated net sales of $769 million for the first quarter of 2000 increased
$372.7 million from the comparable period in 1999. After adjusting 1999 net
sales to exclude $38.7 million from the divestiture of the textile colors
business, and to include $426.7 million from Witco continuing operations for the
first quarter of 1999, net sales decreased 2%. This decrease is primarily the
result of lower sales in the Polymer Processing Equipment business and negative
foreign currency impact. International sales, including U.S. exports, were 48%
of total sales, up from 44% in the first quarter of 1999.
Net earnings for the first quarter were $29.7 million, or $0.26 per common share
diluted as compared to net earnings of $59.2 million, or $0.86 per common share
diluted in the first quarter of 1999. Earnings before after-tax special items
were $29.7 million, or $0.26 per common share diluted, as compared with $32.4
million, or $0.47 per common share diluted, in the first quarter of 1999.
Gross margin as a percentage of sales decreased to 32.7% in the first quarter
of 2000 from 37.6% in the first quarter of 1999. The decrease is primarily due
to the impact of including Witco results. Consolidated operating profit of
$78.2 million increased 19.7% versus the first quarter of 1999. The increase
in operating profit is primarily due to the inclusion of Witco results, offset
by a $3.7 million decrease due to the divestiture of the textile colors
business.
First quarter ended
(In thousands)
1999 1999
1999 Witco Textile 1999
As Continuing Colors As
2000 Reported Operations Business Adjusted
Net Sales
Polymer Products
Polymer Additives $ 257,833 $ 99,745 $ 158,577 $ - $ 258,322
Polymers 81,416 78,735 - - 78,735
Polymer Processing
Equipment 69,081 88,147 - - 88,147
Eliminations (3,544) - - - -
404,786 266,627 158,577 - 425,204
Specialty Products
OrganoSilicones 127,035 - 114,989 - 114,989
Crop Protection 105,462 65,718 42,535 - 108,253
Other 131,735 63,947 110,613 (38,715) 135,845
364,232 129,665 268,137 (38,715) 359,087
Total Net Sales $ 769,018 $ 396,292 $ 426,714 $ (38,715) $ 784,291
First quarter ended
(In thousands)
1999 1999
1999 Witco Textile 1999
As Continuing Colors As
2000 Reported Operations Business Adjusted
Operating Profit
Polymer Products
Polymer Additives $ 22,337 $ 12,477 $ 10,287 $ - $ 22,764
Polymers 19,319 22,303 - - 22,303
Polymer Processing
Equipment 4,252 11,169 - - 11,169
45,908 45,949 10,287 - 56,236
Specialty Products
OrganoSilicones 21,768 - 15,963 - 15,963
Crop Protection 23,977 23,137 4,942 - 28,079
Other 7,034 6,947 4,728 (3,666) 8,009
52,779 30,084 25,633 (3,666) 52,051
General corporate
expense including
amortization (20,490) (10,716) (13,754) - (24,470)
Total Operating
Profit $ 78,197 $ 65,317 $ 22,166 $ (3,666) $ 83,817
Polymer Products
Polymer additives sales of $257.8 million were essentially unchanged from
adjusted first quarter 1999 sales of $258.3 million. Plastic additives sales
increased 2%, despite a negative foreign currency impact of 5%, primarily due
to continuing high demand for PVC. Rubber chemicals sales decreased 8%
primarily as a result of lower pricing. Urethane chemicals sales rose 5%
primarily due to greater demand, partially offset by negative foreign currency
translation of 3%. Operating profit of $22.3 million was down 2% from an
adjusted $22.8 million in 1999 primarily as a result of lower selling prices in
rubber chemicals.
Polymers sales of $81.4 million increased 3% from $78.7 million in the first
quarter of 1999. EPDM sales were up 1% primarily as a result of higher pricing,
reflecting a partial recovery of increased raw material costs. Urethane sales
rose 6% primarily due to greater demand attributable to continuing growth of
U.S. industrial production and strong sales to golf ball manufacturers.
Operating profit of $19.3 million decreased 13% from $22.3 million in the prior
year primarily due to higher EPDM raw material costs and start up costs at our
new nitrile rubber joint venture facility in Mexico.
Polymer processing equipment sales of $69.1 million declined 22% from $88.1
million in the first quarter of 1999. The decrease was primarily due to the
recent down cycle which the plastics machinery market has experienced over the
last three quarters. Operating profit of $4.3 million was $6.9 million behind
1999 primarily due to the decline in sales volume. While shipments did not
recover to last year's level, orders rebounded with the backlog reaching a
record $131 million, up 16% from year end 1999.
Specialty Products
OrganoSilicones sales of $127 million increased 10% from first quarter 1999
adjusted sales of $115 million. The business benefited from improved demand and
market share in key markets such as "greentyre", automotive clearcoat and
personal care, partially offset by negative foreign currency impact of 2%.
Silane sales reached record levels on the strength of continued "greentyre"
growth. Operating profit of $21.8 million was 36% above an adjusted $16 million
in the first quarter of 1999, reflecting the higher sales volume and cost
reductions.
Crop protection sales of $105.5 million were 3% below an adjusted $108.3
million in the first quarter of 1999. Prior year sales were bolstered by a
heavy mite infestation in Australia. Operating profit of $24 million was 15%
behind an adjusted $28.1 million in the first quarter of 1999, primarily due to
the sales decline and an unfavorable product mix which included higher sales of
surfactants and lower active ingredients sales.
Other sales of $131.7 million decreased 3% from adjusted first quarter 1999
sales of $135.8 million. Petroleum additives sales declined 2% primarily due
to lower volume, much of which was associated with the closure of the Gretna
manufacturing facility. Refined products sales were down 5% of which 3% related
to negative foreign currency translation. Industrial colors sales rose 6%
primarily due to continued strength and increased market share in the paper
market. Glycerine/fatty acids sales declined 4%. Operating profit of $7
million was 12% lower than the adjusted $8 million in the first quarter of 1999
primarily due to the decline in sales volume and higher raw material costs.
Other
Selling, general and administrative expenses of $112.4 million increased 86%
versus the first quarter of 1999 primarily due to the inclusion of Witco
operations, partially offset by the impact of the divestiture of the textile
colors business. Depreciation and amortization (up 143%) and research and
development costs (up 98%) also increased primarily as a result of the inclusion
of Witco operations. Interest expense of $28.2 million increased 115% as a
result of the increase in debt, which is primarily due to the inclusion of Witco
operations. Other expense of $1.3 million remained essentially unchanged from
1999 after excluding the gain of $42.1 million from the divestiture of the
specialty ingredients business. The effective tax rate of 39% increased from
36.3% in the comparable quarter of 1999, primarily due to the inclusion of Witco
operations.
On April 19, 2000 the Company announced that it was exploring strategic
alternatives, including the possible sale, for its Refined Products business.
This business produces and markets highly refined hydrocarbon products and had
sales in excess of $230 million in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The March 31, 2000 working capital balance of $322.9 million increased $181.1
million from the year-end 1999 balance of $141.8 million, while the current
ratio increased to 1.38 from 1.14. The increases in working capital and the
current ratio were primarily due to the decrease in total current liabilities,
including short-term borrowings. Days sales in receivables for the first
quarter of 2000 remained unchanged at 44 days versus the same period in 1999.
Inventory turnover increased to 3.8, compared to 2.9 in the same quarter of
1999, primarily the result of the Merger.
Net cash provided by operations of $9 million increased $62.2 million from the
net cash used in operations of $53.2 million in the first quarter of 1999,
mainly due to a $48.2 million income tax payment in 1999 related to the 1998
Gustafson gain. Cash provided by operations and the proceeds from the issuance
of the 8.5% Senior Notes were used primarily to reduce borrowings under the
Company's revolving credit agreements, repurchase common shares, finance capital
expenditures, pay merger costs, make dividend payments and repurchase accounts
receivable under the Company's accounts receivable programs. The Company's debt
to total capital ratio increased to 68% from 65% at year-end 1999, primarily as
a result of the repurchase of common shares. The Company's liquidity needs are
expected to be financed from operations.
On March 7, 2000, the Company issued $600 million of Senior Notes due 2005 with
a coupon rate of 8.5%. Effective March 24, 2000, the Company swapped $300
million of this amount into a variable interest rate contract (three month LIBOR
plus fixed spread of 1.2225%) that expires on March 15, 2005. The rate on the
swap contract was 7.5% at March 31, 2000.
On March 10, 2000, the Company amended the amount of its $1 billion senior
unsecured revolving credit facility to $600 million. Of this amount, $200
million is available through October 2000 and $400 million through October 2004.
Borrowings on these facilities are at various rate options to be determined on
the date of borrowing. Borrowings under these agreements amounted to $275
million at March 31, 2000 and carried a weighted average interest rate of
6.85%.
In addition, the Company has available accounts receivable securitization
programs to sell up to $182 million of domestic accounts receivable to agent
banks. As of March 31, 2000, $151 million of domestic accounts receivable had
been sold under these programs.
In November 1999, the Board of Directors approved a share repurchase program for
10% of the common shares then outstanding, or approximately 11.9 million
shares. During the first quarter of 2000, the Company repurchased 3.3
million common shares, and from November 1999 to date, has repurchased 5.5
million shares at an average price of $12.70 per share.
Capital expenditures for the first quarter of 2000 amounted to $29.9 million as
compared to $12.5 million during the same period of 1999. The increase is
primarily due to the Merger. Capital expenditures are expected to approximate
$175 million in 2000, primarily related to the Company's replacement needs and
improvement of domestic and foreign facilities.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" which delays the effective date of
SFAS No. 133 to fiscal years beginning after June 15, 2000. The Company plans
to adopt the provisions of this statement in the first quarter of 2001. The
Company has not yet determined what the effect of SFAS No. 133 will be on
earnings and financial position.
ENVIRONMENTAL MATTERS
The Company is involved in claims, litigation, administrative proceedings and
investigations of various types in a number of jurisdictions. A number of such
matters involve claims for a material amount of damages and relate to or allege
environmental liabilities, including clean-up costs associated with hazardous
waste disposal sites, natural resource damages, property damage and personal
injury. The Company and some of its subsidiaries have been identified by
federal, state or local governmental agencies, and by other potentially
responsible parties (PRP) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or comparable state
statutes, as a PRP with respect to costs associated with waste disposal sites
at various locations in the United States. In addition, the Company is involved
with environmental remediation and compliance activities at some of its current
and former sites in the United States and abroad.
The Company continually evaluates and reviews estimates for future remediation
and other costs to determine appropriate environmental reserve amounts. For
each site, a determination is made of the specific measures that are believed
to be required to remediate the site, the estimated total cost to carry out the
remediation plan, the portion of the total remediation costs to be borne by the
Company and the anticipated time frame over which payments toward the
remediation plan will occur. As of March 31, 2000, the Company's reserves for
environmental remediation activities totaled $188.6 million. It is reasonably
possible that the Company's estimates for environmental remediation liabilities
may change in the future should additional sites be identified, further
remediation measures be required or undertaken, the interpretation of current
laws and regulations be modified or additional environmental laws and
regulations be enacted.
The Company intends to assert all meritorious legal defenses and all other
equitable factors which are available to it with respect to the above matters.
The Company believes that the resolution of these environmental matters will not
have a material adverse effect on its consolidated financial position or
liquidity. While the Company believes it is unlikely, the resolution of these
environmental matters could have a material adverse effect on the Company's
consolidated results of operations or cash flows in any given year if a
significant number of these matters are resolved unfavorably.
Euro Conversion
On January 1, 1999, certain member countries of the European Union adopted the
Euro as their common legal currency. Between January 1, 1999 and July 1, 2002,
transactions may be conducted in either the Euro or the participating countries
national currency. However, by July 1, 2002, the participating countries will
withdraw their national currency as legal tender and complete the conversion to
the Euro.
The Company conducts business in Europe and does not expect the conversion to
the Euro to have an adverse effect on its competitive position or consolidated
financial position.
FORWARD-LOOKING STATEMENTS
Certain statements made in this Form 10-Q are forward looking statements that
involve risks and uncertainties. These statements are based on currently
available information and the Company's actual results may differ significantly
from the results discussed. Investors are cautioned that there can be no
assurances that the actual results will not differ materially from those
suggested in such forward-looking statements.
ITEM 3. Quantitative and Qualitative Disclosure of Market Risk
Refer to the Market Risk & Risk Management Policies section of Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's annual report on Form 10-K for the year ended December
31, 1999.
The fair market value of long-term debt is subject to interest rate risk. The
Company's long-term debt amounted to $1,494.7 million at March 31, 2000. The
fair market value of such debt was $1,469.1 million, and with respect to notes,
has been determined based on quoted market prices.
On March 7, 2000, the Company issued $600 million of Senior Notes due 2005 with
a coupon rate of 8.5%. Effective March 24, 2000, the Company swapped $300
million of this amount into a variable interest rate contract (three month LIBOR
plus fixed spread of 1.2225%) that expires on March 15, 2005. The rate on the
swap contract was 7.5% at March 31, 2000.
There have been no other significant changes in market risk since December 31,
1999.
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings
Reference is made to Item 3 of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, for information relating to
the Beacon Heights and Laurel Park Coalitions. On April 13, 2000, the United
States District Court for the District of Connecticut ruling in response to
Motions to Alter and Amend and for Reconsideration and Rehearing of its prior
ruling, allowed recovery by the Beacon Heights Coalition in the amount of
approximately $5,071,000, inclusive of interest, and allowed recovery by the
Laurel Park Coalition in the amount of approximately $1,000,000, exclusive of
interest. At the Court's request, the Laurel Park Coalition is in the
process of supplementing the record concerning interest. Prior to the April
13, 2000 Court ruling, the Beacon Heights Coalition and the Laurel Park
Coalition settled their claims with one municipal defendant.
ITEM 4. Submission of Matter to a Vote of Security Holders
(a) The Annual Meeting of the Stockholders was held on April 25, 2000.
(b) Proxies for the Annual Meeting were solicited pursuant to Regulation
14A under the Securities Exchange Act of 1934, there was no
solicitation in opposition to the nominees for the Board of
Directors as listed in the Proxy Statement, and all of such nominees
were elected.
(c) A brief description of each matter voted upon at the Annual Meeting,
and the results of voting, are as follows:
1. Election of Class III directors to serve for a term expiring
in 2003:
FOR WITHHELD
Vincent A. Calarco 101,371,808 shares 1,113,776 shares
Roger L. Headrick 101,489,832 shares 995,752 shares
Patricia K. Woolf, Ph.D. 101,506,567 shares 979,017 shares
Election of Class II directors to serve for a term expiring in
2002:
FOR WITHHELD
Robert A. Fox 101,492,635 shares 992,949 shares
Harry G. Hohn 101,455,789 shares 1,029,795 shares
Election of Class I directors to serve for a term expiring in
2001:
FOR WITHHELD
Leo I. Higdon, Jr. 101,517,123 shares 968,461 shares
C. A. Piccolo 101,519,139 shares 966,445 shares
Bruce F. Wesson 101,512,868 shares 972,716 shares
2. Approval of the recommendation to amend and restate the
Certificate of Incorporation to change the name of the
Corporation to Crompton Corporation.
FOR AGAINST ABSTAINED
99,771,946 shares 2,558,071 shares 155,567 shares
3. Approval of the selection by the Board of KPMG LLP as
Independent Auditors for 2000.
FOR AGAINST ABSTAINED
101,704,924 shares 663,965 shares 116,695 shares
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
3(i)(a)* Certificate of Amendment of Amended and Restated
Certificate of Incorporation of CK Witco Corporation
3(i)(b)* Amended and Restated Certificate of Incorporation of
CK Witco Corporation
27* Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
* A copy of this Exhibit is annexed to this report on Form 10-Q provided to
the Securities and Exchange Commission.
CROMPTON CORPORATION
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.
CROMPTON CORPORATION
(Registrant)
/s/ Peter Barna
Date: May 12, 2000
Peter Barna
Senior Vice President and Chief
Financial Officer
/s/ Barry J. Shainman
Date: May 12, 2000
Barry J. Shainman
Secretary
EXHIBIT 3(i)(a)
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CK WITCO CORPORATION
CK Witco Corporation, a Delaware corporation (the
"Corporation"), does hereby certify:
FIRST: That Article I of the Amended and Restated
Certificate of Incorporation of the Corporation is hereby amended
to read in its entirety as follows:
ARTICLE I
The name of the Corporation is Crompton Corporation.
SECOND: That said amendment was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delware.
In witness whereof, CK Witco Corporation has caused this
Certificate to be executed by its duly authorized officer, this
27th day of April, 2000.
By: /s/John T. Ferguson II
Name: John T. Ferguson II
Title: Senior Vice President
EXHIBIT 3(i)(b)
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CK WITCO CORPORATION
I, the undersigned, for the purpose of incorporating and
organizing a corporation under the General Corporation Law of the
State of Delaware, do hereby execute this Certificate of
Incorporation and do hereby certify as follows:
ARTICLE I
The name of the corporation (which is hereinafter referred to as
the "Corporation") is:
"CK Witco Corporation"
ARTICLE II
The address of the Corporation's registered office in the State
of Delaware is c/o National Registered Agents, Inc., 9 East
Loockerman Street in the City of Dover, County of Kent, State of
Delaware 19901. The name of the Corporation's registered agent
at such address is National Registered Agents, Inc.
ARTICLE III
The purpose of the Corporation shall be to engage in any lawful
act or activity for which corporations may be organized and
incorporated under the General Corporation Law of the State of
Delaware.
ARTICLE IV
Section 1. The Corporation shall be authorized to issue
500,250,000 shares of capital stock, of which 500,000,000 shares
shall be shares of Common Stock, $.01 par value ("Common Stock"),
and 250,000 shares shall be shares of Preferred Stock, $.10 par
value ("Preferred Stock").
Section 2. Shares of Preferred Stock may be issued from time to
time in one or more series as authorized by the Board of
Directors. Prior to issuance of any series of Preferred Stock,
the Board of Directors by resolution shall designate that series
to distinguish it from other series and classes of stock of the
Corporation, shall specify the number of shares to be included in
the series, and shall fix the terms, rights, restrictions and
qualifications of the shares of the series, including any
preferences, voting powers, dividend rights and redemption,
sinking fund and conversion rights. Subject to the express terms
of any other series of Preferred Stock outstanding at the time,
the Board of Directors may increase or decrease the number of
shares or alter the designation or classify or reclassify any
unissued shares of a particular series of Preferred Stock by
fixing or altering in any or more respects from time to time
before issuing the shares of Preferred Stock any terms, rights,
restrictions and qualifications of the shares.
Section 3. (a) Dividends. After the requirements with respect
to preferential dividends upon any issued and outstanding
Preferred Stock have been satisfied, the holders of the Common
Stock shall be entitled to receive such dividends as may be
declared from time to time by the Board of Directors.
(b) Voting Rights. Except as otherwise provided by law, or
by the resolution or resolutions adopted by the Board designating
the rights, powers and preferences of any series of Preferred
Stock, the Common Stock shall have the exclusive right to vote
for the election of directors and for all other purposes. Each
share of Common Stock shall have one vote, and the Common Stock
shall vote together as a single class.
(c) Regarding Preemptive Rights. No stockholder shall be
entitled as a matter of right to subscribe for, purchase or
receive any shares of the stock or any rights or options of the
Corporation which it may issue or sell whether out of the number
of shares now or hereafter authorized to be issued at any time or
out of the shares of the stock of the Corporation acquired by it
after the issuance thereof, nor shall any stockholder be entitled
as a matter of right to purchase or subscribe for or receive any
bonds, debentures or other obligations which the Corporation may
issue or sell that shall be convertible into or exchangeable for
stock or to which shall be attached or appertain any warrant or
warrants or other instrument or instruments that shall confer
upon the holder or owner of such obligation the right to
subscribe for or purchase from the Corporation any shares of its
stock. All such additional issues of stock, rights, options, or
of bonds, debentures or other obligations convertible into or
exchangeable for stock or to which warrants shall be attached or
appertain or which shall confer upon the holder the right to
subscribe for or purchase any shares of stock may (to the extent
permitted by law) be issued and disposed of by the Board of
Directors to such persons and upon such terms as in their
absolute discretion they may deem advisable.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatsoever.
ARTICLE VII
Section 1. The number of Directors of the Corporation shall be
not less than eight or more than 15 persons. The exact number of
directors within the minimum and maximum limitations specified in
the preceding sentence shall be fixed from time to time by the
Board of Directors pursuant to a resolution adopted by a majority
of the entire Board of Directors. At the 2000 annual meeting of
stockholders, the directors shall be divided into three classes,
as nearly equal in number as possible, with the term of office of
the first class to expire at the 2001 annual meeting of
stockholders, the term of office of the second class to expire at
the 2002 annual meeting of stockholders and the term of office of
the third class to expire at the 2003 annual meeting of
stockholders. At each annual meeting of stockholders following
such initial classification and election, directors elected to
succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting
of stockholders after their election.
Section 2. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships
resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or
other cause shall be filled by a majority vote of the directors
then in office, although less than a quorum, and directors so
chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of the class to which
they have been elected expires. If the number of directors is
changed any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class
as nearly equal as possible. No decrease in the number of
directors constituting the Board of Directors shall shorten the
term of any incumbent director.
Section 3. Any director, or the entire Board of Directors may be
removed from office at any time, but only for cause and only by
the affirmative vote of the holders of at least 80% of the voting
power of all of the shares of the Corporation entitled to vote
for the election of directors.
Section 4. Notwithstanding the foregoing, whenever the holders
of any class of stock (other than Common Stock) issued by the
Corporation shall have the right, voting as a class or otherwise,
to elect directors, the then authorized number of directors of
the Corporation shall be increased by the number of additional
directors to be elected.
Section 5. In furtherance, and not in limitation of the powers
conferred by law, the Board of Directors is expressly authorized:
(a) to make, alter, amend or repeal the By-Laws of the
Corporation and, subject to Articles XIV and XV herein,
stockholders of the Corporation shall have the power to alter,
amend or repeal By-Laws made by the Board of Directors;
(b) to remove at any time any officer elected or appointed
by the Board of Directors by such vote of the Board of Directors
as may be provided for in the By-Laws. Any other officer of the
Corporation may be removed at any time by a vote of the Board of
Directors, or by any committee or superior officer upon whom such
power of removal may be conferred by the By-Laws or by the vote
of the Board of Directors;
(c) to determine whether any, and if any, what part, of the
annual net profits of the Corporation or of its net assets in
excess of its capital shall be declared in dividends and paid to
the stockholders, and to direct and determine the use and
disposition of any such annual net profits or net assets in
excess of capital;
(d) to fix from time to time the amount of the profits of
the Corporation to be reserved as working capital or for any
other lawful purpose;
(e) to establish bonus, profit sharing, stock option,
retirement, or other types of incentive or compensation plans for
the employees (including directors and officers) of the
Corporation and to fix the amount of the profits to be
distributed or shared and to determine the persons to participate
in any such plans and the amounts of their respective
participations;
(f) from time to time to determine whether and to what
extent, and at what time and places and under what conditions and
regulations the accounts and books of the Corporation (other than
the stock ledger), or any of them, shall be open to the
inspection of the stockholders; and no stockholder shall have any
right to inspect any account or book or document of the
Corporation, except as conferred by statute or authorized by the
Board of Directors or by a resolution of the stockholders; and
(g) to authorize, and cause to be executed, mortgages and
liens upon the real and personal property of the Corporation.
ARTICLE VIII
No contract or other transaction between the Corporation and any
other corporation and no other act of the Corporation with
relation to any other corporation shall, in the absence of fraud,
in any way be invalidated or otherwise affected by the fact that
any one or more of the directors of the Corporation are
pecuniarily or otherwise interested in, or are directors or
officers of, such other corporation. Any director of the
Corporation individually, or any firm or association of which any
director may be a member, may be party to, or may be pecuniarily
or otherwise interested in, any contract or transaction of the
Corporation; provided that the fact that he individually or as a
member of such firm or association is such a party or so
interested shall be disclosed or shall have been known to the
Board of Directors or a majority of such members thereof as shall
be present at any meeting of the Board of Directors at which
action upon any such contract or transaction shall be taken; and
any director of the Corporation who is also a director or officer
of such other corporation or who is such a party or so interested
may be counted in determining the existence of a quorum at any
meeting of the Board of Directors which shall authorize any such
contract or transaction, and may vote thereat to authorize any
such contract or transaction, with like force and effect as if he
were not such director or officer of such other corporation or
not so interested. Any director of the Corporation may vote upon
any contract or other transaction between the Corporation and any
subsidiary or affiliated corporation without regard to the fact
that he is also a director of such subsidiary or affiliated
corporation.
Any contract, transaction or act of the Corporation or of the
directors, which shall be ratified at any annual meeting of the
stockholders of the Corporation, or at any special meeting called
for such purpose, shall, in so far as permitted by law or by the
Certificate of Incorporation of the Corporation, be as valid and
as binding as though ratified by every stockholder of the
Corporation; provided, however, that any failure of the
stockholders to approve or ratify any such contract, transaction
or act, when and if submitted, shall not be deemed in any way to
invalidate the same or deprive the Corporation, its directors,
officers or employees, of its or their right to proceed with such
contract, transaction or act.
ARTICLE IX
Each officer, director, or member of any committee designated by
the Board of Directors shall, in the performance of his duties,
be fully protected in relying in good faith upon the books of
account or reports made to the Corporation by any of its
officials or by an independent public accountant or by an
appraiser selected with reasonable care by the Board of Directors
or by any such committee or in relying in good faith upon other
records of the Corporation.
ARTICLE X
Section 1. Elimination of Certain Liability of Directors.
Neither any director nor any officer (including former directors
and officers) of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the General Corporation Law of the State of Delaware as the
same exists or may hereafter be amended.
Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a director of the
Corporation existing hereunder with respect to any act or
omission occurring prior to such repeal or modification.
Section 2. Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in
the case of any such amendment, to the fullest extent permitted
by law, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said
law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, amounts paid or to be paid in
settlement, and excise taxes or penalties arising under the
Employee Retirement Income Security Act of 1974) reasonably
incurred or suffered by such person in connection therewith and
such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators.
The right to indemnification conferred in this Article X shall be
a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of the State of
Delaware requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this Section
or otherwise. The Corporation may, by action of the Board of
Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under
paragraph (a) of this Section is not paid in full by the
Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make it permissible
under the General Corporation Law of the State of Delaware for
the Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including
its Board, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard
of conduct set forth in the General Corporation Law of the State
of Delaware, nor an actual determination by the Corporation
(including its Board, independent legal counsel, or its
stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard
of conduct.
(c) Non-Exclusivity of Rights. The right to
indemnification and the payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in
this Section shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision
of the Certificate of Incorporation, By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, and shall
continue as to a person who has ceased to be a director or
officer of the Corporation and shall inure to the benefit of the
heirs, executors and administrators of such person.
(d) Insurance. The Corporation may maintain insurance, at
its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such
expense, liability or loss under the General Corporation Law of
the State of Delaware.
(e) Borrowing. The Board of Directors, without approval of
the stockholders, shall have the power to borrow money on behalf
of the Corporation, including the power to pledge the assets of
the Corporation, from time to time to discharge the Corporation's
obligations with respect to indemnification, the advancement and
reimbursement of expenses, and the purchase and maintenance of
insurance referred to in this Article X.
(f) Successors. For purposes of this Article, references
to the "Corporation" shall include, in addition to the resulting
corporations, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors and officers
so that any person who is or was a director or officer of such
constituent corporation shall stand in the same position under
this Article X with respect to the resulting or surviving
corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(g) Additional Agreements. The Board of Directors is
authorized to enter into a contract with any director, officer,
employee or agent of the Corporation providing for
indemnification rights equivalent to or, if the Board of
Directors so determines, greater than, those provided for in this
Article X.
(h) Amendments. Any amendment, repeal or modification of
any provision of this Article X by the stockholders or the
directors of the Corporation shall not adversely affect any right
of protection of a director or officer of the Corporation under
this Article XI existing at the time of such amendment, repeal or
modification.
(i) Other Employees and Agents. The Corporation may, to
the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article with respect to
the indemnification and advancement of expenses of directors and
officers of the Corporation.
ARTICLE XI
Both the stockholders and the directors of the Corporation may
hold their meetings and the Corporation may have an office or
offices in such place or places outside of the State of Delaware
as the By-Laws may provide and the Corporation may keep its books
outside of the State of Delaware except as otherwise provided by
law.
ARTICLE XII
Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be
effected by any consent in writing by such stockholders. Special
meetings of stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution approved by a
majority of the entire Board of Directors.
(a) (i) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in paragraph (b)
of this Article:
(A) any merger or consolidation of the Corporation or any
subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any other
corporation (whether or not itself an Interested Stockholder)
which, after such merger or consolidation, would be an Affiliate
(as hereinafter defined) of an Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder 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
(D) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation, or
(E) 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 similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) 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
Interested Stockholder or any Affiliate of any Interested
Stockholder, shall require the affirmative vote of the holders of at least 80%
of the outstanding shares of stock of the Corporation entitled to
vote generally in the election of directors, considered for the
purpose of this Article as one class ("Voting Shares"). Such
affirmative vote shall be required notwithstanding the fact that
no vote may be required, or that some lesser percentage may be
specified, by law or in any agreement with any national
securities exchange or otherwise.
(ii) The term "business combination" as used in this
Article shall mean any transaction which is referred to in any
one or more of clauses (A) through (E) of Section (i) of this
paragraph (a).
(b) The provisions of paragraph (a) of this Article shall
not be applicable to any particular business combination, and
such business combination shall require only such affirmative
vote as is required by law and any other provisions of this
Certificate of Incorporation, if either (i) such business
combination has been approved by a majority of the Continuing
Directors (as hereinafter defined) or (ii) the aggregate amount
of the cash and fair market value of consideration other than
cash to be received per share by holders of Common Stock in such
business combination shall be in the same form and of the same
kind as the consideration paid by the Interested Stockholder in
acquiring the initial 10% of the Common Stock owned by it and
shall be at least equal to the highest per share price (including
brokerage commission, transfer taxes and soliciting dealers' fees
and after giving effect to appropriate adjustments for any
recapitalizations and for any stock splits, stock dividends and
like distributions) paid by such Interested Stockholder for any
shares of Common Stock acquired by it prior to the business
combination; and the aggregate amount of cash to be received per
share by the holders of any class of preferred stock in such
business combination is the greater of (i) the highest per share
price paid by the Interested Stockholder in acquiring any shares
of such preferred stock or (ii) the highest preferential amount
per share to which the holders of such class of preferred stock
are entitled in the event of a voluntary or involuntary
liquidation of the Corporation.
(c) For the purposes of this Article XIII:
(i) A "person" shall mean any individual, firm, corporation
or other entity.
(ii) "Interested Stockholder" shall mean, in respect of any
business combination, any person (other than the Corporation or
any Subsidiary) who or which, as of the record date for the
determination of stockholders entitled to notice of and to vote
on such business combination, or immediately prior to the
consummation of any such transaction,
(A) is the beneficial owner, directly or indirectly, of
more than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner, directly
or indirectly, of not less than 10% of the then outstanding
Voting Shares, or
(C) is an assignee of or has otherwise succeeded to any
shares of capital stock of the Corporation which were at any time
within two years prior thereto beneficially owned by any
Interested Stockholder, and 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 1933.
(iii) A person shall be the "beneficial owner" of the
Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereinafter defined) beneficially own, 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 are beneficially owned, directly or indirectly,
by any other person, with which such first mentioned 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 capital stock of
the Corporation.
(iv) The outstanding Voting Shares shall include shares
deemed owned through applications of Section (iii) above but
shall not include any other Voting Shares which may be issuable
pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise.
(v) Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in
effect on March 1, 1983.
(vi) "Subsidiary" means any corporation of which a majority
of any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulation under the Securities Exchange Act of
1934, as in effect on March 1, 1983) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Interested Stockholder set forth in
Section (ii) of this subparagraph (c), 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.
(vii) "Continuing Director" means any member of the Board
of Directors of the Corporation who is unaffiliated with an
Interested Stockholder and was a member of the Board prior to the
time that an Interested Stockholder became an Interested
Stockholder and any successor of a Continuing Director who is
unaffiliated with the Interested Stockholder and is recommended
to succeed a Continuing Director by a majority of the Continuing
Directors then on the Board.
(d) A majority of the directors shall have the power and
duty to determine for the purposes of this Article, on the basis
of information known to them, (A) the number of Voting Shares
beneficially owned by any person, (B) whether a person is an
Affiliate or Associate of another, (C) whether a person has an
agreement, arrangement or understanding with another as to the
matters referred to in Section (iii) of paragraph (c), or (D)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of securities
by the Corporation or any Subsidiary has an aggregate fair market
value of $1,000,000 or move.
(e) Nothing contained in this Article shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
ARTICLE XIV
The provisions set forth in Article VII, Article XII, Article
XIII, Article XIV and Article XV herein may not be repealed or
amended in any respect, and the Corporation's By-Laws may not be
amended by stockholders, unless such action is approved by the
affirmative vote of the holders of not less than 80% of the
voting power of all shares of stock of the Corporation entitled
to vote in the election of directors, considered for purposes of
this Article XIV as one class. The voting requirements contained
in Article VIII, Article XII, Article XIII, Article XIV, and
Article XV herein shall be in addition to the voting requirements
imposed by law, other provisions of this Certificate of
Incorporation or any certificate of designation of preferences
filed with respect to any series of Preferred Stock. The By-Laws
of the Corporation may be altered, amended or repealed by the
Board of Directors at any regular or special meeting of the Board
of Directors.
ARTICLE XV
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by the
laws of the State of Delaware, and all rights conferred on
stockholders herein are granted subject to this reservation.
Notwithstanding the foregoing, the provisions set forth in
Article VII, Article XII, Article XIII, Article XIV and Article
XV may not be repealed or amended in any respect unless such
repeal or amendment is approved as specified in Article XV
herein.
Executed on this 1st day of September, 1999.
By:/s/John T. Ferguson II
Name: John T. Ferguson II
Title: Senior Vice President,
General Counsel and
Secretary
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