<PAGE>
As filed with the Securities and Exchange Commission on December 14, 1999
File No. 000-27579
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- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10/A2
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
CoorsTek, Inc.
(Exact name of registrant as specified in its charter)
Delaware 84-0178380
(I.R.S. Employer Identification No.)
(State or other jurisdiction of
incorporation or organization)
16000 Table Mountain Parkway 80403
Golden, Colorado (Zip Code)
(Address of principal executive
offices)
Copies of any communications should be sent to:
Katherine A. Resler
General Counsel and Secretary
CoorsTek, Inc.
16000 Table Mountain Parkway
Golden, Colorado 80403
(303) 277-4000
and
Linda K. Wackwitz Whitney Holmes
Holme Roberts & Owen LLP Hogan & Hartson L.L.P.
1700 Lincoln Street, Suite 4100 1200 Seventeenth Street, Suite 150
Denver, Colorado 80203 Denver, Colorado 80202
(303) 861-7000 (303) 899-7300
Registrant's telephone number, including area code: (303) 277-4000
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act: $.01 par
value Common Stock and associated Preferred Stock Purchase Rights
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
Item 1. Business
The information required by this item is contained under "Summary,"
"Business," "Relationship between ACX and CoorsTek," "Special Considerations"
and "Available Information" of the Information Statement (the "Information
Statement") attached hereto as Annex I. Those sections are incorporated herein
by reference.
Item 2. Financial Information
The information required by this item is contained under "Summary,"
"Capitalization," "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
the Information Statement. Those sections are incorporated herein by reference.
Item 3. Properties
The information required by this item is contained under "Business--
Properties" of the Information Statement. That section is incorporated herein
by reference.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is contained under "Security
Ownership of 5% Beneficial Owners, Directors and Executive Officers of
CoorsTek" of the Information Statement. That section is incorporated herein by
reference.
Item 5. Directors and Executive Officers
The information required by this item is contained under "Management" of
the Information Statement. That section is incorporated herein by reference.
Item 6. Executive Compensation
The information required by this item is contained under "Executive
Compensation" and "Management" of the Information Statement. That section is
incorporated herein by reference.
Item 7. Certain Relationships and Related Transactions
The information required by this item is contained under "The Spin-off"
and "Relationship Between ACX and CoorsTek" of the Information Statement. Those
sections are incorporated herein by reference.
Item 8. Legal Proceedings
The information required by this item is contained under "Business--
Environmental Matters" and "Business--Legal Proceedings" of the Information
Statement. Those sections are incorporated herein by reference.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
The information required by this item is contained under "The Spin-off--
Results of Spin-off," "The Spin-off--Other Consequences," "The Spin-off--
Listing and Trading of CoorsTek Common Stock," "Dividend Policy," and
"Description of Capital Stock" of the Information Statement. Those sections are
incorporated herein by reference.
I-2
<PAGE>
Item 10. Recent Sales of Unregistered Securities
None.
Item 11. Description of Registrant's Securities to Be Registered
The information required by this item is contained under "Description of
Capital Stock" and "Anti-takeover Effects of CoorsTek's Articles and Bylaws" of
the Information Statement. Those sections are incorporated herein by reference.
Item 12. Indemnification of Directors and Officers
The information required by this item is contained under "Liability and
Indemnification of Officers and Directors" of the Information Statement. That
section is incorporated herein by reference.
Item 13. Financial Statements and Supplementary Data
The information required by this item is contained in "Consolidated
Financial Information" and "Pro Forma Consolidated Financial Information" of
the Information Statement. Those sections are incorporated herein by reference.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 15. Financial Statements and Exhibits.
(a) Financial Statements
Index to Consolidated Financial Statements on page F-1 of the
Information Statement
(b) Exhibits
See Index to Exhibits
I-3
<PAGE>
[ACX Technologies, Inc. Letterhead]
December 14, 1999
Dear ACX Shareholder:
ACX has made a lot of changes since we were spun off from Adolph Coors
Company in December 1992. At that time, we inherited many developmental and new
technologies. Our commitment to profitable growth required that many tough
decisions be made regarding the future of those technologies. During 1999, the
last of these developmental businesses was shut down, sold or is in the process
of being sold. This allowed us to focus our full time and attention on our two
core businesses, Graphic Packaging Corporation and CoorsTek, Inc. ("CoorsTek"),
which was formerly named Coors Porcelain Company.
In addition, we have made several significant acquisitions of folding
carton packaging businesses--Gravure Packaging of Richmond, Virginia in 1996,
Universal Packaging in 1998 and, most recently, the folding carton business of
Fort James Corporation in August 1999. As a result, Graphic Packaging is now
estimated to be the largest folding carton operation in North America. In the
meantime, in September 1999, we sold our flexible packaging business to focus
on our folding carton operations.
In addition to these actions, ACX Technologies, Inc. has announced a plan
to establish CoorsTek as a fully independent public company. In order to
implement this plan and distribute CoorsTek shares, the Board of Directors of
ACX has approved a spin-off on December 31, 1999 to our shareholders of all the
outstanding shares of CoorsTek common stock. In the spin-off, you will receive
one share of CoorsTek common stock for every four shares of ACX common stock
that you hold at the close of business on December 17, 1999. Your current
shares of ACX common stock will be unchanged and will continue to represent
your ownership position in ACX Technologies, Inc. After the spin-off, the
principal business of ACX will be Graphic Packaging Corporation.
Your Board of Directors has concluded that the spin-off is in the best
interests of ACX, ACX's shareholders and the CoorsTek business because it
believes that:
. having two separate public companies will enable financial markets to
evaluate each company more effectively, thereby enhancing shareholder
value over the long term for both companies and making the stock of each
more attractive as currency for future acquisitions;
. separating CoorsTek from the packaging business of ACX will increase the
borrowing capacity of CoorsTek by providing more efficient access to the
debt markets;
. having separate management and ownership structures for CoorsTek will
link equity based compensation more closely to the business in which its
employees work; and
. the spin-off will provide CoorsTek's management with increased strategic
flexibility and decision-making power to realize significant growth
opportunities.
Shares of CoorsTek's common stock are expected to trade on the Nasdaq
National Market under the symbol "CRTK".
The enclosed information statement explains the proposed spin-off in
detail and provides important information regarding CoorsTek. We urge you to
read it carefully. Please note that a shareholder vote is not required in
connection with this matter, and holders of ACX common stock are not required
to take any action to participate in the spin-off. Thus, we are not asking you
for a proxy.
Very truly yours,
William K. Coors
Chairman of the Board
ACX Technologies, Inc.
<PAGE>
[CoorsTek, Inc. Letterhead]
December 14,
1999
Dear Stockholder:
We are delighted to welcome you as an initial stockholder of CoorsTek,
Inc. We will conduct the CoorsTek business as a company separate from ACX
Technologies, Inc., and our common stock will be publicly traded for the first
time on January 4, 2000, and may be traded on a "when issued" basis in December
1999. You will receive a tax free stock dividend of one (1) share of CoorsTek,
Inc. common stock for each four (4) shares of ACX Technologies that you own on
the close of business on December 17, 1999. Shares of our stock will trade on
the Nasdaq National Market under the symbol CRTK.
Established in 1911 as Coors Porcelain Company, CoorsTek is a
manufacturer of advanced technical ceramics. We have in recent years broadened
our materials base to include fluoropolymers and precision machined metals. Our
goal is to become a leading supplier of components and systems made from high
performance materials by partnering with customers to provide manufacturing and
engineering solutions.
We are excited about the opportunities that our spin-off from ACX
Technologies provides, and are enthusiastic about what the future holds. We
believe that CoorsTek has great potential to grow and are excited about you
growing with us as a CoorsTek, Inc. stockholder.
Congratulations on becoming one of the "founding" stockholders of
CoorsTek, Inc.!
Very truly yours,
Joseph Coors, Jr.
Chairman and Chief Executive Officer
CoorsTek, Inc.
<PAGE>
CoorsTek, Inc.
Common Stock
(par value $.01 per share)
At this time, CoorsTek is wholly owned by ACX Technologies, Inc. In this
spin-off, ACX will distribute 100% of the shares of CoorsTek common stock to
ACX shareholders. Each of you, as a holder of ACX's common stock, will receive
one share of our common stock for every four shares of the common stock of ACX
that you hold at the close of business on December 17, 1999, the record date
for the spin-off.
We are sending you this information statement to describe the spin-off.
We expect the spin-off to occur on December 31, 1999. ACX will mail you
certificates representing your proportionate number of shares of CoorsTek
common stock on or as soon after December 31, 1999 as practicable. Immediately
after the spin-off is completed, ACX will not own any shares of CoorsTek common
stock, and we will be a public company independent of ACX. We refer to
ourselves in this information statement as "We," or "CoorsTek."
No shareholder action is necessary to receive your shares of CoorsTek
common stock. This means that:
. you do not need to pay anything to ACX or to CoorsTek; and
. you do not need to surrender any shares of ACX's common stock to
receive your shares of CoorsTek common stock.
In addition, a shareholder vote is not required for the spin-off to
occur. ACX is not asking you for a proxy, and ACX requests that you do not send
a proxy.
There has been no trading market for CoorsTek common stock. However, we
expect that a limited market for shares of our common stock will develop on or
shortly before the record date for the spin-off, commonly known as a "when
issued" trading market. We have applied to have our common stock traded on the
Nasdaq National Market under the symbol "CRTK."
As you review this information statement, you should carefully consider
the matters described in "Special Considerations" beginning on page 8.
----------------
These securities have not been approved or disapproved by the Securities
and Exchange Commission or any state securities commission nor has the
Securities and Exchange Commission or any state securities commission passed
upon the accuracy or adequacy of this Information Statement.
----------------
This Information Statement does not constitute an offer to sell or the
solicitation of an offer to buy any securities. Changes may occur after the
date of this Information Statement and neither CoorsTek nor ACX will update the
information contained herein except in the normal course of their respective
public disclosures.
----------------
Shareholders of ACX with inquiries related to the spin-off should contact
Investor Relations at (303) 271-7005, or ACX's stock transfer agent and
registrar, Norwest Bank Minnesota, NA, Shareowner Services, Post Office Box
64854, St. Paul, Minnesota 55164-0854. Norwest Bank Minnesota, NA is also
acting as distribution agent for the spin-off.
The date of this Information Statement is December 14, 1999.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................................... ii
Summary.................................................................. 1
Special Considerations................................................... 8
The Spin-Off............................................................. 12
Relationship Between ACX and CoorsTek.................................... 16
Capitalization........................................................... 18
Dividend Policy.......................................................... 18
Pro Forma Consolidated Financial Information............................. 19
Selected Consolidated Financial Data..................................... 24
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 25
Business................................................................. 30
Management............................................................... 37
Executive Compensation................................................... 41
Security Ownership of Certain Beneficial Owners, Directors and Executive
Officers of CoorsTek.................................................... 46
Description of Indebtedness.............................................. 48
Description of Capital Stock............................................. 49
Anti-Takeover Effects of Certain Provisions.............................. 51
Liability and Indemnification of Officers and Directors.................. 59
Independent Accountants.................................................. 60
Index to the Consolidated Financial Statements of CoorsTek, Inc.......... F-1
</TABLE>
i
<PAGE>
Available Information
CoorsTek has filed a registration statement on Form 10 with the
Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with respect to its
common stock. This Information Statement, which forms a part of the
registration statement, does not contain all of the information set forth in
the registration statement. This information statement contains summaries of
the material terms and provisions of documents filed as exhibits to the
registration statement. For further information, you should refer to the
registration statement and the exhibits. Each such statement is qualified in
its entirety by such reference. Copies of these documents may be inspected
without charge at the Commission's Public Reference Room located at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the Commission at (800) SEC-
0330. Copies of this material also should be available through the Internet by
using the SEC EDGAR Archive, the address of which is http://www.sec.gov.
Following the spin-off, CoorsTek will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. CoorsTek also will be subject to the proxy
solicitation requirements of the Exchange Act and, accordingly, will furnish
annual reports containing audited financial statements to its stockholders in
connection with its annual meetings of stockholders. After the spin-off, such
reports, proxy statements and other information will be available to be
inspected and copied at the public reference facilities of the Commission or
obtained by mail or over the Internet from the Commission, as described above.
No person is authorized by ACX or CoorsTek to give any information or to
make any representations other than those contained in this Information
Statement. If given or made, such information or representations must not be
relied upon as having been authorized.
ii
<PAGE>
SUMMARY
Because this is a summary, it does not contain all the information that
may be important to you. You should read the entire Information Statement,
including our historical and pro forma consolidated financial statements and
the notes to those financial statements included in this Information Statement.
Unless otherwise indicated, references in this document to "we," "us," "our,"
or "CoorsTek" mean CoorsTek, Inc., formerly named Coors Porcelain Company doing
business as Coors Ceramics Company, and its subsidiaries.
CoorsTek
CoorsTek is a wholly-owned subsidiary of ACX Technologies, Inc. ACX was
spun off from Adolph Coors Company in December 1992. At that time, ACX
inherited many developmental and new technologies. In 1999, the last of these
technologies was sold, is being sold, or closed its doors, allowing ACX to
concentrate on its two core businesses, Graphic Packaging Corporation and
CoorsTek. The Board of Directors of ACX has determined that these two core
businesses can be operated and developed more effectively and in the best
interests of ACX's shareholders if CoorsTek becomes a separate, independent,
publicly traded Company.
CoorsTek has been in business since 1911, when it was incorporated in
Colorado as Coors Porcelain Company, and is a manufacturer of advanced
technical ceramics. In addition, CoorsTek manufactures a wide variety of
products from other engineered materials and is involved in the precision
machining of metals. For some customers, CoorsTek integrates manufactured and
purchased components into assemblies and systems. After the spin-off, CoorsTek
will be an independent, publicly traded company that will continue to develop,
manufacture and sell advanced technical ceramic and other engineered materials
across a wide range of product lines for a variety of applications.
CoorsTek sells its products primarily to industrial manufacturers for
incorporation into their products and processes, providing components to
substantially all of the commonly recognized industrial markets. Since
approximately 90% of CoorsTek's products are manufactured to customer
specifications, we consider our reputation for expert custom product design,
product quality and customer service one of our most valuable assets.
For the nine months ended September 30, 1999 and for its fiscal year
ended December 31, 1998, the revenues of ACX attributable to CoorsTek were $267
million and $297 million respectively.
CoorsTek's principal office is located at 16000 Table Mountain Parkway,
Golden, Colorado 80403, and its telephone number is (303) 277-4000.
1
<PAGE>
The Spin-Off
The following is a brief set of questions and answers about the spin-off.
Why is ACX spinning off . To increase the borrowing capacity of CoorsTek.
CoorsTek?
. To allow financial markets to evaluate ACX and
CoorsTek separately.
. To give CoorsTek's management more flexibility
to take advantage of growth opportunities,
including using CoorsTek stock as currency for
acquisitions.
. To more closely link the value of equity-based
compensation given to CoorsTek's employees to
CoorsTek's business results.
What do I have to do to Nothing; no shareholder vote or other action is
participate in the spin- required. You do not need to surrender any shares
off? of ACX stock to receive shares of CoorsTek common
stock in the spin-off.
What will I receive in the ACX will distribute one share of CoorsTek common
spin-off? stock for every four shares of ACX common stock
owned as of the record date. You will continue to
own your ACX stock.
How will ACX distribute If you own ACX stock on the record date, Norwest
CoorsTek's common stock to Bank Minnesota, NA will mail you a certificate
me? representing your CoorsTek common stock shortly
after December 31, 1999. Following the spin-off
you may retain shares of CoorsTek, sell them or
transfer them to a brokerage or other account.
You will not receive new ACX stock certificates.
When is the record date?
The record date is December 17, 1999.
What if I hold my shares of If you hold your shares of ACX stock through your
ACX stock through my stockbroker, bank or other nominee, you are
stockbroker, bank or other probably not a shareholder of record and your
nominee? receipt of CoorsTek common stock depends on your
arrangements with the nominee that holds your
shares of ACX stock for you. We anticipate that
stockbrokers and banks generally will credit
their customers' accounts with CoorsTek common
stock on or about January 3, 2000, but you should
check with your stockbroker, bank or other
nominee. Following the spin-off you may instruct
your stockbroker, bank or other nominee to
transfer your shares of CoorsTek common stock
into your own name.
What if I hold fractional If you own fractional shares, you will receive
shares of CoorsTek's common cash instead of your fractional share of CoorsTek
stock after the spin-off? common stock. Fractional shares to be cashed out
will be aggregated and sold through a
2
<PAGE>
broker-dealer in the open market by the
distribution agent which will distribute to you
your portion of the cash proceeds promptly after
the spin-off. No interest will be paid on any
cash distributed in lieu of fractional shares.
CoorsTek currently anticipates that no cash
dividends will be paid on its common stock in the
What is CoorsTek's dividend foreseeable future in order to conserve cash for
policy? the repayment of debt, future acquisitions and
capital expenditures. We expect that CoorsTek's
Board will periodically reevaluate this dividend
policy, taking into account CoorsTek's operating
results, capital needs, debt restrictions and
other factors.
We have applied to have CoorsTek common stock
How will CoorsTek's common traded on the Nasdaq National Market under the
stock trade? symbol "CRTK" and expect that regular trading
will begin on January 4, 2000. A temporary form
of interim trading called "when-issued trading"
may occur for CoorsTek common stock on or before
December , 1999 and continue through December
31, 1999. A when-issued listing can be identified
by the letter "v" next to the CoorsTek common
stock symbol on the Nasdaq National Market. If
when-issued trading develops, you may buy and
sell CoorsTek common stock in advance of the
spin-off on a when-issued basis. See pages 14 and
15.
ACX stock will continue to trade on a regular
basis, reflecting an assumed post-spin-off value
for ACX stock. ACX stock will trade carrying due-
bills representing CoorsTek common stock from on
or before December 15, 1999 through December 31,
1999. If this occurs, any due-bills will be
redeemed for CoorsTek common stock on January 5,
2000.
No; the Internal Revenue Service has ruled that
Is the spin-off taxable for the spin-off will be tax-free for U.S. tax
U.S. tax purposes? purposes, except for taxes on any cash received
instead of a fractional share. To review tax
consequences in detail, see pages 8 and 14.
The separation of CoorsTek from ACX presents
certain risks. For example, CoorsTek has no prior
What are the risks involved history of operating as an independent company.
in owning CoorsTek common Certain other risks are associated with owning
stock? CoorsTek common stock due to the nature of its
business and the markets in which it competes.
You are encouraged to carefully consider these
risks, which are described in greater detail on
pages 8 through 11.
ACX will not own any CoorsTek common stock after
the spin-off, and CoorsTek will operate as an
Will ACX and CoorsTek be independent, publicly
related in any way after
the spin-off?
3
<PAGE>
held company. None of the directors or officers
of CoorsTek will remain directors or officers of
ACX, although Joseph Coors, Director Emeritus of
ACX, and William K. Coors, director of ACX, will
serve as Directors Emeriti of CoorsTek. As
Directors Emeriti, Messrs. Coors will provide
advice and consulting services to the Board but
shall not constitute "directors" and shall not
have voting rights. ACX will enter into
agreements with CoorsTek to allocate
responsibility for liabilities (including tax,
environmental and other contingent liabilities
associated with their respective businesses or
otherwise to be assumed by CoorsTek or ACX), to
separate their businesses, and to provide for the
sharing of certain services on a transitional
basis. These agreements are described in greater
detail on pages 16 and 17.
What We Have Already Accomplished to Prepare for the Spin-Off
Board Appointments
ACX has elected five directors to begin their
service on CoorsTek's Board effective as of the
Spin-Off. See pages 37 and 38.
Senior Management
Appointments The CoorsTek Board has voted to retain Joseph
Coors, Jr. as CoorsTek's Chairman and Chief
Executive Officer, John K. Coors as President,
and Derek C. Johnson, who was newly elected to
the office of Executive Vice President. They will
be joined by newly elected officers Joseph G.
Warren, Jr., Chief Financial Officer, Katherine
A. Resler, General Counsel and Secretary, and
Larry D. Murphy, Executive Vice President. See
pages 39 to 40.
New Debt Financing
In contemplation of the spin-off, CoorsTek has
negotiated $270 million in debt financing.
CoorsTek will pay $200 million of the net
proceeds to ACX to repay intercompany obligations
and as a special dividend.
4
<PAGE>
Information Regarding the Spin-off and CoorsTek
Before the spin-off, you should direct inquiries relating to the spin-off
to:
Norwest Bank Minnesota, ACX Technologies, Inc.
NA Investor Relations
Shareowner Services 16000 Table Mountain
Post Office Box 64854 Parkway
St. Paul, Minnesota Golden, Colorado 80403
55164-0854 (303) 271-7005
(651) 450-4064
(800) 468-9716
After the spin-off, you should direct inquiries relating to an investment
in CoorsTek common stock to:
CoorsTek, Inc.
Investor Relations
16000 Table Mountain Parkway
Golden, Colorado 80403
(303) 277-4000
After the spin-off, the transfer agent and registrar for CoorsTek's
common stock will be:
Norwest Bank Minnesota, NA
Shareowner Services
Post Office Box 64854
St. Paul, Minnesota 55164-0854
(651) 450-4064
(800) 468-9716
5
<PAGE>
Summary Financial And Operating Data
The following tables present: 1) summary historical operating data for
each of the last five fiscal years ended December 31, 1998 and for the nine-
month periods ended September 30, 1999 and 1998, 2) summary balance sheet data
as of December 31 for the last five fiscal years and as of September 30, 1999
and 1998 and 3) pro forma selected financial data for the nine months ended
September 30, 1999, and the year ended December 31, 1998, as well as pro forma
balance sheet data as of September 30, 1999. The information as of and for the
nine months ended September 30, 1999 and 1998 and as of and for the years ended
December 31, 1994 and 1995 is derived from our unaudited consolidated financial
statements.
Before the spin-off, we operated as a wholly owned subsidiary of ACX.
Because the data reflect periods during which we did not operate as an
independent company, the historical data may not reflect the results of
operations or the financial condition that would have resulted if we had
operated as a separate, independent company during the periods shown. We have
presented unaudited pro forma financial information as of and for the nine
months ended September 30, 1999 and the year ended December 31, 1998 to give a
better picture of what this information might have looked like if CoorsTek had
been operated independently during this period. The data may not necessarily be
indicative of our future results of operations or financial condition.
The data presented in the table below are derived from our historical and
pro forma consolidated financial statements and the notes to those financial
statements included in this Information Statement. You should read these
sections for a further explanation of the data summarized here.
Unaudited pro forma and historical earnings per share data are presented
on pages 19, 21 and F-3, respectively.
Historical Selected Financial Data:
<TABLE>
<CAPTION>
Nine Months
Ended September
30, Year Ended December 31,
------------------ -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Income
Statement Data:
Net sales.............. $266,936 $230,930 $296,614 $304,824 $276,352 $270,877 $231,288
Gross profit........... 66,481 57,099 73,708 85,003 76,132 80,166 63,570
Selling, general and
administrative
expenses.............. 35,957 28,528 37,758 41,754 35,928 36,613 34,541
Asset impairment
charges............... -- 11,814 11,814 -- -- 438 --
Operating income....... 30,524 16,757 24,136 43,249 40,204 43,115 29,029
Interest and other
income (expense)-net.. (3,631) (2,894) (3,524) (68) (6) 393 (354)
Income tax expense..... 10,101 5,117 7,682 16,192 14,996 14,545 11,304
Net income............. 16,792 8,746 12,930 26,989 25,202 28,963 17,371
<CAPTION>
September 30, December 31,
------------------ -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Total Assets........... $320,609 $279,231 $278,359 $262,687 $216,635 $189,191 $165,804
Working capital........ 73,607 81,666 89,295 71,649 62,480 47,567 42,337
Long-term debt payable
to Parent............. 50,000 50,000 50,000 -- -- -- --
Total shareholder's
equity................ 184,087 161,263 165,825 203,155 163,463 130,381 115,886
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
1999 1998
Pro Forma Selected Financial Data: ------------- ------------
(In thousands)
<S> <C> <C>
Consolidated Income Statement Data:
Net sales........................................... $266,936 $296,614
Gross profit........................................ 66,481 73,708
Selling, general and administrative expenses........ 35,957 37,758
Asset impairment charges............................ -- 11,814
Operating income.................................... 30,524 24,136
Interest and other income (expense)-net............. (14,223) (15,674)
Income tax expense.................................. 6,129 3,150
Net income.......................................... 10,172 5,312
<CAPTION>
September 30,
1999
-------------
<S> <C> <C>
Consolidated Balance Sheet Data:
Total assets........................................ $325,609
Working capital..................................... 83,043
Long term debt...................................... 205,000
Total shareholder's equity.......................... 43,523
</TABLE>
7
<PAGE>
SPECIAL CONSIDERATIONS
We will have increased expenses as an independent public company. This could
impair our profitability.
We do not have an operating history as an independent company. Our
business has historically relied on ACX for various financial, managerial and
administrative services and has been able to benefit from the earnings, assets
and cash flows of ACX's other businesses. ACX will not be obligated to provide
assistance or services to CoorsTek after the spin-off, except as described in
the Distribution Agreement, the Transition Services Agreement and the other
agreements entered into by the companies in connection with the spin-off. See
"Relationship Between ACX and CoorsTek."
Following the spin-off, we will incur the costs and expenses associated
with the management of a public company and will incur interest expense
significantly in excess of that incurred historically. While we have been
profitable as part of ACX, there can be no assurance that, as a stand-alone
company, our future profits will be comparable to historical combined results
before the spin-off. The spin-off may result in some temporary disruption to
the business operation, as well as to the organization and personnel structure,
of CoorsTek which may have an adverse effect on our profitability.
ACX and you would have federal income tax liabilities if the Tax Ruling were
revoked.
The IRS has issued a Tax Ruling to the effect that, among other things,
the spin-off will be tax free to ACX and ACX shareholders under Section 355 of
the Code except to the extent that cash is received in lieu of fractional
shares. The Tax Ruling, while generally binding upon the IRS, is based upon
factual representations and assumptions and commitments on behalf of CoorsTek
with respect to future operations made in the ruling request. If those factual
representations and assumptions were materially incomplete or untrue, or the
facts upon which the Tax Ruling is based are materially different from the
facts at the time of the spin-off, or if CoorsTek does not meet certain
commitments made, the IRS could modify or revoke the Tax Ruling retroactively.
If the spin-off failed to qualify under Section 355 of the Code,
corporate tax would be payable by the consolidated group of which ACX is the
common parent based upon the difference between the aggregate fair market value
of the CoorsTek business and the adjusted tax bases of such business to ACX
prior to the spin-off. The corporate level tax would be payable by ACX. We have
agreed to indemnify ACX for this and other tax liabilities if they result from
certain actions taken by CoorsTek, or from the spin-off. See "Relationship
between ACX and CoorsTek--Tax Sharing Agreement." In addition, under the Code's
consolidated return regulations, each member of ACX's consolidated group
(including CoorsTek) is severally liable for these tax liabilities. If CoorsTek
is required to indemnify ACX for these liabilities or otherwise is found liable
to the IRS for these liabilities, the resulting obligation could exceed $50
million and could materially adversely affect our financial condition.
Additionally, if the spin-off were not to qualify under Section 355 of
the Code, then each owner of ACX common stock who receives shares of CoorsTek
common stock in the spin-off would be treated as if such stockholder received a
taxable distribution in an amount equal to the fair market value of CoorsTek
common stock received on the date it is received.
Our cash flow requirements are significantly higher than our historical needs
because we have increased our leverage and have replaced the financing ACX has
historically provided.
In connection with the spin-off, we have borrowed funds to settle
intercompany obligations and to pay ACX a dividend to reimburse ACX for certain
funds previously provided for acquisitions. Following the spin-off we will no
longer be under ACX's cash management policies. We believe that our cash flow
from operations, together with availability under the credit facility referred
to below in
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"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Financial Resources and Liquidity" and "Description of Certain
Indebtedness," will be sufficient to satisfy our working capital, capital
expenditure and debt service requirements and funding needed for acquisitions
in the foreseeable future. However, we cannot assure you that we will have
sufficient cash flow to satisfy these obligations and insufficient cash flow
could materially adversely impair our financial condition.
CoorsTek's increased debt will mean that we will need to generate a
minimum level of cash flow from operations in order to meet required repayments
of interest and principal. In addition, the credit agreements impose certain
restrictions on the conduct of our business following the spin-off.
We have agreed to restrictions and adopted policies that could have possible
anti-takeover effects.
We have agreed to certain restrictions on our future actions to assure
that the spin-off will be tax-free, including restrictions with respect to an
acquisition of shares of CoorsTek common stock. If we fail to abide by these
restrictions, and, as a result, the spin-off fails to qualify as a tax-free
reorganization, CoorsTek will be obligated to indemnify ACX for any resulting
tax liability. The potential tax liability that could arise from an acquisition
of shares of CoorsTek common stock, together with our related indemnification
obligations, could have the effect of delaying, deferring or preventing a
change in control of CoorsTek. See "Relationship between ACX and CoorsTek--Tax
Sharing Agreement."
Several provisions of CoorsTek's Certificate of Incorporation and Bylaws
could deter or delay unsolicited changes in control of CoorsTek. These include
provisions creating a classified Board of Directors and limiting the
stockholders' powers to remove directors or take action by written consent
instead of at a stockholders' meeting. Our Board of Directors has the
authority, without further action by the stockholders, to fix the rights and
preferences of and issue preferred stock. CoorsTek has also adopted a
stockholder rights plan that could make an unsolicited takeover offer
uneconomical without prior Board approval. These provisions and others that
could be adopted in the future could deter unsolicited takeovers or delay or
prevent changes in control or management of CoorsTek, including transactions in
which stockholders might otherwise receive a premium for their shares over then
current market prices. These provisions may limit the ability of stockholders
to approve transactions that they may deem to be in their best interests. See
"Anti-Takeover Effects of CoorsTek's Certificate and Bylaws" and "Description
of Capital Stock."
If we are unable to compete successfully, our revenues may be adversely
affected.
Competition in the advanced ceramics industry is vigorous and comes
primarily from overseas. Principal competitive factors in the worldwide market
include price, quality and delivery schedules. Our products also face
competition from metals and other materials based primarily on price and weight
of metals and other materials. We believe we will be able to compete
successfully in this environment although we cannot guarantee this.
We also face competition in our precision metal machining business and in
the fluoropolymer material business from a multitude of relatively small
domestic companies. We believe there is an opportunity for us, as a larger
company, to compete successfully in this market but we cannot guarantee our
success. Our inability to compete successfully would materially adversely
affect our revenues and financial condition.
Our international sales and transactions in local currencies expose us to
currency fluctuation risks.
CoorsTek is subject to risks associated with selling products in foreign
countries, primarily risks of fluctuating currency exchange rates.
International sales, primarily in Western European and Far East markets,
constituted approximately 25% of our sales in 1998. To limit our risk of
currency fluctuations,
9
<PAGE>
we selectively hedge the U.S. dollar against foreign currencies used in these
markets to mitigate the effects of adverse currency fluctuations when sales are
made in the foreign currency. The strength of the U.S. dollar relative to the
currency of our customers or competitors also may have an impact on our profit
margins or sales to international customers. We cannot assure you that we will
be able to manage these risks successfully or that they will not have a
material adverse effect on our business, financial condition or results of
operations.
Our profitability is sensitive to economic conditions affecting end users of
our products.
Since we sell our products primarily to industrial manufacturers for
incorporation into their products or processes, our business is sensitive to
changes in economic conditions that affect the various industries in which the
end users of our products operate such as the semiconductor, automotive, oil
and gas and pulp and paper industries. Sales fluctuations in an industry that
incorporates CoorsTek's products into its products could directly and
negatively affect our sales to that market. We cannot assure you that these
risks will not have a material adverse effect on our business, financial
condition or results of operations.
Our profitability and growth are subject to risks related to a significant
customer.
We anticipate that approximately 22% of our revenues in 1999 will come
from one customer, Applied Materials, Inc., a semiconductor equipment
manufacturer. Our dependence on this customer may increase as we further
develop our strategic supplier relationship. Any disruption in this
relationship, including a downturn in Applied Materials' business in the
industry(ies) in which it operates, would have a material adverse effect on our
sales.
Our need to comply with extensive governmental regulation could increase our
costs.
We are subject to numerous federal, state and local environmental laws
and regulations of the U.S. and other countries in which we have operations.
Our operations are also governed by laws and regulations relating to worker
health and workplace safety. Based on ACX's experience to date, we believe that
liability for environmental conditions and the future cost of compliance with
existing environmental or occupational health and safety laws and regulations
will not have a material adverse effect on our businesses or financial
condition. However, the impact of any future changes in laws and regulations
cannot be predicted and could increase our operating costs and adversely affect
our productivity. See "Business--Environmental Matters."
We are parties to litigation that if adversely determined could impair our
financial condition.
In the ordinary course of business, we are subject to claims, lawsuits
and contingent liabilities including claims by current and former employees.
Although CoorsTek is defending against these cases, we cannot assure you that
the ultimate outcome of any or all of these cases will not have a material
adverse effect on our business, financial condition or results of operations.
See "Business--Legal Proceedings."
Factors that may affect future results.
Certain statements in this document constitute "forward-looking
statements." These forward-looking statements involve known or unknown risks,
uncertainties and other factors that may cause the actual results, performance,
or achievements of CoorsTek to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements. Specifically, 1) capturing new customers, successfully increasing
sales to existing unaffiliated customers and the success of CoorsTek's future
years' revenue growth is dependent upon numerous factors, including the
continued strength of the U.S. and key foreign economies, the relative position
of the U.S.
10
<PAGE>
dollar vis-a-vis key European and Asian currencies, the actions of competitors
and customers, CoorsTek's ability to execute its marketing plans and the
ability of CoorsTek to maintain or increase sales to existing customers and
capture new business; 2) CoorsTek's overall financial results and financial
condition is dependent upon its customers' and suppliers' ability to execute
their Year 2000 readiness plans; and 3) CoorsTek's ability to increase revenues
and operating income is dependent upon its ability to continue its track record
for new product innovation, general economic conditions such as the position of
the U.S. dollar vis-a-vis other currencies, the availability and pricing of
substitute materials such as metals and plastics, the performance of key
industry segments such as semiconductor, automotive, and electronics and other
factors.
11
<PAGE>
THE SPIN-OFF
Reasons for the Spin-Off
The ACX Board of Directors has determined that the distribution of 100%
of the outstanding common stock of CoorsTek to owners of the common stock of
ACX will enable the management of each of Graphic Packaging and CoorsTek to
operate and develop these two core businesses more effectively. The ACX Board
of Directors has concluded that the spin-off is in the best interests of ACX,
CoorsTek and ACX's shareholders because it believes that:
. separating CoorsTek from the packaging business of ACX will increase
the borrowing capacity of CoorsTek by providing it with more
efficient access to the debt markets;
. having two separate public companies will enable financial markets to
evaluate each company more effectively, thereby enhancing shareholder
value over the long term for both companies and making the stock of
each more attractive as currency for future acquisitions;
. the spin-off will provide CoorsTek's management with increased
strategic flexibility and decision-making power to realize
significant growth opportunities; and
. having a separate management and ownership structure for CoorsTek
will provide equity based compensation that is more closely related
to the business in which its employees work.
Manner of Effecting the Spin-Off
ACX will effect the spin-off as of the close of business on December 31,
1999 by distributing all issued and outstanding shares of CoorsTek common stock
to holders of record of ACX common stock. The spin-off will be made on the
basis of one share of CoorsTek common stock for every four shares of ACX common
stock (the "Distribution Ratio") held as of the close of business on
December 17, 1999. If you would have received fractional shares as a result of
the Distribution Ratio, you will receive cash instead of fractional shares of
CoorsTek common stock. The distribution agent will aggregate all of the
fractional shares, sell them through a broker-dealer on the open market and
distribute to you your portion of the cash proceeds shortly after the spin-off.
No interest will be paid on any cash distributed in lieu of fractional shares.
Norwest Bank Minnesota, NA, as distribution agent, will mail certificates
representing the number of shares of CoorsTek common stock received by each
stockholder in the spin-off. Following the spin-off, stockholders may transfer
the shares to a brokerage account or may retain, transfer or sell the shares.
No owner of ACX common stock will be required to pay any cash or other
consideration for shares of CoorsTek received in the spin-off or to surrender
or exchange any shares of ACX common stock to receive shares of CoorsTek. The
actual total number of shares of CoorsTek common stock to be distributed will
depend on the number of shares of ACX common stock outstanding on December 17,
1999. The shares of CoorsTek common stock distributed in the spin-off will be
fully paid and nonassessable and will not be entitled to preemptive rights. See
"Description of Capital Stock."
Distribution Agreement
The spin-off will be made pursuant to the Distribution Agreement between
ACX and CoorsTek. It establishes the procedures to effect the spin-off and
provides for the distribution of the CoorsTek common stock to the shareholders
of ACX, the allocation to CoorsTek of certain assets and liabilities of ACX and
the transfer to and assumption by CoorsTek of those assets and liabilities.
The Distribution Agreement also contains agreements related to debt and
financing arrangements. CoorsTek has agreed that, concurrently with the spin-
off, it will repay all outstanding
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<PAGE>
intercompany debt owed by CoorsTek to ACX as of the Distribution Date. CoorsTek
will repay intercompany debt from the net proceeds of the new credit
arrangements and also pay a special dividend to ACX. The total amount of the
repayment and the special dividend together will be $200 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation--Financial Resources and Liquidity."
The Distribution Agreement provides for the continuation of existing
insurance coverage under ACX insurance policies for CoorsTek until such
coverage expires by its terms in March 2000 (for property insurance) and May
2000 (for casualty insurance) and for the allocation between ACX and CoorsTek
of costs and liabilities associated with the insurance. Under the Distribution
Agreement, ACX and CoorsTek have each agreed to retain, and to make available
to the other, books and records and related assistance for audit, accounting,
claims defense, legal, insurance, tax, disclosure, benefit administration and
other business purposes. Each has also agreed to pay its own costs related to
the spin-off and CoorsTek has agreed to indemnify ACX if the spin-off is
taxable or if ACX incurs certain liabilities. Under the Distribution Agreement,
the companies agreed to enter into one or more joint defense agreements as
necessary to provide for the management of litigation in which both ACX or its
subsidiaries and CoorsTek or its subsidiaries are parties and the allocation of
related costs, liabilities and recoveries and an environmental responsibility
agreement allocating responsibility for environmental liabilities. Also, the
Distribution Agreement provides that the ACX Board of Directors may determine
not to proceed with the spin-off at any time prior to the Distribution Date,
although such action is not anticipated.
The Distribution Agreement provides for execution and delivery of the
Agreements described in "Relationship between ACX and CoorsTek."
Results of Spin-Off
After the spin-off, CoorsTek will be a separate public company. The
number and identity of stockholders of CoorsTek immediately after the spin-off
will be approximately the same as the number and identity of shareholders of
ACX on December 17, 1999. Immediately after the spin-off, CoorsTek expects to
have approximately 2,493 holders of record of CoorsTek common stock and
approximately 7,134,880 shares of CoorsTek common stock outstanding, based on
the number of record shareholders and issued and outstanding shares of ACX
common stock as of the close of business on November 26, 1999 and the
Distribution Ratio. The actual number of shares of CoorsTek common stock to be
distributed will be determined as of December 17, 1999 and could be affected
by, among other things, the exercise of vested ACX stock options and
exercisable warrants, which as of September 30, 1999 could have been exercised
for approximately two million shares of ACX common stock. The spin-off will not
affect the number of outstanding shares of ACX common stock or the rights of
ACX shareholders.
Other Consequences
As of September 30, 1999, there were outstanding vested and unvested
options and exercisable and non-exercisable warrants to purchase approximately
2.3 million shares of ACX common stock held by persons who will be employed by
CoorsTek after the spin-off. CoorsTek will grant substitute options or warrants
for these outstanding ACX options. The exercise price for each substituted
option granted by CoorsTek will be based on the respective relative fair market
values of the ACX common stock and the CoorsTek common stock prices pre and
post spin. The number of shares will be determined by dividing the original
exercise price of the ACX option by the exercise price of the substitute
option, as determined above, and then multiplying the result by the original
number of option shares. Substitute options will have the same vesting status
and remaining exercise period as the correspondent ACX option.
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<PAGE>
Similarly, the number of shares and the exercise price of the outstanding
ACX options held by option holders who continue to be employed by ACX or one of
its remaining subsidiaries after the spin-off will be adjusted based on the
relative fair market values of the ACX common stock before and after the spin-
off.
Tax Consequences of the Spin-Off
The following is a description of the material U.S. tax consequences
associated with the spin-off and is not intended to address every individual
stockholder's individual tax consequences. In particular, this summary
description does not cover state, local, municipal, provincial or non-U.S. tax
consequences. Stockholders are strongly encouraged to consult their own tax
advisors concerning the tax consequences of the spin-off applicable to them. In
addition, stockholders residing outside of the U.S. are encouraged to seek tax
advice regarding tax implications of the spin-off.
ACX has received a ruling (the "Tax Ruling") from the Internal Revenue
Service (the "IRS"). The Tax Ruling was issued based upon the accuracy of
factual representations and assumptions and commitments as to CoorsTek's future
operations made by ACX and CoorsTek in the ruling request and states, among
other things, that the spin-off will qualify as a tax-free spin-off under
Section 355 of the U.S. Internal Revenue Code of 1986, as amended, for federal
income tax purposes. No gain or loss will be recognized by ACX shareholders as
a result of their receipt of CoorsTek common stock in the spin-off, except for
any cash received in lieu of fractional shares. See "Manner of Effecting the
Spin-Off." However, if the factual basis or assumptions upon which the ruling
was granted prove to be incorrect, or if CoorsTek does not meet certain
commitments made in the tax ruling request, there could be tax consequences.
See "Special Considerations--ACX and you would have federal income tax
liabilities if the Tax Ruling were revoked."
In connection with the spin-off, a shareholder's tax basis in ACX common
stock will be apportioned between ACX common stock and CoorsTek common stock
received in the spin-off according to the relative fair market values of the
shares at the time of the spin-off. In January 2000, ACX will send a letter to
shareholders that will explain the way to allocate tax basis between ACX common
stock and CoorsTek common stock distributed in the spin-off. The holding period
of the CoorsTek common stock received in the spin-off will include the holding
period of the ACX common stock with respect to which the CoorsTek common stock
will be distributed, provided the ACX common stock is held as a capital asset
on December 31, 1999.
Listing and Trading of CoorsTek Common Stock
There currently is no public market for CoorsTek's common stock. We have
applied to include the CoorsTek common stock in the Nasdaq National Market, and
we expect that a when-issued trading market for CoorsTek common stock will
develop on or before December , 1999.
The term "when-issued" means that shares can be traded prior to the time
certificates are actually available or issued. Prices at which the CoorsTek
common stock may trade on a when-issued basis cannot be predicted. Until the
CoorsTek common stock is fully distributed and an orderly market develops, the
prices at which trading in the stock occurs may fluctuate significantly and may
be lower or higher than the price that would be expected for a fully-
distributed issue.
The prices at which the CoorsTek common stock will trade following the
spin-off will be determined by the marketplace and may be influenced by many
factors, including the depth and liquidity of the market for CoorsTek common
stock, investor perceptions of CoorsTek, its business and prospects, results of
operations, and general economic and market conditions.
Prior to the spin-off, ACX common stock will continue to trade on a
regular basis, reflecting an assumed post-spin-off value for ACX common stock.
ACX common stock will trade carrying due-bills representing CoorsTek common
stock from on or before December 15, 1999 through January 5, 2000.
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<PAGE>
The New York Stock Exchange will require that shares of ACX common stock that
are sold or purchased during the period beginning December 15, 1999 and ending
on December 31, 1999 accompanied by due-bills representing the CoorsTek common
stock distributable be purchased or sold separately. Any due-bills will be
redeemed for CoorsTek common stock on January 5, 2000.
The Transfer Agent and Registrar for the CoorsTek common stock will be
Norwest Bank Minnesota, NA, Shareowner Services, Post Office Box 64854, St.
Paul, Minnesota 55164-0854. As of November 26, 1999, there were approximately
2,493 record holders of ACX common stock, which approximates the number of
prospective record holders of CoorsTek common stock immediately after the spin-
off.
CoorsTek common stock distributed in the spin-off generally will be
freely transferable under the Securities Act of 1933, as amended (the
"Securities Act"), except for securities received by persons who may be deemed
to be affiliates of CoorsTek pursuant to Rule 405 under the Securities Act.
Persons who may be deemed to be affiliates of CoorsTek after the spin-off
generally include individuals or entities that control, are controlled by, or
are under common control with CoorsTek, including directors of CoorsTek.
Persons who are affiliates of CoorsTek will be permitted to sell their shares
of CoorsTek common stock received in the spin-off pursuant to Rule 144 under
the Securities Act, subject to the conditions set forth in Rule 144, other than
its holding period requirements.
Conditions; Termination
It is expected that the spin-off will occur on December 31, 1999,
provided that certain conditions set forth in the Distribution Agreement shall
have been satisfied or waived by the ACX Board of Directors. These include,
among other customary conditions, the following:
. The Tax Ruling shall continue to be in effect.
. All material regulatory approvals necessary to consummate the spin-
off shall have been received and be in full force and effect.
. Financing in the amount of at least $205 million shall have been
obtained.
. The CoorsTek common stock shall have been accepted for inclusion on
the Nasdaq National Market, subject to official notice of inclusion.
. The CoorsTek Board of Directors, as named under "Management--
Directors," shall have been elected, and the CoorsTek Certificate of
Incorporation and Bylaws shall be in effect.
Satisfaction of these conditions will not create any obligation on the part of
ACX, CoorsTek or any other person to effect or seek to effect the spin-off or
alter the consequences of any termination of the Distribution Agreement from
those set forth in the Distribution Agreement. See "Arrangements Between ACX
and CoorsTek Relating to the Spin-Off--Distribution Agreement."
Reasons for Furnishing this Document
This document is being furnished by ACX solely to provide information to
ACX shareholders who will receive CoorsTek common stock in the spin-off. It is
not, and is not to be construed as, an inducement or encouragement to buy or
sell any securities of ACX or CoorsTek. We believe that the information
contained in this document is accurate as of the date on the cover. Changes may
occur after that date, and neither ACX nor CoorsTek will update the information
except as is required in the normal course of their public disclosure
practices.
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<PAGE>
RELATIONSHIP BETWEEN ACX AND COORSTEK
Prior to the spin-off, CoorsTek will continue to be a wholly-owned
subsidiary of ACX. In the past, ACX and CoorsTek have engaged in various
transactions with each other. These relationships, which include financial
support by ACX of CoorsTek, will cease in their current forms at the time of
the spin-off. After the spin-off, ACX will have no ownership interest in
CoorsTek and will no longer provide managerial or financial support to it. ACX
and CoorsTek have entered or will enter into contracts that will govern certain
relationships between them following the Distribution, including the
Distribution Agreement and the agreements described below. CoorsTek and ACX
believe that these agreements are at fair market value and are on terms
comparable to those that would have been reached in arm's-length negotiations
had the parties been unaffiliated at the time of the negotiations.
The Distribution Agreement and the other agreements described below are
included as exhibits to CoorsTek's registration statement on Form 10 of which
this Information Statement is a part. The Agreements will be effective on or
before the Distribution Date. See "The Spin-Off--Distribution Agreement."
Tax Sharing Agreement
ACX, CoorsTek and their respective subsidiaries are parties to a Tax
Sharing Agreement that defines the parties' rights and obligations with respect
to deficiencies and refunds of federal, state and other taxes relating to the
CoorsTek business for tax years prior to the spin-off and with respect to
certain tax attributes of CoorsTek after the spin-off. In general, ACX is
responsible for filing consolidated federal and combined or consolidated state
tax returns and paying the associated taxes for periods through the
Distribution Date. CoorsTek will reimburse ACX for the portion of such taxes
relating to the CoorsTek business. CoorsTek is responsible for filing returns
and paying taxes related to the CoorsTek business for periods beginning on or
after the Distribution Date. ACX and CoorsTek have agreed to cooperate with
each other and to share information in preparing such tax returns and in
dealing with other tax matters. ACX and CoorsTek will be responsible for their
own taxes other than those described above.
The Tax Sharing Agreement is designed to preserve the status of the spin-
off as a tax-free distribution. CoorsTek has agreed that it will refrain from
engaging in certain transactions during the two-year period following the spin-
off unless it first provides ACX with a ruling from the Internal Revenue
Service or an opinion of tax counsel acceptable to ACX that the transaction
will not adversely affect the tax-free nature of the spin-off. The transactions
subject to these restrictions, which are not expected to materially affect
CoorsTek's operating flexibility, consist of liquidations, mergers or
consolidations of CoorsTek, redemptions by CoorsTek of certain amounts of its
stock, sales of assets out of the ordinary course of business, discontinuance
of certain businesses and certain issuances of CoorsTek's common stock. In
addition, CoorsTek has agreed to indemnify ACX against any tax liability or
other expense it may incur if the spin-off is determined to be taxable as a
result of CoorsTek's breach of any covenant or representation contained in the
Tax Sharing Agreement or CoorsTek's action in effecting such transactions. By
its terms, the Tax Sharing Agreement terminates when the statutes of
limitations under applicable tax laws expire.
Transitional Services and Other Agreements
In the past, ACX and CoorsTek have provided services for each other such
as insurance administration, joint purchasing and telecommunications services.
To facilitate an orderly and mutually beneficial transition to the status of
two separate public companies, certain of these services will continue to be
provided by contract on a transitional basis for up to one year following the
Distribution
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Date. ACX and CoorsTek and subsidiaries of ACX and CoorsTek, as applicable,
will enter into one or more transitional services agreements to provide
services deemed necessary or desirable by the parties. The agreements referred
to above, individually or collectively, are not material to the business of
CoorsTek.
ACX and CoorsTek have agreed to enter or cause their respective
subsidiaries to enter into a joint defense agreement with respect to any
litigation or matters in which both ACX (or one or more of its subsidiaries)
and CoorsTek (or one or more of its subsidiaries) are involved and have entered
into an Environmental Responsibility Agreement allocating responsibility for
environmental liabilities. ACX, CoorsTek and their respective subsidiaries have
agreed to give notice and to cooperate with respect to any such environmental
matter and have agreed to indemnify one another for their respective
environmental practices under the environmental responsibility agreement. Any
joint defense agreement would provide for management of the proceeding and
allocation of related costs, liabilities and recoveries. The stated terms of
any joint defense agreement that may be entered into would typically be tied to
the duration of the litigation that is the subject matter of the agreement.
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CAPITALIZATION
The following table sets forth the capitalization of CoorsTek as of
September 30, 1999 (actual) and after giving pro forma effect to the spin-off
and related transactions. On January 4, 2000, CoorsTek will receive
approximately $205 million in net proceeds from the incurrence of debt under
the credit facility provided by Bank of America. CoorsTek will use the net
proceeds to retire the notes and advances payable to ACX, to pay ACX a special
dividend and pay certain transaction fees and expenses under the Bank of
America credit agreement. As of September 30, 1999, CoorsTek had notes and
advances payable to ACX of approximately $59 million, principally as a result
of acquisitions and internal allocation of debt. This amount could increase or
decrease before repayment based upon normal interim operating cash receipts and
payments and acquisition funding requirements.
<TABLE>
<CAPTION>
As of
September 30, 1999
-----------------------
Actual Pro forma (1)
-------- -------------
(In Thousands)
(Unaudited)
<S> <C> <C>
Long-term debt(2)...................................... $ -- $205,000
Notes and advances payable to ACX(3)................... 59,436 --
Shareholder's equity:
Common stock, 200,000 shares authorized, $50 par
value per share (actual), 100,000,000 shares
authorized, $.01 par value per share (pro forma);
200,000 shares issued and outstanding (actual),
7,120,614 shares issued and outstanding (pro forma)
(4)(5).............................................. 10,000 71
Paid-in capital(3)(4).................................. 75,060 42,145
Paid-in capital-warrants............................... 1,600 1,600
Retained earnings(3)................................... 97,720 --
Accumulated other comprehensive income................. (293) (293)
-------- --------
Total shareholder's equity......................... 184,087 43,523
-------- --------
Total Capitalization................................... $243,523 $248,523
======== ========
</TABLE>
- --------
(1) See the Pro Forma Consolidated Financial Information and notes thereto
included elsewhere herein.
(2) See Note 2(a) to the Pro Forma Consolidated Financial Information.
(3) See Note 2(c) to the Pro Forma Consolidated Financial Information.
(4) See Note 2(e) to the Pro Forma Consolidated Financial Information.
(5) The number of shares outstanding after giving effect to the spin-off was
determined based upon the number of shares of ACX common stock outstanding
at September 30, 1999 and reflects the assumed distribution of one share of
CoorsTek common stock for four shares of ACX common stock. The actual
number of shares distributed will depend on the number of shares of ACX
common stock outstanding on December 17, 1999.
DIVIDEND POLICY
CoorsTek currently anticipates that no cash dividends, other than the
special dividend to ACX referenced above in "Capitalization," will be paid on
its common stock in the foreseeable future in order to conserve cash for the
repayment of debt, future acquisitions and capital expenditures. The decision
as to whether to declare any future dividend and the amount thereof, if any,
will be in the sole discretion of CoorsTek's Board of Directors. Any additional
future payment of dividends will depend upon the financial condition, capital
requirements, debt covenants and restrictions, and earnings of CoorsTek, and
such other factors that the CoorsTek Board of Directors may deem relevant.
18
<PAGE>
Pro Forma Consolidated Financial Information
(Unaudited)
The following unaudited Pro Forma Consolidated Statements of Income for
the nine months ended September 30, 1999 and the year ended December 31, 1998
present the results of operations and consolidated financial position of
CoorsTek assuming that the transactions contemplated by the spin-off had been
completed as of the beginning of the year presented. The unaudited Pro Forma
Consolidated Balance sheet as of September 30, 1999 assumes the transactions
contemplated by the proposed spin-off occurred on that date. In the opinion of
management, they include all material adjustments necessary to reflect, on a
pro forma basis, the impact of transactions contemplated by the spin-off on
CoorsTek's historical financial information. The adjustments are described in
the Notes to the Pro Forma Consolidated Financial Information (Unaudited) and
are set forth in the "Pro Forma Adjustments" columns.
The unaudited Pro Forma Consolidated Financial Information of CoorsTek
should be read in conjunction with the historical financial statements of
CoorsTek beginning on page F-1. We have presented unaudited pro forma financial
information as of and for the nine months ended September 30, 1999 and for the
year ended December 31, 1998 to give you a better picture of what our financial
statements might have looked like if CoorsTek had been operated independently
during this period. Actual results may have differed from pro forma results if
we were operated independently. You should not rely on the pro forma financial
information as being indicative of the financial position that would have
resulted, the results of operation that would have been attained or future
results after the spin-off.
COORSTEK, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Nine Months Ended September 30, 1999
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Sales.................................... $266,936 $266,936
Cost of goods sold....................... 200,455 200,455
-------- -------- --------
Gross profit............................. 66,481 66,481
Selling, general and administrative...... 35,957 35,957
-------- -------- --------
Operating income......................... 30,524 -- 30,524
Other income (expense):
Interest expense
Interest expense on debt............. (3,088) (10,592)(2a) (13,680)
Other interest expense............... (605) (605)
-------- -------- --------
Total interest expense................. (3,693) (10,592) (14,285)
Interest income........................ 62 62
-------- -------- --------
Income before income taxes............... 26,893 (10,592) 16,301
Income tax expense....................... 10,101 (3,972)(2b) 6,129
-------- -------- --------
Net income............................... $ 16,792 $ (6,620) $ 10,172
======== ======== ========
Net income per share of basic common
stock................................... $ 2.36 $ (0.93) $ 1.43
======== ======== ========
Weighted average shares outstanding-basic
(2f).................................... 7,111 7,111 7,111
======== ======== ========
Net income per share of diluted common
stock................................... $ 2.34 $ (0.92) $ 1.42
======== ======== ========
Weighted average shares outstanding-
diluted (2f)............................ 7,185 7,185 7,185
======== ======== ========
</TABLE>
See Notes to the Pro Forma Consolidated Financial Statements (Unaudited).
19
<PAGE>
COORSTEK, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1999
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- --------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents................ $ -- $205,000(2a) $ --
(200,000)(2c)
(5,000)(2d)
Accounts receivable, less allowance for
doubtful accounts of $2,572............. 50,868 50,868
Inventories.............................. 67,861 67,861
Other assets............................. 12,893 12,893
-------- -------- --------
Total current assets................... 131,622 -- 131,622
-------- -------- --------
Properties, net............................ 138,070 138,070
Goodwill................................... 37,454 37,454
Debt issuance costs........................ -- 5,000(2d) 5,000
Other assets............................... 13,463 13,463
-------- -------- --------
Total assets........................... $320,609 $ 5,000 $325,609
======== ======== ========
Liabilities And Shareholder's Equity
Current liabilities:
Accounts payable......................... $ 14,836 $ 14,836
Accrued salaries and vacation............ 9,781 9,781
Accrued expenses and other liabilities... 23,962 23,962
Advances payable to Parent............... 9,436 (9,436)(2c) --
-------- -------- --------
Total current liabilities.............. 58,015 (9,436) 48,579
-------- -------- --------
Long-term debt............................. 50,000 205,000(2a) 205,000
(50,000)(2c)
Accrued post-retirement benefits........... 15,327 15,327
Other long-term liabilities................ 13,180 13,180
-------- -------- --------
Total liabilities...................... 136,522 145,564 282,086
-------- -------- --------
Shareholder's equity:
Common stock, 200,000 shares authorized,
$50 par value per share (actual),
100,000,000 shares authorized, $.01 par
value per share (pro forma); 200,000
shares issued and outstanding (actual),
7,120,614 shares issued and outstanding
(pro forma)............................. 10,000 (9,929)(2e) 71
Paid-in capital.......................... 75,060 (42,844)(2c) 42,145
9,929(2e)
Paid-in capital-warrants................. 1,600 1,600
Retained earnings........................ 97,720 (97,720)(2c) --
Accumulated other comprehensive income... (293) (293)
-------- -------- --------
Total shareholder's equity............. 184,087 (140,564) 43,523
-------- -------- --------
Total liabilities and shareholder's
equity................................ $320,609 $ 5,000 $325,609
======== ======== ========
</TABLE>
See Notes to the Pro Forma Consolidated Financial Statements (Unaudited).
20
<PAGE>
COORSTEK, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1998
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- --------
<S> <C> <C> <C>
Sales.................................... $296,614 $296,614
Cost of goods sold....................... 222,906 222,906
-------- --------
Gross profit............................. 73,708 -- 73,708
Selling, general and administrative...... 37,758 37,758
Asset impairment charge.................. 11,814 11,814
-------- -------- --------
Operating income......................... 24,136 -- 24,136
Other income (expense):
Interest expense:
Interest expense on debt............... (4,000) $(12,150)(3a) (16,150)
Other interest expense................. (125) (125)
-------- -------- --------
Total interest expense............... (4,125) (12,150) (16,275)
Interest income.......................... 601 601
-------- -------- --------
Income before income taxes............... 20,612 (12,150) 8,462
Income tax expense....................... 7,682 (4,532)(3b) 3,150
-------- -------- --------
Net income............................... $ 12,930 $ (7,618) $ 5,312
======== ======== ========
Net income per share of basic common
stock................................... $ 1.81 $ (1.07) $ 0.74
======== ======== ========
Weighted average shares outstanding-basic
(3c).................................... 7,126 7,126 7,126
======== ======== ========
Net income per share of diluted common
stock................................... $ 1.78 $ (1.05) $ 0.73
======== ======== ========
Weighted average shares outstanding-di-
luted (3c).............................. 7,258 7,258 7,258
======== ======== ========
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements (Unaudited).
21
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: The accompanying unaudited Pro Forma Consolidated Financial
Information reflects all adjustments which, in the opinion of management, are
necessary to present fairly the pro forma financial position and pro forma
results of operations for CoorsTek assuming CoorsTek was a stand-alone entity.
This information should be read in conjunction with CoorsTek's historical
financial statements and notes thereto beginning on page F-1 in the latter
portion of this document.
Note 2: The pro forma adjustments to the accompanying historical
financial information as of and for the nine months ended September 30, 1999
are described below:
(a) Historical interest expense relates to interest charged on
intercompany debt of $50.0 million at an 8% annual rate. This debt will be
paid off at the time of the spin-off. On a pro forma basis, debt of $205.0
million will be incurred consisting of a $95.0 million revolver at LIBOR
plus 2% (of which $30.0 million will be borrowed) and Senior Term A debt of
$85.0 million at LIBOR plus 2%, both of which have a five-year maturity. In
addition, CoorsTek will have Senior Term B debt of $90.0 million at LIBOR
plus 2.75% with a seven year maturity. The weighted average interest rate
used for the September 30, 1999 pro forma statements was 8.41%. A 1/8%
increase/decrease in the rate used would have increased/decreased the
recorded interest expense by $0.3 million. Interest expense has also been
adjusted to reflect the amortization of the debt issuance costs described
in Note 2(d).
(b) Income tax is adjusted for the pro forma adjustment in Note 2(a) at
the effective rate of 37.5%.
(c) CoorsTek will pay $200.0 million of the debt proceeds discussed at
Note 2(a) to ACX for reduction of intercompany debt, advances payable and
payment of a special dividend. Advances payable to Parent consist of funds
received from ACX primarily to fund the acquisitions of Edwards Enterprises
and Precision Technologies, net of cash generated by CoorsTek from
operations.
(d) Debt issuance costs estimated at $5.0 million will be amortized over
a five year period. The actual debt issuance costs could differ from this
estimate.
(e) Adjustment to reflect the issuance of 7,120,614 shares of Common
Stock, par value $0.01 per share as of December 31, 1999. The actual shares
outstanding and the conversion ratio, one CoorsTek share for every four
shares of ACX, could differ from reported amounts.
(f) Basic and diluted weighted average number of shares outstanding are
based on ACX's basic and diluted weighted average number of shares
outstanding as of September 30, 1999 adjusted for the conversion ratio
described in Note 2(e). All ACX common stock equivalents are included for
purposes of determining diluted weighted average number of shares
outstanding. The actual number of shares issued and the conversion ratio
used in the spin-off could differ from these estimates.
Note 3: The pro forma adjustments to the accompanying historical
financial information for the year ended December 31, 1998 are described
below:
(a) Historical interest expense relates to interest charged on
intercompany debt of $50.0 million at an 8% annual rate. See discussion of
the anticipated debt structure in Note 2(a). The interest rate used for the
December 31, 1998 pro forma statements was 7.39%. A 1/8% increase/decrease
in the rate used would have increased/decreased the recorded interest
expense by $0.3 million. Interest expense has also been adjusted to reflect
the amortization of the debt issuance costs described in Note 2(d).
(b) Income tax is adjusted for pro forma adjustment in Note 3(a) at the
effective rate of 37.3%.
22
<PAGE>
(c) Basic and diluted weighted average number of shares outstanding are
based on ACX's basic and diluted weighted average number of shares
outstanding as of December 31, 1998 adjusted for the conversion ratio
described in Note 2(e). All ACX common stock equivalents are included for
purposes of determining diluted weighted average number of shares
outstanding. The actual number of shares issued used in the spin-off could
differ from these estimates.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected financial data of
CoorsTek. The Income Statement data set forth below for each of the three years
in the three-year period ended December 31, 1998 and the Balance Sheet Data as
of the end of each year in the three-year period ended December 31, 1998 are
derived from audited financial statements of CoorsTek. The Income Statement
data set forth below for the years ended December 31, 1995 and 1994 and for
each of the nine-month periods ended September 30, 1999 and 1998 and the
Balance Sheet Data as of December 31, 1995 and 1994 and September 30, 1999 and
1998 are derived from unaudited consolidated financial statements of CoorsTek.
The historical selected financial data may not necessarily be indicative of
CoorsTek's past or future performance as an independent company. Such
historical data should be read in conjunction with "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and CoorsTek's
Consolidated Financial Statements and notes thereto included elsewhere in this
document.
Unaudited proforma and historical earnings per share data is presented on
pages 19, 21 and F-3, respectively.
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended December 31,
-------------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- -------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Selected
Financial Data:
Consolidated Income
Statement Data:
Net sales.............. $ 266,936 $ 230,930 $296,614 $304,824 $276,352 $270,877 $231,288
Gross profit........... 66,481 57,099 73,708 85,003 76,132 80,166 63,570
Selling, general and
administrative
expenses.............. 35,957 28,528 37,758 41,754 35,928 36,613 34,541
Asset impairment
charges............... -- 11,814 11,814 -- -- 438 --
Operating income....... 30,524 16,757 24,136 43,249 40,204 43,115 29,029
Interest and other
income (expense)-net.. (3,631) (2,894) (3,524) (68) (6) 393 (354)
Income tax expense..... 10,101 5,117 7,682 16,192 14,996 14,545 11,304
Net income............. 16,792 8,746 12,930 26,989 25,202 28,963 17,371
<CAPTION>
September 30, December 31,
-------------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Total assets........... $ 320,609 $ 279,231 $278,359 $262,687 $216,635 $189,191 $165,804
Working capital........ 73,607 81,666 89,295 71,649 62,480 47,567 42,337
Long-term debt payable
to Parent............. 50,000 50,000 50,000 -- -- -- --
Total shareholder's
equity................ 184,087 161,263 165,825 203,155 163,463 130,381 115,886
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Overview
The following discussion and analysis is based on the separate historical
financial statements of CoorsTek, which was formerly named Coors Porcelain
Company and operated its business as Coors Ceramics Company. During the periods
presented, CoorsTek was a wholly owned subsidiary of ACX. The Board of
Directors of ACX announced a plan to spin-off CoorsTek on or about December 31,
1999. This plan is subject to certain requirements, most notably the ruling by
the Internal Revenue Service of the transaction as a tax free distribution. ACX
provides general management, legal, treasury, tax, internal audit, financial
reporting and environmental services to CoorsTek. These ACX costs have been
allocated to CoorsTek and included in the discussion herein on a basis that
management believes is reasonable. This allocation may not necessarily equal
the costs that would have been or will be incurred by CoorsTek on a stand-alone
basis.
CoorsTek develops, manufactures and sells advanced technical products
across a wide range of product lines for a variety of applications. It has been
in business since 1911 and is the largest U.S. owned, independent manufacturer
of advanced technical ceramics. CoorsTek provides components to substantially
every major industrial market.
On March 1, 1999, CoorsTek acquired all of the outstanding shares of
Edwards Enterprises for approximately $18 million in cash. The acquisition has
been accounted for under the purchase method of accounting and goodwill is
approximately $4.2 million. Edwards Enterprises, located in Newark, California,
manufactures precision-machined parts for the semiconductor industry and
aircraft industries.
On March 12, 1999, CoorsTek acquired the net assets of Precision
Technologies for approximately $22 million in cash and 300,000 warrants to
purchase shares of ACX common stock at an exercise price equal to the fair
market value at the date of closing. In connection with the spin-off, the ACX
warrants will be converted into warrants to purchase CoorsTek common stock
following the spin-off. The warrants vest only upon the achievement of certain
revenue goals within three years. The acquisition has been accounted for under
the purchase method of accounting and goodwill is approximately $21.1 million.
Precision Technologies, located in Livermore, California, manufactures
precision-machined parts for the semiconductor, medical and aircraft
industries.
Combined Results of Operations
Comparison of Nine Months Ended September 30, 1999 compared to Nine Months
Ended September 30, 1998
CoorsTek's net sales increased $36.5 million or 15.8% to $266.9 million
for the nine months ended September 30, 1999 compared to $230.4 million for the
same 1998 period. The acquisitions of Edwards Enterprises and Precision
Technologies in March 1999 accounted for an increase in net sales of $45.8
million. Excluding these acquisitions, net sales decreased $9.4 million in the
year to date period as a result of price competition and weakened demand in the
pulp and paper and electronics markets. However, the pricing and demand in
these markets strengthened in the third quarter of 1999, as sales, excluding
Edwards Enterprises and Precision Technologies, increased $3.6 million to $73.6
million compared to $70.0 million for the third quarter of 1998. CoorsTek
expects continued gradual sales improvement in these markets.
Gross profit for the first nine months of 1999 increased $9.4 million or
16.4% to $66.5 million compared to $57.1 million for the nine months ended
September 30, 1998. The increase is attributed to the acquisitions of Edwards
Enterprises and Precision Technologies which contributed $10.4 million. Gross
margin of 24.9% for the first three quarters of 1999 increased compared with
1998 gross margin
25
<PAGE>
for the same period of 24.8% due to the growth of semiconductor sales. As a
result of an increase in pricing and demand in the third quarter of 1999, gross
profit, excluding Edwards Enterprises and Precision Technologies, increased
$3.6 million to $19.0 million compared to $15.4 million for the third quarter
of 1998. CoorsTek expects slight gross profit improvements in these particular
markets to continue.
Operating income for the first nine months of 1999 was $30.5 million, a
$13.7 million or 81.5% increase compared to the first nine months of 1998 of
$16.8 million. In the first quarter of 1998, CoorsTek recorded $6.2 million in
asset impairment charges in conjunction with the cancellation of the C-4
technology agreement with IBM. Changes in the market for C-4 applications
extended the time frame for achieving commercial sales beyond original
expectations. This lack of near term commercial sales opportunities, combined
with increasing overhead costs, prompted CoorsTek to negotiate termination of
the agreement with IBM. In the third quarter of 1998, CoorsTek recorded an
additional $5.6 million asset impairment charge related to the Chattanooga,
Tennessee operation. Management decided to offer this operation for sale when
strong offshore competition in the electronic package market at the time made
it uneconomical to have a manufacturing facility dedicated to this product
line. Consequently, the long-lived assets of Chattanooga were written down to
their estimated fair value using the asset held for use model. In addition, the
acquisitions of Edwards Enterprises and Precision Technologies in March 1999
contributed $8.1 million to operating income for the first nine months of 1999.
CoorsTek's operating income, excluding the impact of acquisitions and asset
impairment charges, decreased $6.1 million for the first nine months of 1999
compared to the same period in 1998 as a result of price competition primarily
in the first half of 1999.
Net interest expense for the nine months ended September 30, 1999 was
$3.6 million compared to $2.9 million in the first nine months of 1998. Three
million dollars of this expense consists of payments to ACX on intercompany
debt for both of the nine month periods ended September 30, 1999 and 1998.
The consolidated effective tax rate was 37.5% for the nine months ended
September 30, 1999 and 36.9% for the same period in 1998.
Year Ended December 31, 1998 to Year Ended December 31, 1997
Net sales for 1998 were $296.6 million, a decline of $8.2 million or
2.7%, from 1997 net sales of $304.8 million. The lower net sales in 1998
reflect downturns in sales resulting from pricing pressures in the pulp and
paper and telecommunication industries and volume declines in the semiconductor
and petrochemical industries.
Gross profit was $73.7 million in 1998, a decrease of $11.3 million or
13.3% from $85.0 million in 1997. The decrease is attributed to increased price
competition, particularly in international markets due to the strength of the
U.S. dollar compared to certain foreign currencies. Gross margins declined from
27.9% in 1997 to 24.8% in 1998 due to a decline in industries previously
mentioned and competitive pricing pressures.
Operating income for 1998 totaled $24.1 million, a decline of $19.1
million or 44.2%, from 1997 operating income of $43.2 million. Excluding the
asset impairment charges and the change to the estimated depreciable lives
discussed below, operating income totaled $34.0 million, a decline of $9.2
million or 21.3% from 1997. Other than the asset impairment charges, the lower
operating income in 1998 reflects a downturn in sales to customers in key
market segments and the effects of currency influenced price competition
resulting from a strong U.S. dollar.
Operating margins declined in 1998 to 8.1% from 14.2% in 1997. The lower
operating margins in 1998 reflect $11.8 million in asset impairment charges
offset by the $2.0 million positive impact
26
<PAGE>
from the change in estimated depreciable lives discussed below, lower sales
volumes in higher margin semiconductor and pulp and paper industry product
lines and currency influenced price competition.
During 1998, CoorsTek recorded $11.8 million in asset impairment charges,
of which $6.2 million related to the cancellation of CoorsTek's C-4 technology
agreement with IBM discussed above. CoorsTek recorded an additional $5.6
million asset impairment charge at the Chattanooga, Tennessee operation
discussed above. In early 1998, the Company changed the estimated depreciable
lives for certain long-lived assets based on the actual lives demonstrated for
similar assets. The effect of this change positively impacted operating income
by approximately $2.0 million.
The allocation of long term debt from ACX resulted in an increase in
interest expense from $110,000 in 1997 to $4.1 million in 1998.
The consolidated effective tax rate was 37.3% for 1998 compared to 37.5%
in 1997.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996.
CoorsTek's net sales for 1997 increased $28.4 million to $304.8 million
over 1996 net sales of $276.4 million. This 10.3% increase is primarily
attributable to a rebound in the telecommunications, semiconductor and data
processing industries and increased sales volumes to the petrochemical
industry. The August 1997 acquisition of Tetrafluor, a manufacturer of Teflon
(R) fluoropolymer parts, extended CoorsTek's material base and added $5.8
million in revenue for 1997. International sales as a percentage of total net
sales decreased in 1997 to 27.0% from 30.5% in 1996. The decrease in
international sales in 1997 was due to gains in domestic sales, lower sales
dollars from some international customers due to currency influenced price
competition and weaker demand from certain foreign mining industry customers.
Gross profit increased $8.9 million or 11.6% to $85.0 million in 1997
compared to $76.1 million in 1996 on the strength of increased sales and the
acquisition of Tetrafluor which contributed $1.6 million. Gross margins
increased slightly in 1997 to 27.9% from 27.5% in 1996.
Operating margins decreased slightly in 1997 to 14.1% compared to 14.5%
in 1996. The strength of the U.S. dollar compared to certain foreign currencies
resulted in increased price competition in some foreign markets.
On the strength of sales increases, CoorsTek's operating income for 1997
rose $3.0 million, or 7.5%, to $43.2 million from 1996 levels.
The consolidated effective tax rate was 37.5% for 1997 compared to 37.3%
in 1996.
Liquidity and Capital Resources
CoorsTek's liquidity is generated from both internal and external sources
and is used to fund short-term working capital needs, capital expenditures and
acquisitions. Internally generated liquidity is measured by net cash from
operations, as discussed below, and working capital. At September 30, 1999,
CoorsTek's working capital was $73.6 million with a current ratio of 2.3 to 1.
In contemplation of the spin-off, CoorsTek has negotiated a new $270
million credit facility consisting of a $95 million revolver and an $85 million
Senior Term A facility both maturing in five years and a $90 million Senior
Term B facility maturing in seven years. Borrowings under the credit facility
will bear interest at rates generally based on LIBOR plus a spread that varies
depending upon CoorsTek's performance. CoorsTek will pay $200.0 million of the
debt proceeds to ACX for reduction of intercompany obligations and payment of a
special dividend.
27
<PAGE>
In 1997 and 1996, CoorsTek contributed its excess cash to ACX. In 1998,
cash was retained by CoorsTek and was not contributed to ACX. Capital
expenditures for the three year period ended December 31, 1998 totaled $84.3
million and were used primarily for the addition of production capacity, as
well as for computerized manufacturing equipment and enhancements to existing
computer systems. CoorsTek expects capital expenditures of $12.0 in 1999 and
$25.0 million in 2000. On March 1, 1999, CoorsTek acquired all of the
outstanding shares of Edwards Enterprises for approximately $18.0 million in
cash. On March 12, 1999, CoorsTek acquired the net assets of Precision
Technologies for approximately $22.0 million in cash and 300,000 non-vested
warrants to purchase shares of ACX common stock at an exercise price equal to
the fair market value at the date of closing. In connection with the spin-off,
the warrants will be converted into warrants to purchase shares of CoorsTek
common stock after the spin-off. The warrants vest only on the attainment of
certain revenue thresholds. Acquisitions during 1998 utilized $0.9 million in
cash for the acquisition of Pulsation Equipment. Cash utilized for acquisitions
in 1997 and 1996 were $15.8 million and $6.6 million for the acquisitions of
Tetrafluor, Inc. and H.B. Company, respectively.
The impact of inflation on CoorsTek's financial position and results of
operations has been minimal and is not expected to adversely affect future
results.
Impact of the Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define a specific year. If not corrected,
a computer program that uses date-sensitive software may recognize a date "00"
as the year 1900 rather than the year 2000. This could result in system
failures or erroneous results to various activities and operations.
Management of ACX implemented a company wide program to prepare ACX's
(including CoorsTek's) financial, manufacturing and other critical systems and
applications for the year 2000. The program includes the establishment of a
task force that has the support and participation of upper management and
includes individuals from CoorsTek and ACX with expertise in information
technologies, risk management and legal. The Board of Directors of ACX monitors
the progress of the program on a quarterly basis. The task force's objective is
to ensure an uninterrupted transition to the year 2000 by assessing, testing,
and modifying all information technology (IT) and non-IT systems, and third
parties such as suppliers and customers.
The Year 2000 task force has taken an inventory of all IT and non-IT
systems of ACX, including those of CoorsTek. This inventory categorizes
potential systems date failures into three categories: "major" (critical to
production and could be business threatening with no short-term alternatives
available); "limited" (disrupting to the business operations with short-term
solutions available); and "minor" (inconsequential to the business operations).
The task force has prioritized the program to focus first on "major" systems.
It is CoorsTek's goal to have all major and limited systems Year 2000 compliant
by December 31, 1999.
IT Systems--CoorsTek is primarily using internal resources to remediate
IT systems. The majority of the IT systems have been recently purchased from
third party vendors. These systems were already Year 2000 compliant or had Year
2000 compliance upgrades. As of December 31, 1998, approximately 75% of
CoorsTek's IT systems were Year 2000 compliant. As of September 30, 1999,
approximately 99% of CoorsTek's IT systems were compliant.
Non-IT Systems--CoorsTek has approximately 18 manufacturing locations
with varying degrees of non-IT systems (such as automated kiln systems,
statistical process control systems, quality control systems, and machining
equipment). The vast majority of these facilities are located in North America.
To ensure Year 2000 compliance for non-IT systems, the Year 2000 task force has
contacted suppliers of these non-IT systems and obtained statements that the
systems are Year 2000 compliant and is in the
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<PAGE>
process of testing Year 2000 compliance. The majority of these non-IT systems
use time intervals instead of dates and are Year 2000 compliant. Thus, CoorsTek
believes that potential disruptions of such systems due to the Year 2000 issue
should be minimal. As of December 31, 1998 and September 30, 1999,
approximately 80% and 99%, respectively, of CoorsTek's "major" and "limited"
non-IT systems are Year 2000 compliant. The "minor" non-IT systems are in
various stages of compliance.
Third Parties--The Year 2000 task force has been in contact with key
suppliers and customers to minimize potential business disruptions related to
the Year 2000 issue between CoorsTek and these third parties. The task force
has focused on suppliers and customers who if their systems were to fail, such
failures would be classified as "major". In October 1998, letters were sent to
each of these suppliers requesting information about their Year 2000 readiness.
Follow-up letters were sent again in February 1999 to those third parties who
did not respond. Finally, in May 1999, those still not responding were
contacted directly by telephone. The responses, in general, indicated that the
Year 2000 programs they had implemented were adequate and they did not foresee
any disruptions. Customer surveys were conducted on an informal basis during
sales calls, customer on-site audits of the Company's Year 2000 program and
documentation of customer programs which was sent to the Company at the time
they requested information about the status of CoorsTek's Year 2000 program.
While CoorsTek cannot guarantee compliance by third party suppliers, CoorsTek
has developed contingency plans to ensure the availability of inventory
supplies in the event a supplier is not Year 2000 compliant.
Contingency Plan--CoorsTek has finalized a contingency plan in the event
there are Year 2000 failures related to CoorsTek's IT and non-IT systems and/or
key third parties. CoorsTek's manufacturing facilities are not interdependent
in terms of non-IT systems, and its facilities utilize a diverse range of non-
IT systems. Thus, the contingency plan includes for non-IT systems the transfer
of production between facilities and manufacturing equipment. Currently, we
believe that we have enough manufacturing capacity to accommodate the
contingency plan.
CoorsTek's major IT systems are heavily dependent on two vendors. These
vendors have completed extensive Year 2000 testing on their products and
indicate they are Year 2000 compliant. In addition, CoorsTek has also performed
Year 2000 testing and has found no compliance issues. CoorsTek will continue to
monitor its systems for Year 2000 compliance and will test such systems, as
considered necessary.
CoorsTek is not dependent on any one supplier for raw materials and other
items and services necessary for the manufacturing of its products. CoorsTek
has established back-up suppliers and will maintain adequate inventory levels
at December 31, 1999 to minimize the potential business disruption in the event
of a Year 2000 failure by a supplier.
Costs--Through December 31, 1998, CoorsTek spent approximately $40,000
out of an estimated total of less than $150,000 related to the Year 2000 issue
for CoorsTek. As of September 30, 1999 CoorsTek spent $101,000 related to the
Year 2000 issue. CoorsTek has not separately tracked internal costs such as
payroll related costs for its information technologies group and other
employees working on the Year 2000 project. CoorsTek expenses all costs related
to the Year 2000 issue as incurred. These costs are being funded through
operating cash flows.
CoorsTek's current estimate of the time and costs related to the
remediation of the Year 2000 issue are based on the facts and circumstances
existing at this time. New developments could affect CoorsTek's estimates to
remediate the Year 2000 issue. These developments include, but are not limited
to: (i) the availability and cost of personnel trained in this area; (ii) the
ability to identify and remediate all IT and non-IT systems; (iii)
unanticipated failures in IT and non-IT systems; and (iv) the planning and Year
2000 compliance success that key customers and suppliers attain.
29
<PAGE>
BUSINESS
General
Established in 1911 as a Colorado corporation, CoorsTek develops,
manufactures and sells engineered solutions for a multitude of industrial and
commercial applications that incorporate advanced materials such as technical
ceramics, engineered plastics or precision machined metals into components,
assemblies and systems. CoorsTek will be reincorporated in Delaware prior to
the Distribution Date.
Industry Overview
Advanced technical ceramics, also known as engineered ceramics, are
materials that exhibit superior mechanical properties, corrosion/oxidation
resistance and thermal, electrical, optical and magnetic properties. In
addition, recent acquisitions of companies offering plastics and metals
fabrication, and assembly capabilities, has expanded CoorsTek's ability to meet
increasing market demand, particularly in the semiconductor industry, for a
broader spectrum of products and services.
Markets and Products
CoorsTek provides components to most of the commonly recognized
industrial markets. Our largest markets include:
. Semiconductor
. Electronics
. Advanced Products
. Pulp and Paper
. Wear and Mining
Semiconductor includes the manufacture, assembly and integration of
ceramic and metal components for use in semiconductor processing equipment in
the semiconductor industry. Currently, the semiconductor industry is one of the
fastest growing market segments for our products. Opportunities exist in this
industry to aggressively pursue new applications for ceramics to replace
certain metal and other conventional materials used in a variety of
applications. In addition, we can offer machined metal components and cleanroom
assembly services for applications where ceramic is not the material of choice.
Electronics is a diverse market group with applications in aerospace,
automotive, computer, defense, power generation and distribution, and
telecommunications. Materials used in this application include high purity
ceramics often combined with metal components and precious metals plating.
Advanced Products, is our most diversified group of products and includes
components for aerospace, automotive, chemical and material processing,
computer, consumer, defense, electrical, fluid handling, mechanical, medical,
paper, and petroleum markets. This category can include ceramics, plastics and
metals. Materials and processes utilized offer specialized solutions for severe
use applications.
Pulp and Paper primarily involves the manufacture of wear and corrosion
resistant components for the paper pulp processing industry. Materials include
ceramics often in a composite form with plastics and/or metals.
Wear and Mining includes products used in chemical and material
processing, mining, paper, and other mechanical applications. Materials
utilized include a wide selection of wear resistant ceramics. Contract, on-site
installation service is also available.
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In order to successfully compete in our chosen markets, we must offer
flexible production processes that are capable of producing custom designs.
Over 90% of our products are custom made to our customer's specific
requirements. Another competitive advantage we have is the ability to evaluate
new materials, applications, and opportunities for value-added products. We
place great value in building and maintaining close relationships with our
customers.
Some uses of our components include:
. Fixtures for processing of silicon wafers in semiconductor chip
fabrication;
. Slitting knives and other processing and sizing devices used in
high-speed paper making machines;
. Seals and other pump components installed in automobiles, home
appliances, chemical processing, and blood analysis equipment;
. Valves used in fluid handling;
. Precipitators used in pollution control equipment;
. Power tubes used in electrical power generation installations;
. Linings for pipe used in the processing of coal and other
abrasive materials;
. Substrates (or bases) for various electronic circuits, pressure
sensors, and semiconductor chips that are critical components in
computers, communications systems, automotive controls and
military electronics;
. Passive electronic components, such as capacitors and insulators,
used in electrical devices; and
. Advanced electronic ceramic packages, which are casings that
surround a semiconductor chip, that insulate and connect the chip
to printed circuitry. Cellular telephones, pagers, and radar
detection devices require these packages due to their need for
high reliability.
We engineer and custom design our products to comply with specific
customer requirements. Successful product design requires consultation with
customers in their choice of the correct base material and selection by
CoorsTek of the appropriate manufacturing processes. Since we sell our products
primarily to industrial manufacturers for incorporation into their products or
processes, the business is sensitive to changes in economic conditions that
affect the end users of our products.
Materials and Services
Ceramic products can be nearly as hard as diamond, can withstand extreme
temperatures and have excellent electrical properties. These properties make
ceramic products ideal materials for a variety of industrial applications.
Although sometimes more expensive than competing materials, such as plastics
and metals, ceramic products provide higher value by contributing to longer
product life and enabling our customers to enhance their technologies.
While advanced technical ceramics constitute the majority of our
business, we believe there is a large potential to expand our existing business
through products that incorporate other materials such as metals and plastics.
Two of our facilities are directly involved in the precision machining of
metals such as stainless steel and aluminum for applications in the
semiconductor equipment and aerospace markets. Both of these manufacturing
sites, acquired in 1999, are capable of performing customer specified cleanroom
assembly and packaging which integrates ceramics and metals. This business
comprises 17.2% of our revenue year-to-date in 1999.
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<PAGE>
We are also involved in the manufacture of fluoropolymer sealing system
plastics used in the aerospace and industrial hydraulic equipment, fluid
handling systems and transportation industries. This business represents 3.5%
of our revenue year-to-date in 1999.
Strategy
We seek to grow our business by devoting resources to new product and
material development, internally and through acquisitions, particularly in
industry segments that show the most growth potential. In pursuit of this
strategy, we purchased Precision Technologies and Edwards Enterprises earlier
this year. We believe these acquisitions have strengthened our ability to
service customers, particularly in the semiconductor industry, by broadening
our materials offerings, including machined aluminum, and by positioning us to
provide assembly services.
We believe our reputation for expert custom product design, product
quality and customer service is one of our most valuable assets for achieving
our strategy. We work with key customers in diverse industries to develop value
added, engineered products. We continuously evaluate new materials and product
offerings, often with customers, in order to anticipate and satisfy customers'
future needs and to offer a greater range of products with improved performance
characteristics.
Manufacturing and Raw Materials
Ceramic manufacturing involves several steps. From raw material
preparation to completion of the finished product, a typical component will be
formed, fired and, if necessary, machined, then inspected, packaged and
shipped. The extent to which a part is processed is dependent on the
specifications placed on the finished product by the customer. Limitations of
the material and manufacturing process determine whether the part will be
processed through secondary finishing steps to meet the final specification.
The raw materials CoorsTek uses in its operations are readily available
from diverse sources. Long term, volume purchase agreements with suppliers
assure CoorsTek of consistent and ongoing supplies of raw materials.
CoorsTek owns or leases approximately 2.28 million square feet of
manufacturing space in the United States and abroad. Overall, CoorsTek
currently operates at approximately 75% of available capacity. Capacity
utilization is not currently a major constraint at CoorsTek's 18 manufacturing
locations. These facilities specialize, to a certain degree, in a particular
market and are located strategically to optimize customer service while
minimizing manufacturing and transportation costs. CoorsTek continues to invest
in computerized, high precision manufacturing equipment and believes it is well
positioned for growth opportunities in both domestic and foreign markets.
Sales and Distribution
We anticipate that more than 22% of our revenues in 1999 will come from
one customer, Applied Materials, Inc., a semiconductor equipment manufacturer.
Our dependence on this customer may increase as we further develop our
strategic supplier relationship. Any disruption in this relationship, including
a downturn in Applied Materials' business in the industry(ies) in which it
operates, would have a material adverse effect on our sales.
CoorsTek sells products primarily to manufacturers, including original
equipment manufacturers, for incorporation into industrial applications and
consumer products. CoorsTek generates sales through direct sales employees
located throughout the United States and Europe and manufacturers'
representatives. CoorsTek's sales personnel, many with engineering expertise,
receive substantial technical assistance and engineering support due to the
highly technical nature of its products.
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<PAGE>
International sales, primarily in Western Europe and Far East markets,
constituted approximately 25%, 27%, and 31% of ceramic product sales in 1998,
1997, and 1996, respectively. CoorsTek selectively hedges the U.S. dollar
against foreign currencies used in these markets in order to mitigate the
effects of adverse currency fluctuations when sales are made in the foreign
currency. The strength of the dollar relative to the currency of our customers
or competitors may have an impact on CoorsTek's profit margins or sales to
international customers.
No single product line or class accounted for more than 10% of CoorsTek's
consolidated net revenue although sales to various industry groups such as the
petrochemical, automotive, power generation and mining, and semiconductor
industries comprised 16%, 13%, 12%, and 10%, respectively, of CoorsTek's 1998
consolidated net revenue.
CoorsTek's 25 largest customers accounted for approximately 34% of our
net sales for 1998, with no single customer representing more than 10% of
CoorsTek's annual sales. A new focus on the semiconductor industry initiated in
1999 may result in an increased dependence on certain semiconductor equipment
manufacturers. Commitment to consistent high quality and customer service has
earned CoorsTek sole supplier status with several major U.S. manufacturers and
a leading position with several other major customers.
As of September 30, 1999, CoorsTek had backlog orders of approximately
$89.1 million, as compared to $83.7 million as of September 30, 1998.
Approximately $62.0 million of the backlog at September 30, 1999 has been
shipped as of December 1, 1999. Customers may place annual orders, with
shipments scheduled over a twelve-month period. Backlog orders may be higher
for certain industrial product segments due to longer time periods between
order and delivery dates under purchase orders. Sales are not seasonal but can
be sensitive to overall economic conditions that affect the users of advanced
ceramic products. Backlog is not necessarily indicative of past or future
operating results.
Competition
Competition in the advanced ceramics industry is vigorous and comes
primarily from Kyocera Corporation (Japan), Morgan Crucible Co. (United
Kingdom), NGK Insulators, Ltd. (Japan), CeramTec AG (Germany) and Saint Gobain
(France). Principal competitive factors in the worldwide market include price
(including the impact of currency fluctuations), quality, and delivery
schedules. A major competitor in most of the markets we serve, CoorsTek holds a
prominent position in many product lines. It has maintained long standing
relationships with major corporations by providing consistent high product
quality and customer service.
We also face competition in our precision metal machining business and in
the fluoropolymer materials business from a multitude of relatively small
domestic companies. We believe there is an opportunity for us, as a larger
company, to compete successfully in these markets but we cannot guarantee our
success.
Ceramic materials offer advantages over conventional materials for
applications in which certain properties such as high electrical resistance,
hardness, high-temperature strength, wear and abrasion resistance, and precise
machinability are important. Ceramic products, however, face competition from
metals and other materials. For example, plastics are substituting ceramics in
certain computer and telecommunications applications because of plastics' lower
cost and lighter weight. CoorsTek believes that the overall value of ceramic
products continues to be attractive to customers. In accordance with the
strategy outlined above, CoorsTek continues to explore and evaluate the
development of, or acquisition of companies with, products manufactured from
competing or complementary materials.
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<PAGE>
Research and Development
Our ability to commercialize CoorsTek's technologies and compete
effectively in our various markets depends significantly on our continued and
timely development of innovative technology, materials, products and processes
using advanced and cost-efficient manufacturing processes. While innovation is
a significant element of CoorsTek's business, we do not have separate, material
research and development expenses. Instead, innovations are generally made as
part of product development on a case-by-case basis in response to customer
orders or needs.
Patents, Proprietary Rights and Licenses
CoorsTek holds a number of patents and pending patent applications in the
U.S. and in foreign countries. Our policy generally is to pursue patent
protection that we consider necessary or advisable for the patentable
inventions and technological improvements of our business. CoorsTek also relies
significantly on trade secrets, technical expertise and know-how, continuing
technological innovations and other means, such as confidentiality agreements
with employees, consultants and customers, to protect and enhance CoorsTek's
competitive position in our markets.
CoorsTek considers the name "Coors" and the goodwill associated with it
to be important to its customer recognition. CoorsTek has received certain
licensing rights to use the Coors name.
CoorsTek believes that we and our subsidiaries own or have the right to
use the proprietary technology and other intellectual property necessary to our
operations. Except as noted above, we do not believe that our success is
materially dependent on the existence or duration of any individual patent,
trademark or license or related group of patents, trademarks or licenses.
Environmental Matters
CoorsTek's operations are subject to all federal, state and local
environmental, health and safety laws and regulations and, in a few instances,
foreign laws, that regulate health and safety matters and the discharge of
materials into air, land and water, and govern the handling and disposal of
solid and hazardous wastes. We believe we are in substantial compliance with
applicable environmental and health and safety laws and regulations and do not
believe that costs of compliance with these laws and regulations will have a
material effect upon our capital expenditures, earnings or competitive
position.
CoorsTek has received a demand for payment arising out of contamination
of a semiconductor manufacturing facility formerly owned by a subsidiary of
CoorsTek, Coors Components, Inc. Colorado State environmental authorities are
seeking clean up of soil and ground water contamination from a subsequent
owner. Although CoorsTek does not believe it is responsible for the
contamination or the cleanup, the parties agreed to a remediation plan.
CoorsTek will manage the remediation and is responsible to pay from 10% to 15%
of the remediation costs in excess of $500,000. There is no firm estimate of
potential clean up costs, although management does not believe it will be
material.
CoorsTek has received a Unilateral Administrative Order issued by the EPA
relating to the Rocky Flats Industrial Park (RFIP) Site, and is participating
with the RFIP group to perform an Engineering Evaluation/Cost Analysis on the
property including investigation and sampling. The EPA has not selected a
remedy but management does not expect costs to exceed reserved amounts.
CoorsTek and some of its subsidiaries have been notified that they may be
or have been named as potentially responsible parties ("PRPs") under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 or
similar state laws with respect to the remediation of certain sites where
hazardous substances have been released into the environment. CoorsTek cannot
predict with certainty the total costs of remediation, its share of the total
costs, the extent to which
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<PAGE>
contributions will be available from other parties, the amount of time
necessary to complete the remediation, or the availability of insurance.
However, based on investigations to date, CoorsTek believes that any liability
with respect to these sites would not be material to the financial condition or
results of operations of CoorsTek, without consideration for insurance
recoveries. There can be no certainty, however, that CoorsTek will not be named
as a PRP at additional sites or be subject to other environmental matters in
the future or that the costs associated with those additional sites or matters
would not be material.
In addition, CoorsTek has received demands or requests for information
relating to alleged contamination of various properties currently or formerly
owned by CoorsTek or to which CoorsTek allegedly shipped waste. In management's
opinion, none of these claims will result in liability that would materially
affect CoorsTek's financial position or results of operations.
Employees
As of September 30, 1999, CoorsTek had approximately 3,300 full-time
employees. None of the employees is subject to a collective bargaining
agreement. Management considers its employee relations to be good.
Properties
CoorsTek believes that its facilities are well maintained and suitable
for their respective operations. The table below lists CoorsTek's plants and
most other physical properties and their locations and character.
<TABLE>
<CAPTION>
Facility Location Character
-------- -------- ---------
<S> <C> <C>
Manufacturing Benton, Arkansas(1) Ceramic Products
Manufacturing Grand Junction, Colorado Ceramic Products
Manufacturing Chattanooga, Tennessee Ceramic Products
Manufacturing Hillsboro, Oregon Ceramic Products
Manufacturing Lawrence, Pennsylvania(2) Ceramic Products
Manufacturing Norman, Oklahoma Ceramic Products
Manufacturing Oklahoma City, Oklahoma(3) Ceramic Products
Manufacturing Glenrothes, Scotland Ceramic Products
Manufacturing Oak Ridge, Tennessee(4) Ceramic Products
Manufacturing Austin, Texas(5) Ceramic Products,
Assembly Operations
Manufacturing and Odessa, Texas Ceramic Products
Distribution Office
Fluoropolymer
Manufacturing El Segundo, California(2) Products
Manufacturing and Company Golden, Colorado(6) Ceramic Products
Offices
Manufacturing Newark, California Metal Machining and
Assembly Operations
Manufacturing Livermore, California(5) Metal Machining and
Assembly Operations
</TABLE>
- --------
(1) Three facilities.
(2) Leased facility.
(3) Two facilities, one of which is leased.
(4) Three facilities, one of which is leased.
(5) Three facilities, all of which are leased.
(6) Four facilities, one of which is leased.
The operating facilities of CoorsTek are not constrained by capacity
issues.
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<PAGE>
Legal Proceedings
In the ordinary course of business, CoorsTek and its subsidiaries are
subject to various pending claims, lawsuits and contingent liabilities. In each
of these cases, CoorsTek is vigorously defending itself. CoorsTek does not
believe that disposition of these matters will have a material adverse effect
on CoorsTek's consolidated financial position or results of operations. On
August 12, 1999, five current and former employees sued one of CoorsTek's
subsidiaries in the U.S. District Court for the Eastern District of Arkansas
claiming gender discrimination, sexual harassment and retaliation. The
plaintiffs are seeking class certification which the Company is resisting based
on the distinctions among their respective claims. Our preliminary evaluation
indicates the case is largely without merit, however, we do not have sufficient
information to determine the ultimate outcome or any potential liability
related to these claims. Specific information regarding environmental legal
proceedings is discussed under the caption "Environmental Matters."
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MANAGEMENT
Directors
In accordance with CoorsTek's Bylaws, the CoorsTek Board will consist of
seven directors. Joseph Coors, Jr. currently serves as the sole director of
CoorsTek. ACX, as sole stockholder of CoorsTek, elected four additional
directors to begin their service as of the distribution date. The CoorsTek
Board intends to appoint the remaining two directors as soon as possible.
Directors of CoorsTek will relinquish any positions held with ACX on the
Distribution Date.
CoorsTek's Certificate of Incorporation provides for the division of the
Board of Directors into three classes as of the first annual meeting of
stockholders. The full slate of directors will stand for election at the first
annual meeting of stockholders, to be held in 2001, and at that time will be
nominated to serve for terms of one, two and three years (Classes I, II and
III), respectively. Stockholders will elect one class, consisting of
approximately one third of the Directors, for three-year terms at each
succeeding annual meeting. CoorsTek's Certificate of Incorporation sets a cap
on the number of directors at 11 and the number of directors may be fixed by or
in the manner provided in the Bylaws. On the Distribution Date, the directors
will be the persons named below.
Joseph Coors and William K. Coors will serve as Directors Emeriti. As
Directors Emeriti, Messrs. Coors will provide advice and consulting services to
the Board but shall not constitute "directors" and shall not have voting
rights.
<TABLE>
<CAPTION>
Principal Occupation or
Name Age Employment for the Past Five Years
---- --- ----------------------------------
<S> <C> <C>
John K. Coors....... 43 President of CoorsTek since October 1998; Chief
Executive Officer of Golden Genesis Company (a
former publicly traded subsidiary of ACX), from
January 1997 to October 1998; President of Golden
Photon Company from July 1992 to October 1998; Vice
President and Plant Manager of Coors Brewing
Company's Memphis, Tennessee brewery from January to
July 1992; director of Golden Genesis Company from
1997 to August 1999. He has been a director of ACX
since 1996.
Joseph Coors, Jr. .. 57 President and director of ACX since its formation in
August 1992; Chairman of CoorsTek since 1989, Chief
Executive Officer of CoorsTek since March 1997, and
President of CoorsTek from 1997 to October 1998 and
from 1985 to 1993; Director of Golden Genesis
Company from May 1998 until August 1999; Chairman of
Golden Aluminum (a former subsidiary of ACX) from
1993 to 1997; Executive Vice President of Adolph
Coors Company from 1991 to 1992; director of Hecla
Mining Company (NYSE: HL); Chairman of the Air Force
Memorial Foundation.
John E. Glancy...... 53 Corporate Executive Vice President and Manager of
Commercial and International Business of Science
Applications International Corp. (SAIC) since 1978
(SAIC provides professional and technical services
and products in high-technology areas to government
and the private sector); Employed by General Atomic
Company, a manufacturer of nuclear reactors, and the
U.S. Atomic Energy Commission prior to 1978;
Director of SAIC and Network Solutions, Inc.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or
Name Age Employment for the Past Five Years
---- --- ----------------------------------
<S> <C> <C>
Donald E. Miller..... 69 Vice Chairman of The Gates Corporation (automotive
and industrial supplier) from 1994 to August, 1996;
President of Gates Rubber Company from 1982 to 1993
and President and Chief Operating Officer of The
Gates Corporation from 1987 to 1994; Director of
Lennox Industries, Inc., Sentry Insurance Company,
Chateau Communities, Inc. and OEA, Inc.
Robert L. Smialek.... 55 President and Chief Executive Officer of Insilco
Corporation from 1993 until July 1999; Insilco
manufactures specialty products for the automotive,
telecommunications, electronics, defense and
consumer product markets; President and Chief
Operating Officer of the Temperature and Appliance
Controls Group of Siebe plc, a global controls and
engineering firm, from October 1992 to May 1993;
President and Chief Operating Officer of Ranco,
Inc., from September 1990 to October 1992, a
subsidiary of Siebe, Inc.; Group Vice President for
Tracor Instruments Group from May 1988 to May 1990;
Employed by General Electric Company from 1969 to
1988, most recent position was General Manager of
Manufacturing and Technology Operations for the
Medical Systems Group; Director of Insilco
Corporation, General Cable Corporation and Gleason
Corporation.
</TABLE>
Committees of the CoorsTek Board
The CoorsTek Board will have four standing committees: Audit,
Compensation, Executive and Corporate Governance. The membership of each
committee will be determined following the spin-off.
Audit Committee (all members will be nonemployee directors):
. Reviews the scope and results of the audit of CoorsTek by CoorsTek's
independent accountants.
. Recommends the appointment of CoorsTek's independent accountants.
. Reviews the adequacy of CoorsTek's systems of internal control and
accounting policies and procedures, including compliance with
CoorsTek's ethics policy.
. Directs and supervises investigations into matters within the scope of
its duties.
Compensation Committee (all members will be nonemployee directors):
. Reviews and recommends to the Board compensation of management
personnel.
. Reviews and approves executive incentive and benefit plans.
. Reviews and recommends to the Board general employee benefits.
Executive Committee (all members will be employee directors):
. Exercises all of the authority of the Board when the Board is not in
session except as provided in CoorsTek's Certificate of Incorporation,
Bylaws and applicable law.
Corporate Governance Committee (all members will be nonemployee directors):
. Considers and recommends nominees for election as directors.
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. Reviews and evaluates the performance of the Board.
Compensation of Directors
Employee directors will not receive additional compensation for serving
as directors of CoorsTek. Each non-employee director of CoorsTek, including
Directors Emeriti, will receive a meeting fee of $7,000 per meeting, 50 percent
of which will be paid in shares of CoorsTek's common stock. The balance of the
retainer will be paid in cash unless the non-employee director elects to take
all or a portion of it in CoorsTek's common stock.
In addition, CoorsTek has adopted the Stock Option and Incentive Plan
under which each non-employee director will receive a grant of 5,000 non-
qualified stock options upon initial election to the Board and 3,000 non-
qualified stock options upon election by stockholders to his or her three year
term. The options, with an exercise price equal to 100% of market value on the
date of grant, will vest in equal increments over a three-year period and will
expire, if unexercised, ten years from the date of grant.
No additional amounts will be paid to directors for committee meetings.
Directors will be reimbursed for expenses incurred while attending Board or
committee meetings and in connection with any other Company business. In
addition, CoorsTek will purchase accidental death and dismemberment insurance
for the non-employee directors.
Family Relationships
John K. Coors and Joseph Coors, Jr. are brothers and are sons of Joseph
Coors and nephews of William K. Coors.
Executive Officers
On the Distribution Date, the executive officers of CoorsTek will be as
follows:
Joseph Coors, Jr., age 57, has been Chairman of CoorsTek since 1989 and
its Chief Executive Officer since March 1997. He was President of CoorsTek from
1985 to 1993 and from 1997 to October 1998. Mr. Coors has been President of ACX
and a Director since its formation in 1992, and was a Director of Golden
Genesis Company from May 1998 until August 1999, a Chairman of Golden Aluminum
Company from 1993 to 1997, and an Executive Vice President of Adolph Coors
Company from 1991 to 1992. He also is a director of Hecla Mining Company
(NYSE:HL) and Chairman of the Air Force Memorial Foundation. Mr. Coors holds a
bachelor's degree in applied mathematics from the University of North Carolina.
John K. Coors, age 43, has been President of CoorsTek since October 1998.
He also has been a Director of ACX since 1996 and of Golden Genesis Company
from January 1997 to August 1999. Mr. Coors was Chief Executive Officer of
Golden Genesis Company from January 1997 to October 1998, President of Golden
Photon Company from July 1992 to October 1998 and Vice President and Plant
Manager of Coors Brewing Company's Memphis, Tennessee brewery from January to
July 1992. Mr. Coors holds a bachelor's degree in chemical engineering from
Colorado School of Mines and a masters degree in biochemistry from the
University of Texas at Austin and a doctorate degree in engineering from
Technical University of Munich.
Derek C. Johnson, age 39, has been Executive Vice President of Sales and
Marketing and Operations of CoorsTek since August 1999. Mr. Johnson was Vice
President of Sales and Marketing from October 1998 to August 1999, Vice
President of Golden Operations from 1997 to 1998 and Manager of Manufacturing
for Golden Operations from 1992 to 1997, for CoorsTek. Mr. Johnson received a
bachelor's degree in electrical engineering from the KirkCaldy Technical
College of Scotland and a master's degree in business administration from the
University of Denver.
39
<PAGE>
Larry D. Murphy, age 57, has been Executive Vice President of Strategic
Initiatives of CoorsTek since October 1999. Prior to joining CoorsTek, he
served as Financial Services Group Banking Director with Andersen Consulting
from 1990 to September 1999. From 1987 to 1990, Mr. Murphy was Chief
Information Officer for Union Bank and he served as Chief Executive Officer and
President of Security Pacific Information Services, Inc. from 1980 to 1987. Mr.
Murphy received a bachelor's degree in mathematics from Auburn University and a
master's degree in business administration from National University.
Katherine A. Resler, age 40, has been General Counsel and Secretary of
CoorsTek since September 1999. Ms. Resler has been Counsel for ACX since 1998,
its Director of Executive Compensation since 1995 and its Assistant Secretary
since 1992. Ms. Resler received a bachelor's degree in science and a master's
degree in business administration from Colorado State University, and a J.D.
from the University of Denver.
Joseph G. Warren, Jr., age 54, has been Chief Financial Officer and
Treasurer of CoorsTek since August 1999. Mr. Warren was Vice President of
Finance, Chief Financial Officer, Secretary and Treasurer of White Electronics
& Designs, Inc., a semiconductor manufacturer, from 1995 to July 1999. From
1994 to 1995 he served as Vice President and Chief Financial Officer of Axxess
Technologies, Inc. and from 1993 to 1994 served as Secretary, Treasurer and
Vice President of Golden Technologies Company, Inc., a wholly-owned subsidiary
of ACX. From 1992 to 1993, Mr. Warren was President of Coors Ceramicon Designs,
Ltd., a subsidiary of CoorsTek, and from 1985 to 1992 was Vice President of
CoorsTek. Mr. Warren received a bachelor's degree in accounting from Arizona
State University.
Other officers are:
Janet D. Comerford, age 41, has been Vice President of Human Resources
and Environmental Health and Safety of CoorsTek since October 1998. Ms.
Comerford was Regional Human Resources Manager of CoorsTek from 1997 to 1998,
served as Manager of Administration from 1994 to 1997 and was a Production
Manager from 1991 to 1994. Ms. Comerford received a bachelor's degree in
business administration from the University of Arizona.
Dean A. Rulis, age 52, has been Vice President of Acquisitions and
Technology of CoorsTek since 1998. He was President and General Manager of
Wilbanks International, Inc. (a wholly owned subsidiary of CoorsTek) from 1997
to 1998; President of Golden Technologies Company, Inc. from 1992 to 1997. He
holds a bachelor's degree in mechanical engineering from Purdue University.
40
<PAGE>
EXECUTIVE COMPENSATION
Compensation Philosophy
CoorsTek's compensation philosophy is intended to create value for
CoorsTek's stockholders through long-term growth in sales and earnings. The
total compensation package will consist of salary, benefits, an annual
incentive opportunity and equity grants and will be designed to attract,
motivate and retain the quality of executives needed to successfully lead and
manage CoorsTek. This package will intentionally tie a significant portion of
the executives' total compensation to CoorsTek's performance and creation of
shareholder value.
CoorsTek Cash Compensation Arrangements
The following table sets forth the initial annual base salaries to be
paid for fiscal year 2000 to the named executive officers. The compensation
amounts do not include incentive cash bonuses that may be payable under
management incentive plans, but which will not be determined until a future
date.
<TABLE>
<CAPTION>
Estimated Cash
Name Position Compensation
---- -------- --------------
<S> <C> <C>
Joseph Coors, Jr. ...... Chairman and Chief Executive Officer $533,000
John K. Coors........... President $300,000
Derek C. Johnson........ Executive Vice President $240,000
Larry D. Murphy......... Executive Vice President $402,000
Joseph G. Warren, Jr. .. Chief Financial Officer and Treasurer $240,000
</TABLE>
Summary of Executive Compensation
The following information relates to the compensation paid by ACX to
Joseph Coors, Jr., who was as of December 31, 1998, and who will be as of the
Distribution Date, the Chief Executive Officer of CoorsTek. Other individuals
who will be executive officers of CoorsTek as of the Distribution Date, were
not among the CoorsTek executive officers for the year ended December 31, 1998
or earned less than $100,000 during 1998 and as a result are not included in
the table. All cash compensation reported in the table was paid by ACX and all
stock compensation was in the form of ACX common stock or options to purchase
shares of ACX common stock.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation/
Annual Compensation Awards
------------------------------ -------------
Securities
Other Annual Underlying All other
Name and Principal Salary Bonus Compensation Options/ SARs Compensation
Position Year ($) ($) ($) (#) ($)
------------------ ---- -------- -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph Coors, Jr. ..... 1998 $485,000 $305,550 -- 62,000 $12,705(1)
Chairman and Chief Ex-
ecutive 1997 $460,000 $479,780 $3,236(2) 15,000 $ 8,659
Officer 1996 $460,000 $437,460 -- -- $ 8,408
</TABLE>
- --------
(1) Other Compensation includes the value of term life insurance benefitting
the executive and the employer's contribution to the 401(k) plan,
respectively, as follows: $8,705 and $4,000.
(2) The amount shown is reimbursement during the year for taxes.
41
<PAGE>
CoorsTek Executive Incentive Compensation
Stock Option and Incentive Plan
CoorsTek has adopted the Stock Option and Incentive Plan (the "Incentive
Plan"), which provides for the grant of stock options, stock appreciation
rights, restricted stock, restricted stock units, deferred stock awards,
unrestricted stock awards, performance stock awards, dividend equivalent
rights, performance awards and annual incentive awards. Awards may be made
under the Incentive Plan to employees and directors of the Company and to any
other individual whose participation in the Incentive Plan is determined to be
in the best interests of the Company by the Board. The number of shares of
common stock to be reserved for issuance under the Incentive Plan is the number
of shares needed in substitution of ACX options plus an additional one million
shares, subject to adjustment for stock dividends, splits and other similar
events. Stock options intended to qualify as incentive stock options under the
Internal Revenue Code of 1986, and options that do not qualify as incentive
stock options may be granted under the Incentive Plan. The exercise price of
each option will be determined by the Board (or a committee if the Board so
delegates) but may not be less than 100% of the fair market value of the
Company's common stock on the date of grant unless the stock options are
granted in lieu of cash compensation forfeited by the participant, in which
case, the exercise price will be discounted by the amount of cash compensation
surrendered.
Deferred Compensation Plan
CoorsTek has adopted the Executive Deferred Compensation Plan (the
"Deferred Plan") which provides for the deferral of up to 100% of an eligible
employee's bonus and annual salary. The amounts deferred are first invested as
a contribution to the Company's 401(k) plan until the maximum elective
contribution permitted by the 401(k) plan is met. Additional amounts may also
be deferred in investments established by the Board. Eligible employees must
elect to participate in the Deferred Plan at least 30 days prior to the
commencement of the year in which the compensation to be deferred is earned. An
election to defer earnings must be made for a period of no less than 24 months
from the date the amount would otherwise have been paid. Payments of deferred
earnings may be made in a lump sum or in pro-rata annual installments for a
period not to exceed 10 years from the date participant's employment is
terminated. The Deferred Plan also provides for the payment of a benefit if the
pension payable to the participant from the Company's retirement plan is
limited by Code Section 415 or Code Section 401(a)(17). To the extent a benefit
is provided to the participant under the Deferred Plan because of limits
imposed by Code Section 401(a)(17), it shall be reduced by the participant's
Section 415 benefit.
Option/SAR Grants in Last Fiscal Year
The following table provides information on grants of options to purchase
shares of ACX common stock made during 1998. All options are granted at the ACX
common stock's market value on the grant date, and each grant has an expiration
date as specified in the table. All options vest in the event of a change in
control. The option price may be paid in cash, by surrendering shares owned for
more than 6 months, or through irrevocable instructions to a broker to deduct
the option price from the proceeds of the sale.
Individual Grants
<TABLE>
<CAPTION>
Number of %of Total
Securities Options/SARS Grant
Underlying Granted to Date
Options/SARs Employees Exercise or Present
Granted in Fiscal Base Price Value
Name (#) Yr. ($/Sh) Expiration Date ($)(1)
---- ------------ ------------ ----------- --------------- --------
<S> <C> <C> <C> <C> <C>
Joseph Coors, Jr. ...... 62,000(2) 13.0% $24.344 2/10/08 $795,460
</TABLE>
42
<PAGE>
- --------
(1) Values indicated are an estimate based on the Black-Scholes option pricing
model using the following assumptions: (a) 28.1 percent stock price
volatility based on the average stock price volatility of the companies
included in the S&P Manufacturing (Diversified/Industrials) Index; (b) 5.63
percent risk-free rate of return; (c) zero dividend yield; (d) anticipated
exercising at the end of the option term; and (e) no adjustment for non-
transferability or risk of forfeiture. The actual value realized will be
determined by the excess of the stock price over the exercise price on the
date the option is exercised. There is no certainty the actual value
realized will be at or near the value estimated by the Black-Scholes option
pricing model.
(2) Options granted annually vest ratably over 3 years with each vested
increment being exercisable until the tenth anniversary of the grant date.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities In-The-Money
Underlying Unexercised Options/SARs
Shares Acquired Value Options/SARs at 12/31/98 ($) (1)
On Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph Coors, Jr. ...... 5,900 $87,269 607,266 90,900 $273,418 $ 0
</TABLE>
- --------
(1) Value of unexercised options equals market value of the shares ($12.8125)
underlying in-the-money options at December 31,1998, less the exercise
price, times the number of in-the-money options outstanding.
Retirement Plan
The Board of Directors of ACX Technologies, Inc. approved the spin-off of
the assets and liabilities of the ACX Technologies, Inc. Retirement Plan
attributable to current and former employees of CoorsTek and its subsidiaries
into a separate CoorsTek Retirement Plan ("Retirement Plan"), effective August
31, 1999. The Retirement Plan's assets will be held in trust. The provisions of
the Retirement Plan will be substantially the same as the provisions applicable
to the CoorsTek portion of the ACX Retirement Plan. The Retirement Plan will be
administered by an administrative committee appointed by the Board of Directors
of CoorsTek. Until the spin-off is completed, employees of CoorsTek and its
subsidiaries will continue to participate in the ACX retirement plan.
The retirement benefit is generally based on length of service and
average monthly compensation. Compensation taken into account is the total base
compensation, including commissions, overtime pay and amounts deferred by the
employee under Company plans pursuant to (S)(S) 125 and 401(k) of the Internal
Revenue Code of 1986, as amended, but excluding profit sharing pay and cash
bonuses. Average monthly compensation is determined by using the average of the
highest 36 consecutive months out of the last ten years, including years with
ACX and its subsidiaries and Adolph Coors Company and its subsidiaries.
The normal annual retirement benefit equals 1.25% of average annual
compensation times years of service (maximum of 25 years), plus .5% of average
annual compensation in excess of covered compensation times years of service
(maximum of 25 years), plus .5% of average annual compensation times years of
service in excess of 25 years, plus, beginning in 1996, the sum of 1.5% of
bonus pay for each plan year (not to exceed 25% of base pay). Covered
compensation is generally based on an average of the Social Security taxable
wage bases in effect during the 35 years ending with the calendar year in which
the employee's social security retirement age occurs. Years of service includes
years of service with ACX and its subsidiaries (and Adolph Coors Company and
its subsidiaries with respect to certain employees).
43
<PAGE>
Unreduced normal retirement benefits are payable under the Retirement
Plan at (i) age 65, regardless of years of service or (ii) any time after age
60 provided age plus years of vesting service total at least 90. The benefit
accrued under the pension formula set forth above is in the form of a straight
life annuity. An employee with at least ten years of vesting service who
retires prior to normal retirement date is eligible for a retirement benefit,
at reduced rates, provided the employee is at least age 55.
The following table sets forth annual retirement benefits for
representative years of service and average annual compensation as of December
31, 1998. The amounts shown in the table were calculated without taking into
account an amount for covered compensation; accordingly, the benefits shown
would be subject to a reduction to reflect the payment of Social Security
benefits. Furthermore, the amounts shown in the table were calculated without
adding any amounts related to the portion of the formula which adds, beginning
in 1996, the sum of 1.5% of bonus pay for each plan year (not to exceed 25% of
base pay). This portion of the formula is not based on average annual
compensation.
The maximum permissible benefit under ERISA from the qualified Retirement
Plan for 1998 was $130,000. In addition, the maximum compensation for 1998 that
may be used in determining benefits from the qualified Retirement Plan is
$160,000. CoorsTek's Executive Deferred Compensation Plan provides for the
benefits that are not payable from the Retirement Plan because of these two
limitations. The amounts shown in this table include the benefits payable under
the Executive Deferred Compensation Plan because of these two limitations.
Pension Plan
<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------------
Remuneration 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $ 32,813 $ 43,750 $ 54,688 $ 57,813 $ 56,328
$150,000 39,375 52,500 65,625 69,375 67,594
$175,000 45,938 61,250 76,563 80,938 78,859
$200,000 52,500 70,000 87,500 92,500 90,125
$225,000 59,063 78,750 98,438 104,063 101,391
$250,000 65,625 87,500 109,375 115,625 112,656
$275,000 72,188 96,250 120,313 127,188 123,922
$300,000 78,750 105,000 131,250 138,750 135,188
$325,000 85,313 113,750 142,188 150,313 146,453
$350,000 91,875 122,500 153,125 161,875 157,719
$375,000 98,438 131,250 164,063 173,438 168,984
$400,000 105,000 140,000 175,000 185,000 180,250
$425,000 111,563 148,750 185,938 196,563 191,516
$450,000 118,125 157,500 196,875 208,125 202,781
$475,000 124,688 166,250 207,813 219,688 214,047
$500,000 131,250 175,000 218,750 231,250 225,313
$525,000 137,813 183,750 229,688 242,813 236,578
$550,000 144,375 192,500 240,625 254,375 247,844
$575,000 150,938 201,250 251,563 265,938 259,109
</TABLE>
- --------
(1) As of fiscal year-end 1998, average annual compensation covered by the
Retirement Plan, which is equal to the highest average salary amount over a
consecutive 36 month period in the last 10 years, and credited years of
service with ACX, including previous compensation and years of service with
CoorsTek and its subsidiaries, for the named executives are as follows:
Joseph Coors, Jr.--$466,808 and 22 years; John K. Coors--$174,152 and 20
years; and Derek C. Johnson--
44
<PAGE>
$125,600 and 14 years. Larry D. Murphy and Joseph G. Warren, Jr. have been
with CoorsTek less than the above 36-month period.
Employment Contracts, Termination of Employment, Salary Continuation and
Change-in-Control Arrangements
CoorsTek has employment contracts with all of the named executives for a
three year period. Under the contracts, the executives receive an annual salary
as indicated in the Compensation Table, receive a $25,000 signing bonus and are
eligible to participate in equity incentive and annual bonus plans. In
addition, Larry D. Murphy received 85,000 ACX nonqualified stock options and
Joseph G. Warren, Jr. received 50,000 ACX nonqualified stock options subject to
vesting conditions based on time and stock performance. Upon termination, the
executive receives: nothing if terminated for cause; the greater of the
remaining term or one year's salary if termination is not for cause but two
years salary if termination is due to a Change in Control (as defined in the
stock option and incentive plan); and a gross-up amount if certain excise tax
payments are triggered.
Compensation received by the named executives upon retirement includes
normal retirement benefits and, for the Chief Executive Officer and the
President, a number of shares of stock to be granted under salary continuation
agreements. The shares will be payable in full upon retirement at age 60 or
after. Additionally, the shares will be 50 percent vested at age 50 with 10
years of service and the remaining 50 percent will vest in 5 percent increments
between ages 51 and 60.
In addition, in the case of a Change in Control of CoorsTek, CoorsTek's
compensation plans will be affected as follows: (1) under the Stock Option and
Incentive Plan, all outstanding options will become exercisable in full and all
stock units will become payable in full and prorated bonuses will be calculated
and paid, if earned; (2) under the Executive Deferred Compensation Plan,
distributions of deferred amounts will be made in a lump sum within 90 days
after the Change in Control; and (3) under the salary continuation agreements,
stock units vest 100% without regard to the executive's age or service. The
definition of change in control for these purposes is as follows: (i) if
beneficial ownership of 50% or more of either the outstanding shares of
CoorsTek's common stock or the combined voting power of CoorsTek's voting stock
is acquired by persons or entities not related to CoorsTek without consent of
the current Board, (ii) upon the election of individuals constituting a
majority of the Board who were either not members prior to their election or
not recommended to the stockholders by the Board, (iii) upon a merger,
consolidation or sale of all or substantially all of CoorsTek's assets,
whereupon (a) at least 50% of the outstanding shares of CoorsTek's common stock
and of the combined voting power of voting securities are not held in the same
proportion, and by the same persons as the beneficial owners prior to such
event, (b) at least 35% of CoorsTek's common stock is held by a person that did
not hold such amount prior to the event and (c) a majority of the current Board
did not continue to serve as directors, or (iv) approval by the stockholders of
CoorsTek of a complete liquidation or dissolution of CoorsTek.
45
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
OF COORSTEK
None of the present executive officers or directors of CoorsTek currently
owns any shares of CoorsTek common stock, all of which are owned currently by
ACX. However, the executive officers and directors of CoorsTek will receive, by
virtue of their ownership of ACX common stock, shares of CoorsTek common stock
in the spin-off. In addition, as discussed under "Management," certain existing
options and warrants to purchase shares of ACX common stock under ACX executive
plans will be converted into comparable options and warrants to purchase shares
of CoorsTek common stock.
The following table lists beneficial ownership of ACX common stock as of
September 30, 1999 by owners of more than five percent of the ACX common stock,
each of the directors, each of the named executive officers and all directors
and executive officers of CoorsTek as a group. Except as otherwise indicated,
the beneficial owner has sole voting and investment power.
<TABLE>
<CAPTION>
Amount and Nature of
Address for 5% Beneficial Percent
Name Owners Ownership of Class
---- ---------------------------- -------------------- --------
<S> <C> <C> <C>
Adolph Coors, Jr. Trust Adolph Coors Company 2,800,000 9.8%
(William K. Coors, Golden, Colorado 80401
Jeffrey H.
Coors, J. Brad Coors,
Joseph
Coors, and Peter H.
Coors, co-
trustees with shared
voting and
investment power)
Grover C. Coors Trust Adolph Coors Company 2,727,016 9.6%
(William K. Coors, Golden, Colorado 80401
Jeffrey H.
Coors, John K. Coors,
Joseph
Coors, and Joseph
Coors, Jr., co-
trustees with shared
voting and
investment power)
May Kistler Coors Trust Adolph Coors Company 1,726,652 6.1%
(William K. Coors, Golden, Colorado 80401
Jeffrey H.
Coors, Joseph Coors,
Joseph
Coors, Jr. and Peter
H. Coors,
co-trustees with
shared voting
and investment power)
Tweedy, Browne Company 52 Vanderbilt Avenue 1,481,685 5.2%
LLC New York, New York 10017
and Affiliates
Herman F. Coors Trust Adolph Coors Company 1,435,000 5.0%
(William K. Coors, Golden, Colorado 80401
Jeffrey H.
Coors, Joseph Coors,
Joseph
Coors, Jr. and Peter
H. Coors, co-
trustees with shared
voting
and investment power)
William K. Coors (1) Adolph Coors Company 1,856,421 6.5%
Golden, Colorado 80401
Jeffrey H. Coors (2) ACX Technologies, Inc. 2,477,883 8.7%
16000 Table Mountain Parkway
Golden, Colorado 80403
Joseph Coors (3) Adolph Coors Company 1,981,788 7.0%
Golden, Colorado 80401
Peter H. Coors (4) Adolph Coors Company 1,735,726 6.1%
Golden, Colorado 80401
John K. Coors (5) 54,558 *
Joseph Coors, Jr. (6) CoorsTek, Inc. 2,459,392 8.6%
16000 Table Mountain Parkway
Golden, Colorado 80403
Derek C. Johnson (7) 14,532 *
Larry D. Murphy 0 --
Joseph G. Warren, Jr. 0 --
Directors and Executive
Officers
as a Group (6 persons) 2,517,482 8.8%
</TABLE>
46
<PAGE>
- --------
* Holds less than 1% of the Common Stock
(1) Includes 1,726,652 shares held by William K. Coors as trustee of the May
Kistler Coors Trust, as to which he shares voting and investment power with
Jeffrey H. Coors, Joseph Coors, Joseph Coors, Jr. and Peter H. Coors, as
co-trustees. Includes 3,333 shares of ACX common stock issuable pursuant to
options that are currently exercisable or will be exercisable within 60
days.
(2) Includes 1,726,652 shares held by Jeffrey H. Coors as trustee of the May
Kistler Coors Trust, as to which he shares voting and investment power with
William K. Coors, Joseph Coors, Joseph Coors, Jr. and Peter H. Coors, as
co-trustees. Does not include: 72,350 shares of Common Stock restricted and
unissued until the earlier of (i) grantee's retirement, death, disability
or termination of employment, or (ii) the year 2000 (5,726) shares), 2001
(3,600 shares), 2002 (5,344 shares), 2004 (10,096 shares), 2005 (11,443)
and 2010 (12,618 shares); or 66,672 shares of Common Stock restricted and
unissued until retirement. Includes 628,442 shares of ACX common stock
issuable pursuant to options that are currently exercisable or will be
exercisable within 60 days.
(3) Includes 250,000 shares held by Joseph Coors as co-trustee of his revocable
trust. Also includes 1,726,652 shares held by Joseph Coors as trustee of
the May Kistler Coors Trust, as to which he shares voting and investment
power with William K. Coors, Jeffrey H. Coors, Joseph Coors, Jr. and Peter
H. Coors, as co-trustees. Includes 2,000 shares of ACX common stock
issuable pursuant to options that are currently exercisable or will be
exercisable within 60 days.
(4) Includes 1,726,652 shares held by Peter H. Coors as trustee of the May
Kistler Coors Trust, as to which he shares voting and investment power with
William K. Coors, Jeffrey H. Coors, Joseph Coors, and Joseph Coors, Jr., as
co-trustees.
(5) Does not include 18,156 shares of ACX common stock restricted and unissued
until retirement. Includes 52,324 shares of ACX common stock issuable
pursuant to options that are currently exercisable or will be exercisable
within 60 days.
(6) Includes 1,726,652 shares held by Joseph Coors, Jr. as trustee of the May
Kistler Coors Trust, as to which he shares voting and investment power with
William K. Coors, Jeffrey H. Coors, Joseph Coors and Peter H. Coors, as co-
trustees. Does not include 1,798 shares of ACX common stock restricted and
unissued until the earlier of retirement or death, disability or
termination of employment; or 64,032 shares of common stock restricted and
unissued until retirement. Includes 651,832 of ACX common stock issuable
pursuant to options that are currently exercisable or will be exercisable
within 60 days.
(7) Includes 11,332 shares of ACX common stock issuable pursuant to options
that are currently exercisable or will be exercisable within 60 days.
47
<PAGE>
DESCRIPTION OF INDEBTEDNESS
In connection with the spin-off, CoorsTek expects to enter into a Credit
Agreement (the "Bank of America Loan"), provided by Bank of America and a
syndicate of other lenders. The Bank of America Loan will provide for a $270
million credit facility consisting of a $95 million revolving credit facility
maturing in five years, an $85 million term facility maturing in five years and
a $90 million term facility maturing in seven years. Borrowings under the
credit facility will bear interest at rates generally based on LIBOR plus a
spread that will vary depending upon CoorsTek's performance. The Bank of
America Loan will be collateralized by the accounts receivable and inventory of
CoorsTek and all of the outstanding capital stock of CoorsTek's subsidiaries,
whether now owned or later acquired. The agreement for the Bank of America Loan
is expected to contain covenants restricting liens, capital expenditures,
investments, borrowing, payment of dividends, mergers, and acquisitions and
sales of assets. In addition, the agreement for the Bank of America Loan, as
amended, is expected to contain financial covenants restricting maximum annual
capital expenditures and requiring maintenance of the following ratios:
. maximum total debt to EBITDA (as defined in the agreement for the
Bank of America Loan);
. minimum EBITDA to interest; and
. minimum tangible net worth.
CoorsTek will pay $200 million of the debt proceeds to ACX for reduction
of intercompany obligations and payment of a special dividend.
48
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Authorized Shares
Under CoorsTek's Certificate of Incorporation, the authorized capital
stock of CoorsTek consists of 100,000,000 shares of common stock, par value
$.01 per share, and 20,000,000 shares of preferred stock, $.01 par value per
share. ACX currently owns all outstanding shares of common stock. No shares of
preferred stock have been issued. Immediately after the spin-off, based on the
number of shares of common stock of ACX outstanding at November 26, 1999 and
the distribution ratio of one share of CoorsTek common stock for every four
shares of ACX common stock, approximately 7,134,880 shares of the CoorsTek
common stock and no shares of the preferred stock will be issued and
outstanding. ACX will not own shares of CoorsTek common stock after the spin-
off.
Common Stock
Holders of CoorsTek common stock are entitled to one vote for each share
on all matters voted on by stockholders. Holders of CoorsTek common stock do
not have cumulative voting rights in the election of directors. The first
annual meeting of stockholders is expected to be held during 2001.
There is no established public trading market for CoorsTek common stock,
although a "when issued" market is expected to develop prior to the spin-off
date. We have applied for inclusion of CoorsTek common stock on the Nasdaq
National Market. We expect to receive approval of such inclusion prior to the
spin-off.
All shares of CoorsTek common stock to be distributed will be fully paid
and nonassessable. Holders of CoorsTek common stock do not have any
subscription, redemption or conversion privileges.
Under the Delaware General Corporation Law, we may pay dividends out of
"surplus" (as determined in accordance with the Delaware General Corporation
Law) or, if there is no surplus, out of net profits for the fiscal year in
which the dividends are declared and/or the preceding fiscal year (subject to
certain restrictions). Subject to the preferences or other rights of any
CoorsTek preferred stock that may be issued from time to time, holders of
CoorsTek common stock are entitled to participate ratably in dividends on the
common stock as declared by the Board of Directors. Our dividend policy will be
established by our Board of Directors from time to time. Subject to legal and
contractual restrictions, the Board of Directors' decisions regarding dividends
will be based on all considerations that in its business judgment are relevant
at the time, including past and projected earnings, cash flows, economic,
business and securities market conditions and anticipated developments
concerning our business and operations. We do not currently intend to pay
dividends on the common stock.
Holders of CoorsTek common stock are entitled to share ratably in all
assets available for distribution to stockholders in the event of liquidation
or dissolution of CoorsTek, subject to distribution of the preferential amount,
if any, to be distributed to holders of preferred stock.
Preferred Stock
The Certificate of Incorporation authorizes the Board, without any vote
or action by the holders of common stock, to issue preferred stock from time to
time in one or more series. The Board is authorized to determine the number of
shares and to fix the powers, designations, preferences and relative,
participating, optional or other special rights of any series of preferred
stock. Issuances of preferred stock would be subject to the applicable rules of
the Nasdaq National Market or other organizations on which CoorsTek stock is
then quoted or listed. Depending upon the terms of preferred stock established
by the Board of Directors, any or all series of preferred stock could have
preference over the common stock with respect to dividends and other
distributions and upon liquidation of
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CoorsTek. If any shares of preferred stock are issued with voting powers, or if
additional shares of common stock are issued, the voting power of the
outstanding common stock would be diluted.
CoorsTek believes that the availability of preferred stock will provide
increased flexibility to facilitate possible future financings and acquisitions
and to meet other corporate needs that might arise.
Transfer Agent and Registrar
Norwest Bank Minnesota, NA will be the transfer agent and registrar for
the CoorsTek common stock immediately following the spin-off.
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ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS
CoorsTek's Certificate of Incorporation and Bylaws, the Delaware General
Corporation Law and the Stockholder Rights Plan contain provisions that may
discourage or delay the acquisition of control of CoorsTek by means of a tender
offer, open market purchases, a proxy contest or otherwise.
Purposes of Provisions
The relevant provisions of the Certificate of Incorporation and Bylaws
are intended to discourage certain types of transactions that may involve an
actual or threatened change of control of CoorsTek and to encourage any person
who might seek to acquire control of CoorsTek to negotiate with the Board of
Directors. Management of ACX and CoorsTek believe that generally the interests
of the stockholders would be served best if any change in control results from
negotiations with the CoorsTek Board of the proposed terms, such as the price
to be paid, the form of consideration and the anticipated tax effects of the
transaction. However, to the extent that these provisions do discourage
takeover attempts, they could make it more difficult to accomplish transactions
that are opposed by the incumbent Board and could deprive stockholders of
opportunities to realize takeover premiums for their shares or other advantages
that large accumulations of stock would provide.
The Certificate of Incorporation, the Bylaws and the Stockholder Rights
Plan will be effective on or before the Distribution Date, and are filed as
exhibits to CoorsTek's registration statement on Form 10 of which this
Information Statement is a part.
Delaware Section 203
Section 203 of the Delaware General Corporation Law provides that,
subject to certain exceptions, a corporation shall not engage in any "business
combination" with any "interested stockholder" for a three-year period
following the time that such stockholder becomes an interested stockholder
unless:
. prior to such time, the board of directors of the corporation
approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
. upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain
shares); or
. on or subsequent to such time, the business combination is approved
by the board of directors of the corporation and by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not
owned by the interested stockholder.
Section 203 generally defines an "interested stockholder" to include:
. any person that is the owner of 15% or more of the outstanding voting
stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within three years
immediately prior to the relevant date; and
. the affiliates and associates of any such person.
Section 203 generally defines a "business combination" to include:
. mergers and sales or other dispositions of 10% or more of the assets
of the corporation with or to an interested stockholder;
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. certain transactions resulting in the issuance or transfer to the
interested stockholder of any stock of the corporation or its
subsidiaries;
. certain transactions which would result in increasing the
proportionate share of the stock of the corporation or its
subsidiaries owned by the interested stockholder; and
. receipt by the interested stockholder of the benefit (except
proportionately as a stockholder) of any loans, advances, guarantees,
pledges, or other financial benefits.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period, although the
certificate of incorporation or stockholder-adopted bylaws may exclude a
corporation from the restrictions imposed thereunder. Neither the Certificate
of Incorporation nor the Bylaws exclude CoorsTek from the restrictions imposed
under Section 203. It is anticipated that the provisions of Section 203 may
encourage companies interested in acquiring CoorsTek to negotiate in advance
with the Board of Directors since the stockholder approval requirement would be
avoided if the Board approves, prior to the time the acquirer becomes an
interested stockholder, either the business combination or the transaction that
results in the acquirer becoming an interested stockholder.
Classification of the Board
Effective as of the first annual meeting of stockholders, to be held in
2001, the total number of directors will be divided into three classes, with
each class containing one-third of the total, as near as may be. The terms of
directors will expire as follows:
. the terms of the first class will expire at the second annual meeting
of stockholders held after the spin-off,
. the terms of directors in the second class will expire at the third
annual meeting of stockholders held after the spin-off, and
. the terms of directors in the third class will expire at the fourth
annual meeting of stockholders held after the spin-off.
Upon the expiration of the initial staggered terms, directors shall be
elected for terms of three years to succeed those whose terms expire. Of the
initial directors, the first class will consist of two persons, the second
class will consist of two persons and the third class will consist of one
person. The two additional directors will be elected to the third class and the
first class, respectively. The structure of the classified board is intended to
promote continuity and stability of CoorsTek's management and policies because
a majority of the directors serving at any given time will have prior
experience as directors of CoorsTek.
The classification of directors could make it more difficult for
stockholders to quickly change the composition of the Board. At least two
annual meetings of stockholders, instead of one, generally would be required to
effect a change in the majority of the Board.
Number of Directors; Removal; Vacancies
The Certificate of Incorporation provides that the number of directors
shall not exceed 11. The initial Board of Directors will consist of seven
persons. The exact number of directors is set in accordance with the Bylaws by
resolution from time to time of two-thirds of the directors then in office.
Interim vacancies on the Board, or vacancies created by an increase in the
number of directors, may be filled by a majority of the directors then in
office. A director appointed to fill a vacancy will hold office for the
remainder of the term of the class of director in which the vacancy occurred or
the new directorship was created.
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Directors may be removed for cause only by a class vote of the holders of
two-thirds of the stockholders entitled to vote thereon. This provision, in
conjunction with the provisions of the Certificate of Incorporation authorizing
the Board to fill vacant directorships, would prevent stockholders holding less
than two-thirds of the voting stock from removing incumbent directors and
filling the resulting vacancies with their own nominees.
Stockholder Action
The Certificate of Incorporation requires all stockholder action to be
taken at an annual or special meeting of stockholders and prohibits stockholder
action by written consent, unless the action is by unanimous consent. The
Certificate of Incorporation and Bylaws also provide that special meetings of
stockholders may be called by the Board of Directors, the Chairperson or the
President.
The provisions prohibiting stockholder action by consent resolution
except by unanimous consent and, not permitting any stockholder or group
thereof to call a special meeting may have the effect of delaying consideration
of a stockholder proposal until the next annual meeting of the stockholders
unless a special meeting is called by the Board of Directors, the Chairperson
or the President.
Stockholder Proposals
CoorsTek's Bylaws establish an advance notice procedure for nominations
(other than by or at the direction of the Board) of candidates for election as
directors at, and for proposals to be brought before, an annual meeting of
stockholders. Subject to any other applicable requirements, only such
nominations may be considered and such business may be conducted at an annual
meeting as have been brought before the meeting by or at the direction of the
Board or by a stockholder who has given to the Secretary of CoorsTek timely
written notice, in proper form, of the same.
To be timely, notice of nominations or other business to be brought
before an annual meeting must be received by the Secretary of CoorsTek not less
than 90 days nor more than 120 days prior to the anniversary of the preceding
year's annual meeting. For the purposes of CoorsTek's first annual meeting held
after 2000, the anniversary date shall be deemed to be May 15, 2001.
Each notice must set forth:
. the identity (including name and address) of the stockholder or
stockholders who intend to make the nomination or proposal,
. the class and number of shares of common stock and preferred stock
owned directly or indirectly, by such stockholder,
. a representation that the stockholder is a holder of record of Coors
Ceramic stock entitled to vote at the meeting and intends to appear
in person or by proxy at the meeting to propose the business or
nomination,
. a representation whether the stockholder or the beneficial owner, if
any, intends or is part of a group which intends:
. to deliver a proxy statement and/or form of proxy to holders of at
least the percentage of CoorsTek's capital stock required to approve
the proposal or elect the nominee, or
. otherwise to solicit proxies from stockholders in support of the
proposal or nomination,
. in the case of a stockholder proposal,
-- a brief description of the business desired to be brought before
the meeting,
-- the text of the proposal (including the text of any resolutions
proposed for consideration and in the event that the business
includes a proposal to amend the Bylaws, the language of the
proposed amendment),
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-- the reasons for conducting such business at the meeting and
-- any material interest of such stockholder in the proposed
business, if any, and
. in the case of a nomination for election of a director,
-- all information regarding the nominee proposed by the stockholder
that would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange
Commission, and
-- the consent of the nominee to be named in a proxy statement as a
candidate for election and to serve as a director if elected.
CoorsTek may require any proposed nominee to furnish such other
information as it may reasonably require to determine the eligibility of such
proposed nominee to serve as a director.
The chairperson of the meeting at which the directors are to be elected
or at which the stockholder action is to be taken shall have the power and
duty:
-- to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed in accordance with
these procedures, and
-- if any proposed nomination or business was not made or proposed in
compliance with these procedures, to declare that the nomination
shall be disregarded or that the proposed business shall not be
transacted.
These provisions are intended to facilitate planning for the conduct of
CoorsTek's annual meeting of stockholders and to provide time for proposals to
be evaluated fully. They may have the effect of precluding a nomination or the
conduct of business at a particular meeting if the proper procedures are not
followed and may deter a potential acquirer from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of CoorsTek, even if the conduct of such solicitation or such attempt
might be beneficial to the stockholders.
Acquisition Proposals
In determining whether an acquisition proposal is in the long-term best
interests of CoorsTek and its stockholders, the Certificate of Incorporation
provides that the Board may consider the effect of both an acquisition proposal
and a potential acquisition on creditors, customers and employees of CoorsTek
and on the community in general, the risks of non-consummation of an
acquisition proposal, the identity, prior background and other business
experiences of the person or entity making an acquisition proposal, and the
business plans of both CoorsTek and the person or entity making an acquisition
proposal and their respective effects on stockholder interests.
Stockholder Vote for Amendment of Certificate of Incorporation and Bylaws
Under Delaware law, amendments to a company's certificate of
incorporation require a resolution of the board of directors and the approval
of the holders of a majority of the outstanding shares entitled to vote and, in
certain cases, of a majority of the outstanding shares of each class entitled
to vote, voting separately as a class. Delaware law also permits a company's
certificate of incorporation to require a greater vote than the vote otherwise
required for any corporate action. The Certificate of Incorporation requires
the concurrence of the holders of at least two-thirds of the voting stock of
CoorsTek, voting together as a single class, to amend or repeal, or adopt any
provision inconsistent with the anti-takeover provisions of the Certificate of
Incorporation discussed above. The Certificate of Incorporation also provides
that the Bylaws may be amended or repealed by an affirmative vote of two-thirds
of the directors then in office or by an affirmative vote of two-thirds of the
stockholders entitled to vote thereon. These supermajority vote requirements
are intended to prevent a stockholder with a majority of CoorsTek's common
stock from avoiding the requirements of these provisions by simply amending
them.
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Other Provisions of Certificate
CoorsTek's Certificate of Incorporation authorizes the Board of Directors
to take such action as it may determine to be reasonably necessary or desirable
to encourage any person or entity to enter into negotiations with the Board and
management of CoorsTek respecting any transaction that may result in a change
of control and to contest or oppose any such transaction that the Board
determines to be unfair, abusive or otherwise undesirable to CoorsTek or its
stockholders, business, customers, employees or other constituencies. This
provision specifically permits the Board to adopt plans or to issue securities
(including common stock or preferred stock, rights or debt securities), which,
among other things, may be exchangeable or convertible into cash or other
securities on such terms as the Board determines, may provide for differential
and unequal treatment of different holders or classes of holders and may
contain restrictions that preclude or limit the entitlement, exercise or
transfer of such securities by a person who, after their creation, acquires a
certain percentage of CoorsTek's voting stock. This provision is intended, in
part, to give the Board greater bargaining power to negotiate on behalf of
stockholders in the event of a takeover proposal. It may, however, discourage
or make more difficult a hostile takeover or acquisition of control and could
deprive stockholders of possible opportunities to realize premiums for their
shares and reduce the risk to management that it might be displaced by a
takeover.
Preferred Stock and Additional Common Stock
The Board's authority to issue of shares of common stock and preferred
stock and to fix by resolution the terms and conditions of each series of
preferred stock may either impede or facilitate the completion of a merger,
tender offer or other takeover attempt. For example, the issuance of new shares
might impede a business combination if the terms of those shares include series
voting rights that would enable the holder to block business combinations or
the issuance of new shares might facilitate a business combination if those
shares have general voting rights sufficient to cause an applicable percentage
vote requirement to be satisfied. The Board of Directors will make any
determination regarding issuance of additional shares based on its judgment as
to the best interest of its stockholders, customers, employees or other
constituencies.
Stockholder Rights Plan
CoorsTek adopted a Stockholder Rights Plan which will cause the issuance
of, one preferred share purchase right (a "Right") for each share of CoorsTek
Common stock. Each Right will entitle the registered holder to purchase from
CoorsTek one one-thousandth of a share of Series A Junior Participating
Preferred Stock of CoorsTek (the "Junior Preferred") at an exercise price of
$38, subject to adjustment. The description and terms of the Rights will be set
forth in a Stockholder Plan Rights Agreement between CoorsTek and Norwest Bank,
N.A., as Rights Agent (the "Rights Agent").
Initially, the Rights will be attached to all certificates representing
shares of common stock then outstanding. The Rights will separate from the
common stock and a distribution of Rights Certificates will occur upon the
earlier to occur of:
. ten days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of
15% or more of the outstanding shares of common stock (the "Stock
Acquisition Date"), or
. ten business days following the commencement of a tender offer or
exchange offer the consummation of which would result in the
beneficial ownership by a person of 15% or more of the outstanding
shares of common stock.
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The earlier of such dates is referred to as the "Distribution Date."
Until the Distribution Date:
. the Rights will be evidenced by the common stock certificates, no
separate certificates evidencing the Rights will be distributed and
the Rights will be transferred only with the common stock
certificates, and
. the surrender for transfer of any certificates of common stock
outstanding will also constitute the transfer of the Rights
associated with the common stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on January 1, 2010, unless earlier redeemed or
exchanged by CoorsTek as described below. The Rights will not be exercisable by
a holder in any jurisdiction where the requisite qualification to the issuance
to such holder, or the exercise by such holder, of the Rights has not been
obtained or is not obtainable.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the common stock as of the close of business on the
Distribution Date and, thereafter, the separate Rights Certificates alone will
evidence the Rights. Except as otherwise determined by the CoorsTek Board, only
shares of common stock issued prior to the Distribution Date will be issued
with Rights.
If a person or group becomes an Acquiring Person (except pursuant to an
offer for all outstanding shares of common stock that the independent directors
determine to be fair to and otherwise in the best interests of CoorsTek and its
stockholders), each holder of a Right will, after the end of a redemption
period referred to below, have the right to receive, upon exercise, common
stock (or, in certain circumstances, cash, property or other securities of
CoorsTek) having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of the events set forth above until such time as the
Rights are no longer redeemable by CoorsTek as set forth below.
For example, at a Purchase Price of $38 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $76 worth
of common stock (or other consideration, as noted above) for $38. Assuming that
the common stock had a per share value of $19 at such time, the holder of each
valid Right would be entitled to purchase 4 shares of common stock for $38.
If, at any time following the Stock Acquisition Date,
. CoorsTek is acquired in a merger or other business combination
transaction in which CoorsTek is not the surviving corporation (other
than a merger which follows an offer for all outstanding shares of
common stock that the independent directors determine to be fair to
and otherwise in the best interests of CoorsTek and its
stockholders), or
. 50% or more of CoorsTek's assets or earning power is sold or
transferred,
each holder of a Right (except Rights that previously have been voided as set
forth above) shall, after the expiration of the redemption period referred to
below, have the right to receive, upon exercise, common stock of the acquiring
company having a value equal to two times the Purchase Price of the Right
(e.g., common stock of the acquiring company having a value of $76 for the $38
Purchase Price).
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At any time after a person or group becomes an Acquiring Person, CoorsTek
Board may exchange the Rights (other than Rights owned by such Acquiring Person
that have become void), in whole or in part, at an exchange ratio of one share
of common stock per Right (subject to adjustment).
The Purchase Price payable, and the number of one one-thousandths of a
share of Junior Preferred or other securities or property issuable, upon
exercise of the Rights, are subject to adjustment from time to time to prevent
dilution:
. in the event of a stock dividend on, or a subdivision, combination or
reclassification of the Junior Preferred,
. upon the grant to holders of the Junior Preferred of certain rights or
warrants to subscribe for Junior Preferred or convertible securities at
less than the current market price of the Junior Preferred, or
. upon the distribution to holders of the Junior Preferred of evidences of
indebtedness or assets (other than regular quarterly cash dividends and
dividends payable in Junior Preferred) or of subscription rights or
warrants (other than those referred to above).
The Stockholder Rights Plan provides that the number of outstanding
Rights shall adjust in the event of a stock dividend on CoorsTek's common stock
payable in shares of common stock and in the event of any subdivisions,
consolidations or combinations of common stock occurring, in any such case,
prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares will be issued (other than fractions
of Junior Preferred that are integral multiples of one one-thousandth of a
share of Junior Preferred, which may, at CoorsTek's election be evidenced by
depositary receipts) and in lieu thereof, an adjustment in cash will be made
based on the market price of the Junior Preferred on the last trading date
prior to the date of exercise.
CoorsTek does not have authority to redeem shares of the Junior
Preferred. Each share of Junior Preferred will be entitled, when, as and if
declared, to a minimum preferential quarterly dividend payment of the greater
of:
. $0.01 per share; and
. 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.
Upon any liquidation (voluntary or otherwise), dissolution or winding up
of CoorsTek, no distribution shall be made to the holders of shares of
CoorsTek's capital stock ranking junior to the Junior Preferred unless, prior
thereto, the holders of shares of Junior Preferred shall have received $38 per
share (the "Junior Preferred Liquidation Preference"), plus any unpaid
dividends and distributions payable thereon, whether or not declared, to the
date of such payment.
Following the payment of the Junior Preferred Liquidation Preference, no
additional distributions shall be made to the holders of Junior Preferred
unless, prior thereto, the common stockholders shall have received an amount
per share equal to the quotient obtained by dividing the Junior Preferred
Liquidation Preference by 1,000.
Each share of Junior Preferred shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the common stockholders of the
Corporation. In the event of any merger, consolidation or other transaction in
which outstanding shares of Ceramics common stock are
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converted or exchanged, each share of Junior Preferred will be entitled to
receive 1,000 times the amount received per share of common stock. These
rights, and the rights described in the preceding two paragraphs, are protected
by customary antidilution provisions.
In general, the Board may cause CoorsTek to redeem the Rights in whole,
but not in part, at any time during the period commencing on January 1, 2000,
and ending on the tenth day following the Stock Acquisition Date, as such
period may be extended or shortened by the Board (the "Redemption Period") at a
price of $.001 per Right (payable in cash, common stock or other consideration
deemed appropriate by the CoorsTek Board). After the redemption period has
expired, CoorsTek's right of redemption may be reinstated if an Acquiring
Person reduces his beneficial ownership to 10% or less of the outstanding
shares of common stock in a transaction or series of transactions not involving
CoorsTek and there are no other Acquiring Persons. Immediately upon the action
of the Board ordering redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the $.001 redemption
price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of CoorsTek, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be subject to federal taxation to stockholders or to CoorsTek, stockholders
may, depending upon the circumstances, recognize taxable income in the event
that the Rights become exercisable for common stock (or other consideration) of
CoorsTek or for common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by
CoorsTek's Board prior to the Distribution Date. After the Distribution Date,
the provisions of the Rights Agreement may be amended by CoorsTek's Board in
order to cure any ambiguity, defect or inconsistency or to make changes which
do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or to shorten or lengthen any time period
under the Rights Agreement; provided however, no amendment to adjust the time
period governing redemption may be made at such time as the Rights are not
redeemable.
The Rights are being registered under the Exchange Act, together with
common stock, pursuant to the registration statement. In the event that the
Rights become exercisable, CoorsTek will register the shares of Junior
Preferred for which the Rights may be exercised, in accordance with applicable
law.
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LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Elimination of Liability in Certain Circumstances
The Certificate of Incorporation eliminates the personal liability of
directors to CoorsTek or its stockholders for monetary damages for breach of
fiduciary duty, except in the instances described below. The Certificate of
Incorporation also provides that if Delaware law is amended to further
eliminate or limit the liability of directors, then the liability of a director
will be so eliminated or limited to the fullest extent permitted by the amended
law, without further stockholder action.
Directors remain liable for:
. breaches of their duty of loyalty to CoorsTek and its stockholders,
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of laws,
. transactions from which a director derives improper personal benefit,
and
. for unlawful distributions, under a provision of the Delaware General
Corporation Law that makes directors personally liable and which
expressly sets forth a negligence standard with respect to such
liability.
The provisions that eliminate liability as described above will apply to
officers of CoorsTek if they are directors of CoorsTek and are acting in their
capacity as directors and will not apply to officers of CoorsTek who are not
directors.
CoorsTek believes the diligence exercised by directors stems primarily
from a desire to act in the best interest of CoorsTek and not from a fear of
monetary damages awards. Consequently, CoorsTek believes that the level of
scrutiny and care exercised by CoorsTek's directors and officers will not be
lessened by the limitations on liability provided by the Certificate of
Incorporation.
Indemnification and Insurance
The Delaware General Corporation Law contains provisions permitting and,
in some situations, requiring Delaware corporations to provide indemnification
to their officers and directors for losses and litigation expense incurred in
connection with their service to the corporation in those capacities. The
Certificate of Incorporation and Bylaws contain provisions that require
CoorsTek to indemnify its directors and officers to the fullest extent
permitted by law. Indemnification includes advancement of reasonable expenses
in certain circumstances.
The Delaware General Corporation Law permits indemnification of a
director of a Delaware corporation, in the case of a third party action, if the
director
. conducted himself or herself in good faith,
. reasonably believed that
-- in the case of conduct in his or her official capacity, his or
her conduct was in the corporation's best interest, or
-- in all other cases, his or her conduct was at least not opposed
to the corporation's best interest, and
. in the case of any criminal proceeding, had no reasonable cause to
believe that his or her conduct was unlawful.
The Delaware General Corporation Law further provides for mandatory
indemnification of directors and officers who are wholly successful on the
merits or otherwise in litigation. The Delaware
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statute limits the indemnification that a corporation may provide to its
directors in a derivative action in which the director is held liable to the
corporation, or in any proceeding in which the director is held liable on the
basis of his or her improper receipt of a personal benefit.
In addition, the Delaware General Corporation Law and CoorsTek's Bylaws
authorize CoorsTek to purchase insurance for its directors and officers
insuring them against certain risks as to which CoorsTek may be unable lawfully
to indemnify them. CoorsTek intends to maintain insurance coverage for its
officers and directors as well as insurance coverage to reimburse CoorsTek for
potential costs of its corporate indemnification of officers and directors.
CoorsTek may enter into agreements with its directors providing contractually
for indemnification consistent with the Certificate of Incorporation and
Bylaws.
The Bylaws also provide with respect to officers and directors covered by
insurance and indemnity:
. that the rights conferred on the covered officers and directors
thereby are not exclusive of any other rights which the officer or
director may have or thereafter acquire under any statute, provision
of the Certificate of Incorporation, the Bylaws, agreement, vote of
stockholders or disinterested directors, or otherwise,
. that CoorsTek's obligation, if any, to indemnify or to advance
expenses to any covered officer or director who was or is serving at
its request as a director, officer, employee or agent of another
company, partnership, joint venture, trust, enterprise or nonprofit
entity will be reduced by any amount that the covered officer or
director may collect as indemnification or advancement of expenses
from such other company, partnership, joint venture, trust,
enterprise or nonprofit entity, and
. that any repeal or modification of the relevant provisions of the
Bylaws will not adversely affect any right or protection thereunder
of any covered officer or director in respect of any act or omission
occurring prior to the time of such repeal or modification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted for directors and officers and controlling persons
pursuant to the foregoing provisions, CoorsTek has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
INDEPENDENT ACCOUNTANTS
The Board of Directors of CoorsTek will select before the end of 1999 an
independent accounting firm to audit CoorsTek's financial statements for the
year ending December 31, 1999. PricewaterhouseCoopers LLP has served as
independent accountants of ACX throughout the periods covered by the financial
statements included in this Information Statement.
60
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
COORSTEK, INC.
(A Wholly-owned Subsidiary of ACX Technologies, Inc.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Statement of Income and Comprehensive Income for each of the
three years ended December 31, 1998...................................... F-3
Consolidated Balance Sheet at December 31, 1998 and December 31, 1997..... F-4
Consolidated Statement of Cash Flows for each of the three years ended
December 31, 1998........................................................ F-5
Consolidated Statement of Shareholder's Equity for each of the three years
ended December 31, 1998.................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
Financial Statement schedule for the fiscal years ended December 31, 1998,
1997 and 1996
Schedule II--Valuation and Qualifying Accounts.......................... F-22
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of CoorsTek, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of CoorsTek, Inc. and its subsidiaries at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and the financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Denver, Colorado
September 24, 1999
F-2
<PAGE>
COORSTEK, INC.
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ ----------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Sales........................ $266,936 $230,390 $296,614 $304,824 $276,352
Cost of goods sold........... 200,455 173,291 222,906 219,821 200,220
-------- -------- -------- -------- --------
Gross profit............... 66,481 57,099 73,708 85,003 76,132
Selling, general and
administrative.............. 35,957 28,528 37,758 41,754 35,928
Asset impairment charge...... -- 11,814 11,814 -- --
-------- -------- -------- -------- --------
Operating income........... 30,524 16,757 24,136 43,249 40,204
Other income (expense):
Interest expense........... (3,693) (2,943) (4,125) (110) (182)
Interest income............ 62 49 601 82 95
Miscellaneous--net......... -- -- -- (40) 81
-------- -------- -------- -------- --------
Total other expense...... (3,631) (2,894) (3,524) (68) (6)
Income before income taxes... 26,893 13,863 20,612 43,181 40,198
Income tax expense........... 10,101 5,117 7,682 16,192 14,996
-------- -------- -------- -------- --------
Net income................... $ 16,792 $ 8,746 $ 12,930 $ 26,989 $ 25,202
======== ======== ======== ======== ========
Other comprehensive income:
Minimum pension liability
adjustment, net of tax of
$167...................... -- -- (281) -- --
Foreign currency
translation adjustments... (130) (188) (56) 27 601
-------- -------- -------- -------- --------
Comprehensive income......... $ 16,662 $ 8,558 $ 12,593 $ 27,016 $ 25,803
======== ======== ======== ======== ========
Net income per basic share of
common stock (unaudited).... $ 2.36 $ 1.23 $ 1.81 $ 3.84 $ 3.61
======== ======== ======== ======== ========
Weighted average shares
outstanding-basic
(unaudited)................. 7,111 7,130 7,126 7,030 6,975
======== ======== ======== ======== ========
Net income per diluted share
of common stock
(unaudited)................. $ 2.34 $ 1.20 $ 1.78 $ 3.74 $ 3.54
======== ======== ======== ======== ========
Weighted average shares
outstanding-diluted
(unaudited)................. 7,185 7,281 7,258 7,221 7,126
======== ======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
COORSTEK, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
------------------- ------------------
Pro Forma 1999 1998 1997
---------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............. $ -- $ -- $ 17,203 $ 988
Accounts receivable, less allowance
for doubtful accounts of $2,572 in
1999 (unaudited), $1,839 in 1998 and
$1,993 in 1997....................... 50,868 50,868 39,044 44,430
Inventories........................... 67,861 67,861 56,223 54,583
Other assets.......................... 12,893 12,893 10,241 10,566
-------- -------- -------- --------
Total current assets................ 131,622 131,622 122,711 110,567
-------- -------- -------- --------
Properties, net......................... 138,070 138,070 131,324 132,538
Goodwill, less accumulated amortization
of $5,064 in 1999 (unaudited), $3,656
in 1998 and $2,750 in 1997............. 37,454 37,454 11,839 11,951
Debt issuance costs..................... 5,000 -- -- --
Other assets............................ 13,463 13,463 12,485 7,631
-------- -------- -------- --------
Total assets........................ $325,609 $320,609 $278,359 $262,687
======== ======== ======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable...................... $ 14,836 $ 14,836 $ 10,837 $ 16,298
Accrued salaries and vacation......... 9,781 9,781 11,794 11,884
Taxes other than income............... 2,985 2,985 2,874 2,626
Accrued expenses and other
liabilities.......................... 20,977 20,977 7,911 8,110
Advances payable to Parent............ -- 9,436 -- --
-------- -------- -------- --------
Total current liabilities........... 48,579 58,015 33,416 38,918
-------- -------- -------- --------
Long-term debt payable to Parent........ -- 50,000 50,000 --
Long-term debt.......................... 205,000 -- -- --
Accrued postretirement benefits......... 15,327 15,327 15,327 14,994
Other long-term liabilities............. 13,180 13,180 13,791 5,620
-------- -------- -------- --------
Total liabilities................... 282,086 136,522 112,534 59,532
-------- -------- -------- --------
Commitments and contingencies (note 11)
Shareholders' Equity:
Common stock, 200,000 shares
authorized, $50 par value per share
(actual), 100,000,000 shares
authorized, $.01 par value per share
(pro forma); 200,000 shares issued
and outstanding (actual), 7,120,614
shares issued and outstanding (pro
forma) .............................. 71 10,000 10,000 10,000
Paid-in capital......................... 42,145 75,060 75,060 124,983
Paid-in capital-warrants................ 1,600 1,600 -- --
Retained earnings....................... -- 97,720 80,928 67,998
Other comprehensive income (loss)....... (293) (293) (163) 174
-------- -------- -------- --------
Total shareholder's equity.......... 43,523 184,087 165,825 203,155
-------- -------- -------- --------
Total liabilities and shareholder's
equity............................. $325,609 $320,609 $278,359 $262,687
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
COORSTEK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year ended December 31,
------------------ ----------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income.................. $ 16,792 $ 8,746 $ 12,930 $ 26,989 $ 25,202
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization.............. 17,587 14,933 19,977 18,664 16,159
Asset impairment charges... -- 11,814 11,814 -- --
Change in deferred income
taxes..................... (1,500) (3,619) (3,372) (972) 805
(Gain) loss on sale of
properties................ 558 98 (810) 303 975
Change in current assets
and current liabilities,
net of effects from
acquisitions:
Accounts receivable....... (6,171) 3,244 5,386 (5,842) 873
Inventories............... (2,850) (1,437) (1,640) (3,657) (5,022)
Other assets.............. 172 445 540 (1,044) 1,266
Accounts payable.......... 1,715 (2,930) (5,460) 3,899 (4,863)
Accrued expenses and other
liabilities.............. 9,190 10,530 (163) 1,853 (5,324)
Change in deferred
compensation.............. (780) 662 1,237 (1,204) 1,197
Change in other............ (40) (7) 2,076 19 (1,860)
-------- -------- -------- -------- --------
Net cash provided by
operating activities........ 34,673 42,479 42,515 39,008 29,408
Cash flows from investing
activities:
Additions to properties..... (8,077) (22,369) (26,890) (28,812) (28,667)
Acquisitions, net of cash
acquired................... (52,841) (915) (915) (15,781) (6,636)
Proceeds from sale of
properties................. -- -- 1,863 89 315
Other....................... 1,033 (282) (343) (284) (1,165)
-------- -------- -------- -------- --------
Net cash used in investing
activities.................. (59,885) (23,566) (26,285) (44,788) (36,153)
Cash flows from financing
activities, net of debt
assumed in acquisitions:
Net capital contributions
from (to) Parent........... 8,009 (449) (15) 5,829 7,097
-------- -------- -------- -------- --------
Net cash provided by (used
in) financing activities.... 8,009 (449) (15) 5,829 7,097
Cash and cash equivalents:
Net increase (decrease) in
cash and cash equivalents.. (17,203) 18,464 16,215 49 352
Balance at beginning of
period..................... 17,203 988 988 939 587
-------- -------- -------- -------- --------
Balance at end of period.... $ -- $ 19,452 $ 17,203 $ 988 $ 939
======== ======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
COORSTEK, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(In thousands)
<TABLE>
<CAPTION>
Common Paid-in Paid-in Capital Retained
Stock Capital Warrants Earnings Other Total
------- -------- --------------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... $10,000 $104,812 $ -- $16,023 $(454) $130,381
Net capital contribution
from Parent............ -- 7,495 -- -- -- 7,495
Dividends paid to
Parent................. -- -- -- (216) -- (216)
Net income.............. -- -- -- 25,202 -- 25,202
Cumulative translation
adjustment............. -- -- -- -- 601 601
------- -------- ------ ------- ----- --------
Balance at December 31,
1996................... $10,000 $112,307 $ -- $41,009 $ 147 $163,463
Net capital contribution
from Parent............ -- 12,676 -- -- -- 12,676
Net income.............. -- -- -- 26,989 -- 26,989
Cumulative translation
adjustment............. -- -- -- -- 27 27
------- -------- ------ ------- ----- --------
Balance at December 31,
1997................... $10,000 $124,983 $ -- $67,998 $ 174 $203,155
Net capital distribution
to Parent.............. -- (49,923) -- -- -- (49,923)
Net income.............. -- -- -- 12,930 -- 12,930
Minimum pension
liability adjustment... -- -- -- -- (281) (281)
Cumulative translation
adjustment............. -- -- -- -- (56) (56)
------- -------- ------ ------- ----- --------
Balance at December 31,
1998................... $10,000 $ 75,060 $ -- $80,928 $(163) $165,825
Net income (unaudited).. -- -- -- 16,792 -- 16,792
Issuance of warrants
(unaudited)............ -- -- 1,600 -- -- 1,600
Cumulative translation
adjustment
(unaudited)............ -- -- -- -- (130) (130)
------- -------- ------ ------- ----- --------
Balance at September 30,
1999, (unaudited)...... $10,000 $ 75,060 $1,600 $97,720 $(293) $184,087
======= ======== ====== ======= ===== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. General Information
The accompanying financial statements and notes are based on the separate
historical financial statements of CoorsTek, Inc., which was formerly named
Coors Porcelain Company and operated its business as Coors Ceramics Company
(the "Company" or "CoorsTek"). During the periods presented, CoorsTek was a
wholly owned subsidiary of ACX Technologies, Inc. ("ACX" or "Parent"). The
Board of Directors of ACX has announced a plan to spin-off CoorsTek to existing
ACX shareholders on or about December 31, 1999. This plan is contingent on
certain requirements, most notably the pending ruling by the Internal Revenue
Service of the transaction as a tax free distribution.
Established in 1911, CoorsTek develops, manufactures and sells engineered
solutions for a multitude of industrial and commercial applications that
incorporate advanced materials such as technical ceramics, engineered plastics
or precision machined metals into components, assemblies and systems.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation: The consolidated financial statements include the
assets, liabilities, results of operations, cash flows and changes in
shareholder's equity of CoorsTek and its wholly-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated. CoorsTek
was a wholly-owned subsidiary of ACX for the periods presented. The
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles, using management's best estimates and
judgments when appropriate.
The consolidated financial statements include allocations of certain
charges from ACX for general management, legal, treasury, tax, internal audit,
financial reporting, environmental affairs and other miscellaneous services.
Management believes the charges are a reasonable estimate of the costs that
would have been incurred by CoorsTek on a stand-alone basis.
The financial information included herein may not necessarily reflect the
consolidated financial position, results of operations, cash flows and changes
in shareholder's equity of CoorsTek in the future or what they would have been
had CoorsTek been a separate, stand-alone company during the periods presented.
Parent Allocations: Selling, general and administrative expense for 1998,
1997 and 1996 includes allocation of $4.7 million, $5.0 million and $4.0
million, respectively of certain ACX corporate expenses for general management,
legal, treasury, tax, internal audit, financial reporting and environmental
services. Management believes the basis for allocating the foregoing
allocations was reasonable but may not necessarily equal the costs that would
have been or will be incurred by CoorsTek on a stand-alone basis. In
determining the allocation of ACX corporate costs, CoorsTek performed a review
of 1) the services performed by ACX, 2) headcount, facilities and sales
comparisons and 3) management oversight provided to CoorsTek, as well as
considering other factors.
Long-term debt consists of intercompany debt transferred from ACX in 1998
at an annual interest rate of 8%. CoorsTek had no intercompany debt prior to
1998. Interest expense for the nine months ended September 30, 1999 and the
year ended December 31, 1998 includes $3.0 million (unaudited) and $4.0 million
paid to ACX on intercompany debt, respectively. Interest income (expense)
includes ($0.6) million (unaudited) and $0.5 million (paid) earned from the
participation in ACX's cash management system during the nine months ended
September 30, 1999 and the year ended December 31, 1998, respectively. No
interest income was earned from participation in ACX's cash
F-7
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
management during 1997 or 1996. If intercompany debt had been transferred from
ACX in 1997 and 1996, the debt costs would have been approximately $4.0 million
on debt of $50.0 million at an annual rate of 8%.
Use of estimates: The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as revenues and expenses reported for the
periods presented. Actual results can differ from these estimates.
Interim financial information: The financial information as of September
30, 1999 and for the nine months ended September 30, 1999 and 1998 is unaudited
but includes all adjustments that management considers necessary for a fair
presentation of its financial position, results of operations, cash flows and
changes in shareholder's equity. Results for the nine months ended September
30, 1999 are not necessarily indicative of results to be expected for the full
fiscal year 1999 or for any future period.
Pro Forma Financial Information: The pro forma balance sheet as of
September 30, 1999 is unaudited but includes all pro forma adjustments that
management considers necessary for a fair presentation of its financial
position after the proposed spin off giving effect to the anticipated
incurrence of debt and payment of a special dividend to the Parent (see
subsequent event discussion). The pro forma balance sheet is not necessarily
indicative of the financial position that would have been attained had the spin
off occurred on September 30, 1999.
Revenue recognition: Revenues are recognized when finished products are
shipped to customers or services have been rendered.
Inventories: Inventories are stated at the lower-of-cost or market. Cost
is determined by the first-in, first-out (FIFO) method. The classification of
inventories, in thousands, was as follows:
<TABLE>
<CAPTION>
December 31,
September 30, -----------------
1999 1998 1997
------------- -------- --------
(unaudited)
<S> <C> <C> <C>
Finished..................................... $ 26,889 $ 21,890 $ 19,106
In process................................... 25,979 22,049 23,299
Raw materials................................ 14,993 12,284 12,178
-------- -------- --------
Total inventories.......................... $ 67,861 $ 56,223 $ 54,583
======== ======== ========
</TABLE>
Properties: Land, buildings and equipment are stated at cost. For
financial reporting purposes, depreciation is recorded principally on a
straight-line method over the estimated useful lives of the asset as follows:
<TABLE>
<S> <C>
Buildings and
improvements........... 10 to 30 years
Machinery and
equipment.............. 3 to 30 years
Leasehold improvements.. The shorter of the useful life, lease term or 20 years
Goodwill................ The shorter of the useful life or 20 years
</TABLE>
F-8
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The cost of properties and related accumulated depreciation, in
thousands, consisted of the following:
<TABLE>
<CAPTION>
December 31,
September 30, --------------------
1999 1998 1997
------------- --------- ---------
(unaudited)
<S> <C> <C> <C>
Land and improvements.................... $ 7,339 $ 6,401 $ 6,401
Buildings................................ 74,140 65,739 64,052
Machinery and equipment.................. 229,681 197,513 185,373
Construction in progress................. 9,374 12,178 11,729
--------- --------- ---------
320,534 281,831 267,555
Less: accumulated depreciation........... (182,464) (150,507) (135,017)
--------- --------- ---------
Net properties......................... $ 138,070 $ 131,324 $ 132,538
========= ========= =========
</TABLE>
Accelerated depreciation methods are generally used for income tax
purposes. Expenditures for new facilities and improvements that substantially
extend the capacity or useful life of an asset are capitalized. Ordinary
repairs and maintenance are expensed as incurred.
In early 1998, CoorsTek changed the estimated depreciable lives for
certain long-lived assets based on the actual lives exhibited for similar
assets. The effect of this change positively impacted earnings before interest
and taxes by approximately $2.0 million in 1998.
Impairment of Long-Lived Assets and Identifiable Intangibles: CoorsTek
periodically reviews long-lived assets, identifiable intangibles and goodwill
for impairment whenever events or changes in business conditions indicate the
carrying amount of the assets may not be fully recoverable. Measurement of the
impairment loss is based on fair value of the asset, which is generally
determined by the discounting of future estimated cash flows. See Note 4.
Cash and Cash Equivalents: CoorsTek defines cash equivalents as highly
liquid investments with original maturities of 90 days or less. The carrying
value of CoorsTek's cash equivalents approximates their fair market value.
Miscellaneous-net: Certain royalty and building rental revenues are
included in "Miscellaneous-net" in the Consolidated Statement of Income.
Earnings per share: On or about December 31, 1999, CoorsTek will issue
approximately 7,120,614 shares of common stock based on a conversion ratio of
one CoorsTek share for every four outstanding shares of ACX common stock. The
number of shares reported is based on the number of shares of ACX stock
outstanding on September 30, 1999. The number of shares actually issued will
differ from this amount.
Unaudited basic and diluted net earnings per common share have been
computed by dividing the net earnings for each period presented by the number
of common shares of ACX outstanding during the periods presented as adjusted
for the conversion ratio described above. All ACX common stock equivalents were
considered for purposes of determining dilutive shares outstanding.
Environmental Expenditures: Environmental expenditures that relate to
current operations are expensed or capitalized as appropriate. Expenditures
that relate to an existing condition caused by past operations, and which do
not contribute to current or future revenue generation, are expensed.
Liabilities are recorded when environmental assessments and/or remedial efforts
are probable and the costs can be reasonably estimated.
F-9
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hedging Transactions: CoorsTek from time to time engages in hedging
activities against fluctuations in foreign currency prices. These activities
are immaterial to CoorsTek and are expected to remain so in the future.
Subsequent Event: CoorsTek anticipates issuing debt and paying $200
million of the proceeds to ACX for settlement of intercompany obligations and
payment of a special dividend. CoorsTek plans to issue debt of $270 million
consisting of a $95 million short-term revolver, Senior Term A debt of $85
million and Senior Term B debt of $90 million. The revolver will have an unused
commitment of $65 million and will initially bear interest at LIBOR plus 2%
with a maturity of five years. The Senior Term A debt will initially bear
interest at LIBOR plus 2% and mature in five years. The Senior Term B debt will
initially bear interest at LIBOR plus 2.75% and mature in seven years. The
interest spread for the three debt instruments will vary in future periods
based upon performance pricing criteria.
Adoption of New Accounting Standards: Statement of Financial Accounting
Standards (SFAS) No. 133 "Accounting for Derivative Instruments and Hedging
Activities" which establishes accounting and reporting standards for derivative
instruments and for hedging activities was issued in June 1998. This statement
requires the recognition of all derivatives as either assets or liabilities at
fair value in the statement of financial position. This statement is effective
for the year ending December 31, 2000 and is not expected to have a material
effect on CoorsTek's financial statements.
Note 3. Operating Leases
CoorsTek has leases for a variety of equipment and facilities that expire
in various years. Future minimum lease payments, in thousands, required as of
December 31, 1998, under non-cancelable operating leases with terms exceeding
one year, are as follows:
<TABLE>
<S> <C>
1999.................................................................. $1,435
2000.................................................................. 1,068
2001.................................................................. 579
2002.................................................................. 443
2003 and thereafter................................................... 337
------
Total............................................................... $3,862
======
</TABLE>
Operating lease rentals for warehouse, production, office facilities and
equipment amounted to $1.5 million for the nine months ended September 30, 1999
(unaudited) and $0.9 million, $1.2 million and $2.3 million for the years ended
December 1998, 1997 and 1996, respectively.
Note 4. Asset Impairment Charges
During 1998, CoorsTek recorded $11.8 million in asset impairment charges.
A $6.2 million charge was taken in March of 1998 in conjunction with the
cancellation of the C-4 technology agreement with IBM. Changes in the market
for C-4 applications extended the time frame for achieving commercial sales
beyond original expectations. This lack of near term commercial sales
opportunities, combined with increasing overhead costs, prompted CoorsTek to
negotiate termination of the agreement with IBM. Consequently, CoorsTek wrote
down the carrying value of fixed assets associated with this project to their
discounted expected future cash flows of zero. During 1998, CoorsTek disposed
of the C-4 fixed assets. The disposition of the C-4 assets had no impact on the
operating
F-10
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
results of CoorsTek. Prior to the impairment, these assets were included in the
Industrial Ceramics segment.
As a result of strong offshore competition in the electronic package
market, CoorsTek recorded a $5.6 million asset impairment charge in September
of 1998 at the Chattanooga, Tennessee operation. A review of estimated
undiscounted future cash flows indicated the carrying amount of property, plant
and equipment at Chattanooga may not be recoverable. Accordingly, the fixed
assets were written down to fair value calculated by discounting expected
future cash flows under the asset held for use model. These assets are included
in the Industrial Ceramics segment.
Note 5. Income Taxes
CoorsTek and its U.S. subsidiaries file consolidated Federal and Colorado
state income tax returns with ACX. In addition, CoorsTek files state income tax
returns in various other states. The Federal income tax sharing agreement with
ACX substantially approximates a Federal income tax provision and liability as
if CoorsTek was filing on a separate income tax return basis. Liabilities for
Federal and Colorado state income taxes are payable to ACX. CoorsTek directly
pays to all other states in which it files a state tax return. CoorsTek's
foreign subsidiaries file separate returns with the applicable taxing
authority.
The components of income before income taxes, in thousands, for the years
ended December 31 were:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Domestic......................................... $ 20,319 $ 42,933 $ 39,201
Foreign.......................................... 293 248 997
-------- -------- --------
Total income before taxes...................... $ 20,612 $ 43,181 $ 40,198
======== ======== ========
</TABLE>
The provision for income taxes, in thousands, for the years ended
December 31, included the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- --------
<S> <C> <C> <C>
Current provision:
Federal....................................... $ 9,209 $ 14,889 $ 12,086
State......................................... 1,764 2,122 1,762
Foreign....................................... 81 153 343
------- -------- --------
Total current tax expense................... 11,054 17,164 14,191
------- -------- --------
Deferred provision:
Federal....................................... (3,014) (898) 785
State......................................... (358) (74) 20
------- -------- --------
Total deferred tax expense (benefit)........ (3,372) (972) 805
------- -------- --------
Total income tax expense.................... $ 7,682 $ 16,192 $ 14,996
======= ======== ========
</TABLE>
F-11
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Temporary differences which give rise to a significant portion of
deferred tax assets and liabilities, in thousands, at December 31, are as
follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Deferred tax asset arising from:
Depreciation and other property related.................. $ 2,517 $ 2,885
Pension and employee benefits............................ 12,181 10,159
Inventory................................................ 2,205 1,672
All other................................................ 3,223 1,890
Valuation allowance...................................... (3,386) (3,657)
------- -------
Gross deferred tax assets.............................. 16,740 12,949
------- -------
Deferred tax liabilities arising from:
Depreciation and other property related.................. 7,325 6,462
Interest................................................. -- 411
Pension and employee benefits............................ -- 159
All other................................................ 157 31
------- -------
Gross deferred tax liabilities......................... 7,482 7,063
------- -------
Net deferred tax asset..................................... $ 9,258 $ 5,886
======= =======
</TABLE>
The principal differences between the effective income tax rate and the
U.S. statutory federal income tax rate at December 31, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Expected tax rate....... 35.0 % 35.0 % 35.0 %
State income taxes (net
of federal benefit).... 4.9 % 3.5 % 3.5 %
Research tax credits.... (2.2)% (1.3)% (0.7)%
Non-taxable income and
expenses............... (1.0)% (0.1)% 0.0 %
Foreign tax expense..... 0.1 % 0.0 % (0.8)%
Other--net.............. 0.5 % 0.4 % 0.3 %
---- ---- ----
Effective tax rate...... 37.3 % 37.5 % 37.3 %
==== ==== ====
</TABLE>
The Internal Revenue Service (IRS) has completed its examination of ACX's
Federal income tax returns through 1995. The IRS will begin reviewing the
Federal income tax returns for 1996 through 1998 during 1999. In the opinion of
management, adequate accruals have been provided for all income tax matters and
related interest.
CoorsTek has not provided for U.S. or additional foreign taxes on $5.4
million of undistributed earnings of its foreign subsidiaries. These
undistributed earnings are considered to be reinvested indefinitely. If such
earnings were repatriated, foreign tax credits should become available under
current law to reduce or eliminate the resulting U.S. income tax liability.
ACX, CoorsTek and their respective subsidiaries have executed a Tax
Sharing Agreement that defines the parties' rights and obligations with respect
to deficiencies and refunds of Federal, state and other taxes relating to the
CoorsTek business for tax years prior to the spin-off and with respect to
certain tax attributes of CoorsTek after the spin-off. In general, ACX will be
responsible for filing consolidated Federal and combined or consolidated state
tax returns and paying the associated taxes for periods through the date of the
spin-off (the "Distribution Date"). CoorsTek will reimburse ACX for the
F-12
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
portion of such taxes relating to the CoorsTek business. CoorsTek is
responsible for filing returns and paying taxes related to the CoorsTek
business for periods beginning on or after the Distribution Date. ACX and
CoorsTek will agree to cooperate with each other and to share information in
preparing such tax returns and in dealing with other tax matters. ACX and
CoorsTek will be responsible for their own taxes other than those described
above.
The Tax Sharing Agreement is designed to preserve the status of the spin-
off as a tax-free distribution. CoorsTek has agreed that it will refrain from
engaging in certain transactions during the two-year period following the spin-
off unless it first provides ACX with a ruling from the Internal Revenue
Service or an opinion of tax counsel acceptable to ACX that the transaction
will not adversely affect the tax-free nature of the spin-off. The transactions
subject to these restrictions, which are not expected to materially affect
CoorsTek's operating flexibility, consist of liquidations, mergers or
consolidations of CoorsTek, redemptions by CoorsTek of certain amounts of its
stock, sales of assets out of the ordinary course of business, discontinuance
of certain businesses and certain issuances of CoorsTek's common stock. In
addition, CoorsTek will agree to indemnify ACX against any tax liability or
other expense it may incur if the spin-off is determined to be taxable as a
result of CoorsTek's breach of any covenant or representation contained in the
Tax Sharing Agreement or CoorsTek's action in effecting such transactions. By
its terms, the Tax Sharing Agreement will terminate when the statutes of
limitations under applicable tax laws expire.
Note 6. Stock Compensation
ACX has an equity incentive plan that provides for the granting of
nonqualified stock options and incentive stock options to certain key employees
of its subsidiaries that eligible CoorsTek employees participate in. The equity
incentive plan also provides for the granting of restricted stock, bonus
shares, stock units and offers to officers of ACX and its subsidiaries to
purchase stock. Generally, options outstanding under ACX's equity incentive
plan are subject to the following terms: (1) the exercise price of a stock
option is generally equal to the fair market value of ACX's common stock on the
date of grant; (2) ratable vesting over either a three-or four-year service
period; and (3) maximum term of ten years from the date of grant.
There are currently approximately 1,009,000 and 998,000 vested and
unvested ACX options, respectively, held by current CoorsTek employees and ACX
employees who will be transferred to CoorsTek upon the spin-off. The exercise
price for these shares ranges from $10.14 to $27.06. CoorsTek will grant
substituted options for outstanding vested and unvested ACX options. It is
currently not known how many substituted CoorsTek options will be granted or
what the range of the exercise prices will be. The number of options granted
and the corresponding exercise prices will be based on the respective ACX and
CoorsTek stock prices pre and post spin. CoorsTek does not anticipate incurring
any compensation charges as 1) the aggregate intrinsic value of the options
immediately subsequent to the spin off will not exceed the aggregate intrinsic
value of the options immediately prior to the spin off, 2) the ratio of the
exercise price per option to the market value per share will not be reduced and
3) the vesting provisions and option period of the original grant will remain
the same.
Pro forma information: CoorsTek applies the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," in accounting for stock options granted to CoorsTek
employees. Accordingly, no compensation expense has been recognized for the
issuance of employee stock options as the exercise price of the options equaled
or exceeded the fair market value of the ACX stock at the time of grant.
F-13
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pro forma net earnings and earnings per share information, as required by
SFAS No. 123 "Accounting for Stock-Based Compensation" has been determined as
if ACX had accounted for employee stock options grants to CoorsTek employees
under SFAS No. 123's fair value method. The fair value of these options was
estimated at the grant date using a Black-Scholes option pricing model with the
following weighted-average assumptions: (1) dividend yield of 0%; (2) expected
volatility of 28.1% in 1998, 23.2% in 1997, and 22.6% in 1996; (3) risk-free
interest rate ranging from 4.8% to 5.0% in 1998, 5.4% to 5.5% in 1997 and 6.1%
to 6.4% in 1996; and (4) expected life of 3 to 7.36 years in 1998, 3 to 6.23
years in 1997 and 3 to 6.37 years in 1996. The weighted average per share fair
value of options granted during 1998, 1997, and 1996 was $22.16, $21.26 and
$15.17, respectively.
The pro forma effect of recognizing compensation expense in accordance
with SFAS No. 123 would have been to reduce CoorsTek's reported net earnings by
$0.7 million in 1998, $0.3 million in 1997 and $0.6 million in 1996. Had
compensation expense been recorded by CoorsTek in accordance with SFAS No. 123,
the effect would be to reduce unaudited pro forma diluted net earnings per
share to $1.68 in 1998, $3.68 in 1997 and $3.44 in 1996.
Note 7. Retirement and Other Postretirement Benefit Plans
Pension Plan: CoorsTek participates with ACX in a defined benefit
retirement plan for substantially all of CoorsTek's employees. The Parent
manages the plan including plan assets which consist primarily of equity and
interest-bearing investments. Benefits are based on years of service and
average base compensation levels over a period of years. The Parent's funding
policy is to contribute annually not less than the ERISA minimum funding
standards nor more than the maximum amount that can be deducted for Federal
income tax purposes.
Retiree Medical Plan: In addition to receiving pension benefits, CoorsTek
employees may participate in ACX's medical plan which provides health care and
life insurance benefits to eligible retirees and their dependents. Eligible
employees may receive these benefits after reaching age 55 with 10 years of
service. Prior to reaching age 65, eligible retirees may receive certain health
care benefits substantially similar to those available to active employees. The
amount the retiree pays is based on age and service at the time of retirement.
These plans are not funded.
401(k) Plan: Eligible employees of CoorsTek may participate in CoorsTek's
401(k) plan in which employees can contribute up to 18% of annual eligible
compensation subject to certain regulatory and plan limitations. CoorsTek
matches contributions by employees up to 1% of the employee's contribution.
CoorsTek's expense related to the 401(k) match was $0.7 million each for 1998
and 1997 and $0.6 million in 1996.
CoorsTek has established a separate defined benefit retirement plan and
has established a health plan that includes retiree medical coverage for its
current and former employees. An allocable share of the defined benefit plan
assets and pension obligations will be transferred from the ACX retirement plan
to the CoorsTek retirement plan. This allocation will be based on the
requirements of the applicable regulatory body at the date of the spin-off.
Included in the December 31, 1998 and 1997 balance sheets of CoorsTek are
estimates of assets and pension obligations to be transferred to CoorsTek.
Actual amounts to be transferred will be measured at the spin date and will
likely be different from these estimates.
F-14
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following tables set forth the estimated change in benefit
obligation, change in plan assets, funded status, net periodic benefit cost and
other information applicable to the CoorsTek, Inc. Retirement Plan and retiree
medical coverage. This information is based on the estimated allocations of the
respective plan assets and liabilities as described above. The actual results
could differ from these estimates. All information, except interest rates, is
in thousands.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of
year............................... $ 90,267 $ 82,605 $ 12,357 $ 11,570
Service Cost........................ 2,290 1,968 338 248
Interest Cost....................... 6,439 4,470 892 763
Actuarial loss (gain)............... 1,890 3,986 (3) 258
Benefits Paid....................... (3,071) (2,762) (422) (482)
-------- -------- -------- --------
Benefit obligation at end of year... 97,815 90,267 13,162 12,357
-------- -------- -------- --------
Change in plan assets
Fair value of plan assets at
beginning of year.................. 79,404 68,601 -- --
Actual return on plan assets........ 630 13,212 -- --
Acquisitions........................ -- -- -- --
Company contributions............... -- 353 -- --
Benefits paid....................... (2,805) (2,762) -- --
-------- -------- -------- --------
Fair value of plan assets at end of
year............................... 77,229 79,404 -- --
-------- -------- -------- --------
Funded status......................... (20,586) (10,863) (13,162) (12,357)
Unrecognized actuarial loss (gain).... 11,794 2,046 (1,929) (2,407)
Unrecognized prior service cost....... 4,070 3,810 (793) (991)
-------- -------- -------- --------
Accrued benefit cost.................. $(4,722) $(5,007) $(15,884) $(15,755)
======== ======== ======== ========
Amounts recognized in the Consolidated
Balance Sheet consist of:
Accrued benefit liability........... $(9,738) $(5,007) $(15,884) $(15,755)
Intangible asset.................... 4,568 -- -- --
Accumulated other comprehensive
income............................. 448 -- -- --
-------- -------- -------- --------
Net amount recognized............... $(4,722) $(5,007) $(15,884) $(15,755)
======== ======== ======== ========
Weighted average assumptions at year
end:
Discount rate....................... 6.80% 7.25% 6.80% 7.25%
Expected return on plan assets...... 9.75% 9.75%
Rate of compensation increase....... 4.30% 4.75%
</TABLE>
It is the Parent's policy to amortize unrecognized gains and losses in
excess of 10% of the larger of plan assets and the projected benefit obligation
(PBO) over the expected service of active employees (12-15 years). However, in
cases where the accrued benefit liability exceeds the actual unfunded liability
by more than 20% of the PBO, the amortization is reduced to 5 years.
For measurement purposes, a 7.5% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1998. The rate was
assumed to decrease by 0.5% per annum to 4.25% and remain at that level
thereafter.
F-15
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------- --------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost
Service cost............... $ 2,290 $ 1,968 $ 1,815 $ 338 $ 248 $ 495
Interest cost.............. 6,439 4,470 3,605 892 763 807
Expected return on plan
assets.................... (843) (8,595) (6,132) -- -- --
Amortization of prior
service costs............. 651 306 150 (198) (104) (199)
Recognized actuarial loss
(gain).................... (6,082) 4,879 3,436 (481) (90) (38)
------- ------- ------- ----- ----- ------
Net periodic benefit cost.. $ 2,455 $ 3,028 $ 2,874 $ 551 $ 817 $1,065
======= ======= ======= ===== ===== ======
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1% Point 1% Point
Increase Decrease
-------- --------
<S> <C> <C>
Effect on total of services and interest cost
components............................................. $297 $276
Effect on postretirement benefit obligation............. 903 849
</TABLE>
Note 8: Supplemental Cash Flow Information:
<TABLE>
<CAPTION>
Nine months ended
September 30, 1999 1998 1997 1996
------------------ ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C>
Total interest costs............ $3,693 $ 4,125 $ 224 $ 217
Interest capitalized............ -- -- 114 35
Interest expensed............... 3,693 4,125 110 182
Interest paid (primarily to
Parent)........................ 3,000 4,000 24 145
Income taxes paid (primarily to
Parent)........................ $ 966 $11,882 $16,950 $18,390
</TABLE>
Non-Cash Investing Activities: See description of non-cash investing
activities with ACX in Note 10.
Interest costs for the nine months ended September 30, 1999 and the year
ended December 31, 1998 include $3.0 million (unaudited) and $4.0 million paid
to ACX on intercompany debt, respectively.
Note 9. Acquisitions
In March 1999, CoorsTek acquired the net assets of Precision Technologies
for approximately $22.0 million in cash and 300,000 warrants to receive shares
of the Parent's common stock at an exercise price equal to the fair market
value at the date of close. These warrants will be converted into warrants to
purchase shares of CoorsTek common stock after the spin-off. These warrants
vest only upon the achievement of certain revenue goals within three years. The
warrants have been recorded as an increase in the purchase price at their
estimated fair value on the date of acquisition using the Black-Scholes pricing
model. The acquisition has been accounted for under the purchase method of
accounting, and goodwill of approximately $21.1 million is being amortized over
20 years. Precision Technologies, located in Livermore, California,
manufactures precision-machined parts for the semiconductor, medical, and
aircraft industries.
F-16
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In March 1999, CoorsTek acquired all of the outstanding shares of Edwards
Enterprises for approximately $18.0 million. The acquisition has been accounted
for under the purchase method of accounting, and goodwill of approximately $4.2
million is being amortized over 20 years. Edwards Enterprises, located in
Newark, California, manufactures precision-machined parts for the semiconductor
industry.
In May of 1998, CoorsTek acquired the assets of Pulsation Equipment for
$0.9 million. The acquisition was accounted for under the purchase method of
accounting and goodwill of $0.8 million is being amortized over 15 years on a
straight line basis.
On August 1, 1997, CoorsTek acquired the assets of Tetrafluor, Inc.,
based in El Segundo, California, for $15.8 million. Tetrafluor manufactures
Teflon(R) fluoropolymer sealing systems and components for use in aerospace,
industrial and transportation industries. The acquisition was accounted for
under the purchase method of accounting, and Tetrafluor's results of operations
are included in CoorsTek's consolidated financial statements from the date of
acquisition. The purchase price was allocated to the net assets acquired based
upon their estimated fair value. Goodwill for Tetrafluor was $10.7 million and
is being amortized over 15 years on a straight-line basis.
During 1996, CoorsTek purchased the operating assets of H.B. Company,
Inc., a manufacturer of oilfield pump components based in Oklahoma City,
Oklahoma. The acquisition was accounted for under the purchase method of
accounting, and CoorsTek's results of operations for 1996 include the results
of the acquisition since March 19, 1996. The purchase price was $6.6 million
and was allocated to the net assets acquired based upon their estimated fair
market value. Goodwill of $1.4 million is being amortized over 15 years on a
straight-line basis.
Note 10. Related Party Transactions
Beginning on December 28, 1992, Adolph Coors Company (ACCo) had no
ownership interest in CoorsTek. However, certain Coors family trusts have
significant interests in both ACX and ACCo. Transactions with ACCo were
immaterial for 1998, 1997 and 1996.
Since the formation of ACX, CoorsTek has engaged in several related party
transactions with ACX and its subsidiaries. These include, but are not limited
to, participation in ACX's cash management system (see Note 2), benefiting from
administrative services provided by ACX (see Note 2), intercompany debt
allocations (see Note 2), payments of dividends, miscellaneous asset and
liability transfers between the entities as well as miscellaneous capital
contributions of other forms between the entities. The average amount due to
ACX, during the nine months ended September 30, 1999 was $70.3 million
(unaudited). The average amount due to ACX for the years ended December 31,
1998 and 1997 was $45.8 million and $0, respectively. At September 30, 1999,
the Company owed ACX $59.4 million (unaudited). At December 31, 1998 and 1997,
the Company owed ACX $50.0 million and $0, respectively.
F-17
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Dividends paid to ACX totaled $0, $38,000 and ($216,000) in 1998, 1997
and 1996, respectively. Net capital contributions from ACX, in thousands, for
the year ended December 31, consisted of:
<TABLE>
<CAPTION>
1998 1997 1996
--------- -------- -------
<S> <C> <C> <C>
Assets transferred from ACX.................... $ 13 $ 6,846 $ 630
Bonuses paid in common stock of ACX............ 79 177 747
Transfer of liability to ACX................... -- (176) (979)
Transfer of long-term debt from ACX............ (50,000) -- --
Capital contribution to ACX.................... (15) -- --
Capital contribution from ACX.................. -- 5,829 7,097
--------- -------- -------
Total net capital contributions.............. $ (49,923) $ 12,676 $ 7,495
========= ======== =======
</TABLE>
Note 11. Commitments and Contingencies
CoorsTek is self-insured for certain insurable risks consisting primarily
of employee health insurance programs and workers compensation. Certain stop-
loss and excess insurance policies are also maintained to reduce overall risk.
In addition, CoorsTek maintains insurance policies to protect against loss
related to property, business interruption and general liability risks.
CoorsTek is named as a defendant in various actions and proceedings
arising in the normal course of business, including claims by current or former
employees relating to employment or termination. Although the eventual outcome
of the various lawsuits cannot be predicted, it is management's opinion that
these suits will not result in liabilities to such extent that they would
materially affect CoorsTek's financial position or results of operations.
CoorsTek has received a demand for payment arising out of contamination
of a semiconductor manufacturing facility formerly owned by a subsidiary of
CoorsTek, Coors Components, Inc. ("CCI"). Colorado State environmental
authorities are seeking clean up of soil and ground water contamination from a
subsequent owner. The contamination is believed to have occurred prior to
CoorsTek's ownership of CCI and there are possible off site sources of
contamination. CCI was sold in November, 1987. Although CoorsTek does not
believe it is responsible for the contamination or the cleanup, the parties
agreed to a remediation plan. CoorsTek will manage the remediation and is
responsible to pay from 10% to 15 % of the remediation costs in excess of
$500,000. However, the remediation costs to date are below $500,000 and
management does not expect costs to exceed this amount.
CoorsTek has received a Unilateral Administration Order issued by the EPA
relating to the Rocky Flats Industrial Park Site, (RFIP) and is participating
with the RFIP Group to perform an Engineering Evaluation/Cost Analysis on the
property. There is no estimate of potential clean up costs, but management does
not believe it will be material.
Some of CoorsTek's subsidiaries have been notified that they may be
potentially responsible parties ("PRPs") under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA") or similar state
laws with respect to the remediation of certain sites where hazardous
substances have been released into the environment. CoorsTek cannot predict
with certainty the total costs of remediation, its share of the total costs,
the extent to which contributions will be available from other parties, the
amount of time necessary to complete the remediation or the availability of
insurance. However, based on investigations to date, CoorsTek believes that any
liability with respect to these sites would not be material to the financial
condition and results of operations of CoorsTek, without
F-18
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
consideration for insurance recoveries. There can be no certainty, however,
that CoorsTek will not be named as a PRP at additional sites or be subject to
other environmental matters in the future or that the costs associated with
those additional sites or matters would not be material.
CoorsTek is a guarantor on industrial development bonds of CCI, a former
subsidiary that was sold in November 1987. The buyer of CCI assumed the
liability at the time of purchase. The terms require annual principal and
interest payments and a balloon payment of $2.2 million in May 2000. In the
event of default by the buyer, CoorsTek would assume the liability. The buyer
has made all payments to date in a timely manner and management does not
believe CoorsTek is at risk for payment of the bonds as of December 31, 1998.
The outstanding balance as of December 31, 1998, 1997 and 1996 was $2.4
million, $3.0 million and $3.1 million, respectively.
Note 12. Segment Information
Prior to 1999, the Company operated as a single segment that consisted
primarily of industrial ceramic products. In 1999, the Company acquired Edwards
Enterprises and Precision Technologies (see Note 9). These companies
manufacture precision-machined parts primarily for the semiconductor industry.
As a result of acquiring these companies and the resultant significance of the
semiconductor market to the Company, the Company changed its internal reporting
to track two segments separately: semiconductor products and industrial
ceramics products. The semiconductor products segment produces both ceramic and
non-ceramic products that are used in the semiconductor industry. The
industrial ceramics products segment produces primarily ceramic products that
are used in non-semiconductor industries.
The accounting policies of the segments are the same as those described
in Note 2 and there are generally no intersegment transactions. The Company
evaluates the performance of its segments and allocates resources to them based
primarily on gross margin.
The table below summarizes information about reportable segments, in
thousands, as of and for the nine months ended September 30 (unaudited):
<TABLE>
<CAPTION>
Depreciation
Net Gross and Capital
Sales Margin Amortization Expenditures
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
1999
Semiconductor........................ $ 73,986 $20,559 $ 3,682 $ 1,504
Industrial ceramics.................. 192,950 45,922 13,905 6,573
-------- ------- ------- -------
Consolidated total................. $266,936 $66,481 $17,587 $ 8,077
======== ======= ======= =======
1998
Semiconductor........................ $ 11,898 $ 3,874 $ 956 $ 970
Industrial ceramics.................. 218,492 53,225 13,977 21,399
-------- ------- ------- -------
Consolidated total................. $230,390 $57,099 $14,933 $22,369
======== ======= ======= =======
</TABLE>
The depreciation and amortization for the semiconductor segment for the
periods ended September 30, 1999 and 1998 includes $702 and $0, respectively,
of goodwill amortization that is included in selling, general and
administrative expense. The depreciation and amortization for the industrial
ceramics segment for the periods ended September 30, 1999 and 1998 includes
$691 and $679, respectively, of goodwill amortization that is included in
selling, general and administrative expense.
F-19
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The table below summarizes information about reportable segments, in
thousands, as of and for the years ended December 31:
<TABLE>
<CAPTION>
Depreciation
Net Gross and Capital
Sales Margin Amortization Assets Expenditures
-------- ------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
1998
Semiconductor............... $ 17,061 $ 4,976 $ 1,337 $ 20,626 $ 1,015
Industrial ceramics......... 279,553 68,732 18,640 257,733 25,875
-------- ------- ------- -------- -------
Consolidated total........ $296,614 $73,708 $19,977 $278,359 $26,890
======== ======= ======= ======== =======
1997
Semiconductor............... $ 19,199 $ 6,928 $ 1,527 $ 19,279 $ 1,032
Industrial ceramics......... 285,625 78,075 17,137 243,408 27,780
-------- ------- ------- -------- -------
Consolidated total........ $304,824 $85,003 $18,664 $262,687 $28,812
======== ======= ======= ======== =======
1996
Semiconductor............... $ 19,500 $ 8,443 $ 807 $ 17,942 $ 4,146
Industrial ceramics......... 256,852 67,689 15,352 198,693 24,521
-------- ------- ------- -------- -------
Consolidated total........ $276,352 $76,132 $16,159 $216,635 $28,667
======== ======= ======= ======== =======
</TABLE>
Depreciation and amortization for the industrial ceramics segment
includes $912, $438 and $93 of goodwill amortization for the years ended
December 31, 1998, 1997 and 1996, respectively. This amortization expense is
included in selling, general and administrative expense. There was no goodwill
amortization included in depreciation and amortization for the semiconductor
segment for the years ended December 31, 1998, 1997 and 1996.
Information related to CoorsTek's operations by geographic area is
presented below:
Revenue from unaffiliated customers, in thousands:
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
United States.................................. $224,295 $224,272 $193,061
Europe......................................... 39,338 41,815 39,109
Asia........................................... 19,975 23,497 23,512
Canada......................................... 8,446 8,886 7,614
Other Foreign.................................. 6,696 8,161 14,128
Less: discounts and allowances................. (2,136) (1,807) (1,072)
-------- -------- --------
Total........................................ $296,614 $304,824 $276,352
======== ======== ========
Long-lived assets, in thousands:
<CAPTION>
December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
United States.................................. $151,630 $155,712 $126,687
Europe......................................... 3,486 3,101 2,978
Canada......................................... 6 84 72
-------- -------- --------
Total........................................ $155,122 $158,897 $129,737
======== ======== ========
</TABLE>
F-20
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Long-lived assets consist primarily of net property, plant and equipment,
goodwill and cash surrender values on certain insurance policies.
Note 13. Quarterly Financial Information (unaudited)
The following summarizes selected quarterly financial information, in
thousands, for each of the two years in the period ended December 31, 1998.
<TABLE>
<CAPTION>
First Second Third Fourth Year
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1998
Net sales....................... $80,945 $79,422 $70,023 $66,224 $296,614
Cost of goods sold.............. 60,241 59,258 53,792 49,615 222,906
------- ------- ------- ------- --------
Gross profit.................... 20,704 20,164 16,231 16,609 73,708
Selling, general &
administrative................. 10,076 9,762 8,690 9,230 37,758
Asset impairment charges........ 6,232 -- 5,582 -- 11,814
------- ------- ------- ------- --------
Operating income................ 4,396 10,402 1,959 7,379 24,136
Other income (expense):
Interest expense, net......... (1,055) (984) (855) (630) (3,524)
------- ------- ------- ------- --------
Income before income taxes...... 3,341 9,418 1,104 6,749 20,612
Income tax expense.............. 1,229 3,485 403 2,565 7,682
------- ------- ------- ------- --------
Net income...................... $ 2,112 $ 5,933 $ 701 $ 4,184 $ 12,930
======= ======= ======= ======= ========
Net income per basic share...... $ 0.29 $ 0.83 $ 0.10 $ 0.59 $ 1.81
======= ======= ======= ======= ========
Weighted average shares
outstanding--basic............. 7,106 7,138 7,145 7,115 7,126
======= ======= ======= ======= ========
Net income per diluted share.... $ 0.29 $ 0.81 $ 0.10 $ 0.58 $ 1.78
======= ======= ======= ======= ========
Weighted average shares
outstanding--diluted........... 7,284 7,306 7,255 7,186 7,258
======= ======= ======= ======= ========
1997
Net sales....................... $71,416 $75,011 $79,329 $79,068 $304,824
Cost of goods sold.............. 50,444 52,871 58,126 58,380 219,821
------- ------- ------- ------- --------
Gross profit.................... 20,972 22,140 21,203 20,688 85,003
Selling, general &
administrative................. 10,774 10,601 9,999 10,380 41,754
------- ------- ------- ------- --------
Operating income................ 10,198 11,539 11,204 10,308 43,249
Other income (expense):
Interest income (expense)..... (4) (1) (12) (11) (28)
Miscellaneous--net............ 20 12 (36) (36) (40)
------- ------- ------- ------- --------
Income before income taxes...... 10,214 11,550 11,156 10,261 43,181
Income tax expense.............. 3,829 4,334 4,184 3,845 16,192
------- ------- ------- ------- --------
Net income...................... $ 6,385 $ 7,216 $ 6,972 $ 6,416 $ 26,989
======= ======= ======= ======= ========
Net income per basic share...... $ 0.91 $ 1.03 $ 0.99 $ 0.91 $ 3.84
======= ======= ======= ======= ========
Weighted average shares
outstanding--basic............. 6,991 7,002 7,045 7,079 7,030
======= ======= ======= ======= ========
Net income per diluted share.... $ 0.89 $ 1.01 $ 0.96 $ 0.88 $ 3.74
======= ======= ======= ======= ========
Weighted average shares
outstanding--diluted........... 7,150 7,176 7,262 7,294 7,221
======= ======= ======= ======= ========
</TABLE>
F-21
<PAGE>
SCHEDULE II
Allowance for doubtful receivables (deducted from accounts receivable)
<TABLE>
<CAPTION>
Additions
Balance at charged to costs Balance at end
beginning of year and expenses Other Deductions of year
----------------- ---------------- ----- ---------- --------------
<S> <C> <C> <C> <C> <C>
1996........ $1,608 301 19 (646) $1,282
1997........ $1,282 1,079 60 (428) $1,993
1998........ $1,993 547 (5) (696) $1,839
</TABLE>
F-22
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
2 Distribution Agreement+
3.1 Certificate of Incorporation of Registrant
3.2 Bylaws of Registrant
4.1 Form of Rights Agreement
4.2 Form of Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock
10.1 Description of Officers' Life Insurance Program
10.2 CoorsTek, Inc. Stock Option and Incentive Plan
10.3 CoorsTek, Inc. Executive Deferred Compensation Plan
10.4 Tax Sharing Agreement+
10.5 Environmental Responsibility Agreement+
10.6 Master Transition Materials and Services Agreement+
10.7 Amended Salary Continuation Agreement for John K. Coors
10.8 Amended Salary Continuation Agreement for Joseph Coors, Jr.
10.9 Employment Agreement for John K. Coors
10.10 Employment Agreement for Joseph Coors, Jr.
10.11 Employment Agreement for Derek C. Johnson
10.12 Employment Agreement for Larry D. Murphy
10.13 Employment Agreement for Joseph G. Warren, Jr.
21 List of Subsidiaries
27 Financial Data Schedule +
</TABLE>
- --------
+Filed with amendment to registration statement on Form 10 filed December 2,
1999
I-4
<PAGE>
Signatures
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
CoorsTek, Inc.
/s/ Joseph Coors, Jr.
By: _________________________________
Name:Joseph Coors, Jr.
Title:Chairman and Chief
Executive Officer
December 14, 1999
Signing Date
I-5
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
COORSTEK, INC.
Article 1. NAME
The name of the corporation is CoorsTek, Inc. (the "Corporation").
Article 2. REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be located at
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 in the
County of New Castle. The registered agent of the Corporation at such address
shall be The Corporation Trust Company.
Article 3. PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law"). The
Corporation shall have all power necessary or convenient to the conduct,
promotion or attainment of such acts and activities.
Article 4. CAPITAL STOCK
4.1 Authorized Shares. The total number of shares of all classes
of stock that the Corporation shall have the authority to issue is 120,000,000,
of which 100,000,000 shall be Common Stock, all of one class, having a par value
of $.01 per share ("Common Stock"), and 20,000,000 of such shares shall be
Preferred Stock, having a par value of $.01 per share ("Preferred Stock").
4.2 Common Stock
4.2.1 Relative Rights. The Common Stock shall be subject to
all of the rights, privileges, preferences and priorities of the Preferred Stock
as set forth in the certificate of designations filed to establish the
respective series of Preferred Stock. Each share of Common Stock shall have the
same relative rights as and be identical in all respects to all the other shares
of Common Stock. The Board of Directors is authorized, subject to the
limitations prescribed by the Delaware General Corporation Law and the
provisions of this Certificate of Incorporation, to
i
<PAGE>
provide, by resolution or resolutions from time to time for the issuance of
shares of Common Stock.
4.2.2 Dividends. Whenever there shall have been paid, or
declared and set aside for payment, to the holders of shares of any class of
stock having preference over the Common Stock as to the payment of dividends,
the full amount of dividends and of sinking fund or retirement payments, if any,
to which such holders are respectively entitled in preference to the Common
Stock, then dividends may be paid on the Common Stock and on any class or series
of stock entitled to participate therewith as to dividends, out of any assets
legally available for the payment of dividends thereon, but only when and as
declared by the Board of Directors of the Corporation.
4.2.3 Dissolution, Liquidation, Winding Up. In the event of
any dissolution, liquidation, or winding up of the Corporation, whether
voluntary or involuntary, the holders of the Common Stock, and holders of any
class or series of stock entitled to participate therewith, in whole or in part,
as to the distribution of assets in such event, shall become entitled to
participate in the distribution of any assets of the Corporation remaining after
the Corporation shall have paid, or provided for payment of, all debts and
liabilities of the Corporation and after the Corporation shall have paid, or set
aside for payment, to the holders of any class of stock having preference over
the Common Stock in the event of dissolution, liquidation or winding up the full
preferential amounts (if any) to which they are entitled.
4.2.4 Voting Rights. Each holder of shares of Common Stock
shall be entitled to attend all special and annual meetings of the stockholders
of the Corporation and, share for share and without regard to class, together
with the holders of all other classes of stock entitled to attend such meetings
and to vote (except any class or series of stock having special voting rights),
to cast one vote for each outstanding share of Common Stock so held upon any
matter or thing (including, without limitation, the election of one or more
directors) properly considered and acted upon by the stockholders.
4.3 Preferred Stock. The Board of Directors is authorized, subject
to limitations prescribed by the Delaware General Corporation Law and the
provisions of this Certificate of Incorporation, to provide, by resolution or
resolutions from time to time and by filing a certificate of designations
pursuant to the Delaware General Corporation Law, for the issuance of the shares
of Preferred Stock in one or more series, to establish from time to time the
number of shares to be included in each such series, to fix the powers,
designations, preferences and relative, participating, optional or other special
rights of the shares of each such series and to fix the qualifications,
limitations or restrictions thereof.
4.4 Preemptive Rights. Ownership of shares of any class of the
capital stock of the Corporation shall not entitle the holders thereof to any
preemptive right to subscribe for or purchase or to have offered to them for
subscription or purchase any additional shares of capital stock of any class of
the Corporation or any securities convertible into any class of capital stock
ii
<PAGE>
of the corporation, whether now or hereafter authorized, however acquired,
issued or sold by the corporation, it being the purpose and intent hereof that
the Board of Directors shall have the full right, power and authority to offer
for subscription or sell or to make any disposal of any or all unissued shares
of the capital stock of the Corporation or any securities convertible into stock
or any or all shares of stock or convertible securities issued and thereafter
acquired by the Corporation, for such consideration, in money or property, as
the Board of Directors in its sole discretion shall determine.
Article 5. INCORPORATOR
The name and mailing address of the incorporator (the
"Incorporator") is M.C. Kinnamon 1209 Orange Street, Wilmington, Delaware 19801.
The powers of the Incorporator shall terminate upon the filing of this
Certificate of Incorporation, effective immediately after the Incorporator
appoints the initial members of the board of Directors.
Article 6. BOARD OF DIRECTORS
6.1 Initial Board; Staggered Board; Number; Election. The initial
directors shall serve until the first annual meeting of stockholders which will
be held in 2001. At the annual meeting of the stockholders held in 2001, the
total number of directors shall be divided into three classes, with each class
containing one-third of the total, as near as may be. The terms of directors
elected to serve in Class I shall expire at the annual meeting of stockholders
held in 2002, the terms of directors elected to serve in Class II shall expire
at the annual meeting of stockholders held in 2003, and the terms of directors
elected to serve in Class III shall expire at the annual meeting of stockholders
held in 2004. Upon the expiration of the initial staggered terms, directors of
each class shall be elected for terms of three years to succeed those whose
terms expire. The number of directors constituting the whole board shall not
exceed 11. The number of directors may be altered from time to time as provided
in the Bylaws. The initial director shall be Joseph Coors, Jr. who shall serve
until his successor is duly elected and qualified in accordance with this
Certificate of Incorporation or the Bylaws, or until the earlier of his
resignation or removal. Unless and except to the extent that the bylaws of the
Corporation shall otherwise require, the election of directors of the
Corporation need not be by written ballot. Except as otherwise provided in this
Certificate of Incorporation, each director of the Corporation shall be entitled
to one vote per director on all matters voted or acted upon by the Board of
Directors.
6.2 Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by the
affirmative vote of a majority of the directors then in office, although fewer
than a quorum, or by a sole remaining director or the intial director. A
director shall hold office for the remainder of the term of the class of
director to which the vacancy occurred or the new directorship was created.
Whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the provisions of the Certificate of
Incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by the affirmative vote of a majority of the
directors elected by
iii
<PAGE>
such class or classes or series thereof then in office, or by a sole remaining
director so elected. Each director so chosen shall hold office until the next
election of directors of the class to which such director was appointed, and
until such director's successor is elected and qualified, or until the
director's earlier death, resignation or removal. In the event that one or more
directors resign from the Board, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office until the next election of directors for such class or series,
and until such director's successor is elected and qualified, or until the
director's earlier death, resignation or removal.
6.3 Removal of Directors. A director may be removed only for cause
and only by an affirmative vote of two-thirds of the stockholders entitled to
vote thereon.
6.4 Management of Business and Affairs of the Corporation. The
business and affairs of the Corporation shall be managed by or under the
direction of the Board of Directors.
6.5 Limitation of Liability. No director of the Corporation shall be
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision shall not eliminate
or limit the liability of a director (a) for any breach of the director's duty
of loyalty to the Corporation or its stockholders; (b) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law; (c) under Section 174 of the Delaware General Corporation Law; or (d) for
any transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article 6.5 shall be prospective only and
shall not adversely affect any right or protection of, or any limitation of the
liability of, a director of the Corporation existing at, or arising out of facts
or incidents occurring prior to, the effective date of such repeal or
modification.
Article 7. STOCKHOLDER ACTION
7.1 Action Without a Meeting by Unanimous Written Consent. Any
action required or permitted to be taken at a stockholders' meeting may be taken
without a meeting only by the unanimous written consent of all stockholders
entitled to vote on such matter. The action must be evidenced by one or more
written consents describing the action taken, signed by all of the stockholders
entitled to vote on such action, and delivered to the Corporation in the manner
prescribed by the Delaware General Corporation Law for inclusion in the minute
book.
7.2 Special Meetings. Unless the Delaware General Corporation Law
shall provide otherwise, no stockholder nor any group thereof shall have the
right to call a special meeting of the stockholders.
Article 8. BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
iv
<PAGE>
The Corporation by this provision hereby elects to be governed by
Section 203 of the Delaware General Corporation
Article 9. COMPROMISE OR ARRANGEMENTS
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
Article 10. ACQUISITION PROPOSALS
In determining whether the acquisition proposal is in the long-term
best interests of the Corporation and its stockholders, the Board of Directors
may consider the effect of both an acquisition proposal and a potential
acquisition on creditors, customers and employees of the Corporation and on the
community in general, the risks of non-consummation of an acquisition proposal,
the identity, prior background and other business experiences of the person or
entity making an acquisition proposal, and the business plans of both the
Corporation and the person or entity making an acquisition proposal and their
respective effects on stockholder interests. The Board of Directors is
authorized to take such action as it may determine to be reasonably necessary or
desirable to encourage any person or entity to enter into negotiations with the
Board and management of the Corporation respecting any transaction that may
result in a change of control and to contest or oppose any such transaction that
the Board determines to be unfair, abusive or otherwise undesirable to the
Corporation or its stockholders, business, customers, employees or other
constituencies.
Article 11. AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors of the Corporation is
expressly authorized and
v
<PAGE>
empowered to adopt, amend and repeal the bylaws of the Corporation by an
affirmative vote of two-thirds of the directors then in office. The bylaws of
the Corporation may also be adopted, amended or repealed by an affirmative vote
of two-thirds of the stockholders entitled to vote thereon.
Article 12. RESERVATION OF RIGHT TO AMEND CERTIFICATE OF INCORPORATION
The Corporation reserves the right at any time, and from time to
time, to amend, alter, change, or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences, and privileges
of any nature conferred upon stockholders, directors, or any other persons by
and pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights reserved in this Article 12.
With respect to action to be taken by the stockholders to amend Sections 4.3 and
4.4, and Articles 6, 7, 8, 10, 11 and 12 of this Certificate of Incorporation,
the affirmative vote of two-thirds of all votes entitled to be cast by such
stockholders shall be required.
* * * * * * *
vi
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the Incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
Delaware General Corporation Law, hereby certifies that the facts hereinabove
stated are truly set forth, and accordingly executes this Certificate of
Incorporation this 7th day of December, 1999.
/s/ M.C. Kinnamon
___________________________________________
M.C. Kinnamon
___________________________________________
Incorporator
vii
<PAGE>
BYLAWS
OF
COORSTEK, INC.
ADOPTED
DECEMBER 7, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. OFFICES................................................................1
1.1. Registered Office...............................................1
1.2. Other Offices...................................................1
2. MEETINGS OF STOCKHOLDERS...............................................1
2.1. Place of Meetings...............................................1
2.2. Annual Meetings.................................................1
2.3. Special Meetings................................................2
2.4. Notice of Meetings..............................................2
2.5. Waivers of Notice...............................................2
2.6. Business at Special Meetings....................................2
2.7. List of Stockholders............................................3
2.8. Quorum at Meetings..............................................3
2.9. Voting; Proxies.................................................3
2.10. Required Vote..................................................4
2.11. Powers and Duties of Chairperson of Meetings...................4
3. DIRECTORS..............................................................4
3.1. Powers..........................................................4
3.2. Number..........................................................4
3.3. Nomination of Directors.........................................4
3.4. Meetings........................................................5
3.4.1. Regular Meetings.........................................5
3.4.2. Special Meetings.........................................5
3.4.3. Telephone Meetings.......................................5
3.4.4. Action Without Meeting...................................6
3.4.5. Waiver of Notice of Meeting..............................6
3.5. Quorum and Vote at Meetings.....................................6
3.6. Committees of Directors.........................................6
3.7. Compensation of Directors.......................................7
4. OFFICERS...............................................................7
4.1. Positions......................................................7
4.2. Chairperson....................................................7
4.3. President......................................................8
4.4. Vice President.................................................8
4.5. Secretary......................................................8
4.6. Assistant Secretary............................................8
4.7. Treasurer......................................................8
4.8. Assistant Treasurer............................................9
4.9. Term of Office.................................................9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
4.10. Compensation....................................................9
4.11. Fidelity Bonds..................................................9
5. CAPITAL STOCK...........................................................9
5.1. Certificates of Stock; Uncertificated Shares....................9
5.2. Lost Certificates...............................................10
5.3. Record Date.....................................................10
5.3.1. Actions by Stockholders..................................10
5.3.2. Payments.................................................11
5.4. Stockholders of Record..........................................11
6. INDEMNIFICATION; INSURANCE..............................................11
6.1. Authorization of Indemnification................................11
6.2. Right of Claimant to Bring Action Against the Corporation.......12
6.3. Non-exclusivity.................................................13
6.4. Survival of Indemnification.....................................13
6.5. Insurance.......................................................13
6.6. Offset..........................................................13
6.7. Effect of Amendments............................................14
7. GENERAL PROVISIONS......................................................14
7.1. Inspection of Books and Records.................................14
7.2. Dividends.......................................................14
7.3. Reserves........................................................14
7.4. Execution of Instruments........................................14
7.5. Fiscal Year.....................................................14
7.6. Seal............................................................15
</TABLE>
ii
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
COORSTEK, INC.
1. OFFICES
1.1. Registered Office
The initial registered office of the Corporation shall be Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware, and the initial
registered agent in charge thereof shall be The Corporation Trust Company.
1.2. Other Offices
The Corporation may also have offices at such other places, both
within and outside the State of Delaware, as the Board of Directors may from
time to time determine or as may be necessary or useful in connection with the
business of the Corporation.
2. MEETINGS OF STOCKHOLDERS
2.1. Place of Meetings
All meetings of the stockholders shall be held at such place as may be
fixed from time to time by the Board of Directors, the Chairperson or the
President.
2.2. Annual Meetings
The Corporation shall hold annual meetings of stockholders, commencing
with the year 2001, on such date and at such time as shall be designated from
time to time by the Board of Directors, the Chairperson or the President, at
which stockholders shall elect a Board of Directors and transact such other
business as may properly be brought before the meeting. A stockholder may
propose to transact business at a meeting provided that such stockholder
submitted in writing to the Secretary of the Corporation no later than 90 days
nor more than 120 days prior to the anniversary of the preceding year's annual
meeting of stockholders, information regarding the stockholder and the action to
be taken, together with the identity (including name and address) of such
stockholder and the class and number of shares of the Corporation's common stock
and preferred stock owned, directly or indirectly, by such stockholder or
stockholders. For the purposes of the Corporation's first annual meeting after
2000, the anniversary date shall be deemed to be May 15, 2000. Such proposal
shall set forth the following information: (1) a brief description of the
business desired to be brought before the meeting; (2) the reasons for
conducting such business at the meeting; (3) a representation that the
stockholder is a holder of record of Corporation stock entitled to vote at the
meeting and intends
<PAGE>
to appear in person or by proxy at the meeting to propose the business; (4) a
representation whether the stockholder or the beneficial owner, if any, intends
or is part of a group that intends (a) to deliver a proxy statement and/or form
of proxy to holders of at least the percentage of Corporation capital stock
required to approve the proposal, or (b) otherwise to solicit proxies from
stockholders is support of the proposal; (5) the text of the proposal (including
the text of any resolutions proposed for consideration and in the event that the
business includes a proposal to amend the Bylaws, the language of the proposed
amendment); and (6) any material interest of such stockholder in the proposed
business.
2.3. Special Meetings
Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the Board of Directors,
the Chairperson or the President.
2.4. Notice of Meetings
Notice of any meeting of stockholders, stating the place, date and
hour of the meeting, and if it is a special meeting the purpose or purposes for
which the meeting is called, shall be given to each stockholder entitled to vote
at such meeting not less than 10 nor more than 60 days before the date of the
meeting (except to the extent that such notice is waived or is not required as
provided in the General Corporation Law of the State of Delaware (the "Delaware
General Corporation Law") or these Bylaws). Such notice shall be given in
accordance with, and shall be deemed effective as set forth in, Section 222 (or
any successor section) of the Delaware General Corporation Law.
2.5. Waivers of Notice
Whenever the giving of any notice is required by statute, the
Certificate of Incorporation or these Bylaws, a waiver thereof, in writing and
delivered to the Corporation, signed by the person or persons entitled to said
notice, whether before or after the event as to which such notice is required,
shall be deemed equivalent to notice. Attendance of a stockholder at a meeting
shall constitute a waiver of notice (1) of such meeting, except when the
stockholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (2) if it is a special meeting of
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the stockholder
objects to considering the matter at the beginning of the meeting.
2.6. Business at Special Meetings
Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice (except to the extent that such
notice is waived or is not required as provided in the Delaware General
Corporation Law or these Bylaws).
2
<PAGE>
2.7. List of Stockholders
After the record date for a meeting of stockholders has been fixed, at
least 10 days before such meeting, the officer who has charge of the stock
ledger of the Corporation shall make a list of all stockholders entitled to vote
at the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place in the city where the meeting is
to be held, which place is to be specified in the notice of the meeting, or at
the place where the meeting is to be held. Such list shall also, for the
duration of the meeting, be produced and kept open to the examination of any
stockholder who is present at the time and place of the meeting.
2.8. Quorum at Meetings
Stockholders may take action on a matter at a meeting only if a quorum
exists with respect to that matter. Except as otherwise provided by statute or
by the Certificate of Incorporation, the holders of a majority of the shares
entitled to vote at the meeting, and who are present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. Where a separate vote by a class or series or classes
or series is required, a majority of the outstanding shares of such class or
series or classes or series, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter. Once a share is represented for any purpose at a meeting other than
solely to object (1) to holding the meeting or transacting business at the
meeting, or (2) if it is a special meeting to consideration of a particular
matter at the meeting that is not within the purpose or purposes described in
the meeting notice, it is deemed present for quorum purposes for the remainder
of the meeting and for any adjournment of that meeting unless a new record date
is or must be set for the adjourned meeting. The holders of a majority of the
voting shares represented at a meeting, whether or not a quorum is present, may
adjourn such meeting from time to time.
2.9. Voting; Proxies
Unless otherwise provided in the Delaware General Corporation Law or
in the Corporation's Certificate of Incorporation, and subject to the other
provisions of these Bylaws, each stockholder shall be entitled to one vote on
each matter, in person or by proxy, for each share of the Corporation's capital
stock that has voting power and that is held by such stockholder. Cumulative
voting shall not be allowed in the election of directors or for any other
reason. No proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed appointment of
proxy shall be irrevocable if the appointment form states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power.
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2.10. Required Vote
When a quorum is present at any meeting of stockholders, all matters
shall be determined, adopted and approved by the affirmative vote (which need
not be by ballot) of the holders of a majority of the shares present in person
or represented by proxy at the meeting and entitled to vote with respect to the
matter, unless the proposed action is one upon which, by express provision of
statutes, of the Certificate of Incorporation or of these Bylaws, a different
vote is specified and required, in which case such express provision shall
govern and control with respect to that vote on that matter. Where a separate
vote by a class or classes is required, the affirmative vote of the holders of a
majority of the shares of such class or classes present in person or represented
by proxy at the meeting shall be the act of such class. Notwithstanding the
foregoing, directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors.
2.11. Powers and Duties of Chairperson of Meetings
The chairperson of the meeting at which the directors are to be
elected or at which the stockholder action is to be taken shall have the power
and duty (1) any business proposed to be brought before the meeting by a
stockholder in accordance with Section 2.2 of these Bylaws or to determine
whether a nomination presented by a stockholder in accordance with Section 3.3
of these Bylaws was made or proposed in accordance with the procedures set forth
in such sections, and (2) if any proposed business or nomination was not made or
proposed in compliance with the procedures set forth in Sections 2.2 or 3.3,
respectively, to declare that the proposed business shall not be transacted or
that the nomination shall be disregarded.
3. DIRECTORS
3.1. Powers
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things, subject to any
limitation set forth in the Certificate of Incorporation or as otherwise may be
provided in the Delaware General Corporation Law.
3.2. Number
The number of directors constituting the whole board shall not exceed
11. Within the limits above specified, the number of directors shall be fixed
by the affirmative vote of two-thirds of the directors then in office.
3.3. Nomination of Directors
The Board of Directors shall nominate candidates to stand for election
as directors; and other candidates also may be nominated by any Corporation
stockholder, provided
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such other nomination(s) are submitted in writing to the Secretary of the
Corporation no later than 90 days nor more than 120 days prior to the
anniversary of the preceding year's meeting of stockholders at which directors
were elected, together with the identity and address of the nominator and the
class and number of shares of the Corporation's common stock and preferred stock
owned, directly or indirectly, by the nominator. Such stockholder nomination
shall set forth all information regarding the nominee proposed by the
stockholder that would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission and the
consent of the nominee to be named in a proxy statement as a candidate for
election and to serve as a director if elected. The stockholder nomination shall
contain representations: (1) that the stockholder is a holder of record of
Corporation stock entitled to vote at the meeting and intends to appear in
person or by proxy at the meeting to propose the nomination; and (2) whether the
stockholder or the beneficial owner, if any, intends or is part of a group that
intends (a) to deliver a proxy statement and/or form of proxy to holders of at
least the percentage of Corporation capital stock required to approve the
proposal, or (b) otherwise to solicit proxies from stockholders in support of
the nomination. The Board of Directors may require any proposed nominee to
furnish such other information as it may reasonably require to determine the
eligibility of such proposed nominee to serve as a Director. The directors shall
be elected at the annual meeting of the stockholders, except as provided in the
Certificate of Incorporation, and each director elected shall hold office until
such director's successor is elected and qualified or until the director's
earlier death, resignation or removal. Directors need not be stockholders. The
Board of Directors shall be elected or removed and vacancies filled as set forth
in the Certificate of Incorporation.
3.4. Meetings
3.4.1. Regular Meetings
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board of Directors.
3.4.2. Special Meetings
Special meetings of the Board may be called by the Chairperson or
President on one day's notice to each director, either personally or by
telephone, express delivery service (so that the scheduled delivery date of the
notice is at least one day in advance of the meeting), telegram or facsimile
transmission, and on five days' notice by mail (effective upon deposit of such
notice in the mail). The notice need not describe the purpose of a special
meeting.
3.4.3. Telephone Meetings
Members of the Board of Directors may participate in a meeting of the
board by any communication by means of which all participating directors can
simultaneously hear each
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other during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
3.4.4. Action Without Meeting
Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if the action is taken by all
members of the Board. The action must be evidenced by one or more written
consents describing the action taken, signed by each director, and delivered to
the Corporation for inclusion in the minute book.
3.4.5. Waiver of Notice of Meeting
A director may waive any notice required by statute, the Certificate
of Incorporation or these Bylaws before or after the date and time stated in the
notice. Except as set forth below, the waiver must be in writing, signed by the
director entitled to the notice, and delivered to the Corporation for inclusion
in the minute book. Notwithstanding the foregoing, a director's attendance at
or participation in a meeting waives any required notice to the director of the
meeting unless the director at the beginning of the meeting objects to holding
the meeting or transacting business at the meeting and does not thereafter vote
for or assent to action taken at the meeting.
3.5. Quorum and Vote at Meetings
At all meetings of the board, a quorum of the Board of Directors
consists of a majority of the total number of directors prescribed pursuant to
Section 3.2 of these Bylaws. The vote of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation or by these Bylaws.
3.6. Committees of Directors
The Board of Directors may designate one or more committees, each
committee to consist of one or more directors. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. If a member of a
committee shall be absent from any meeting, or disqualified from voting thereat,
the remaining member or members present and not disqualified from voting,
whether or not such member or members constitute a quorum, may, by unanimous
vote, appoint another member of the Board of Directors to act at the meeting in
the place of such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers requiring it; but no such
committee shall have the power or authority in reference to approving or
adopting, or recommending to the stockholders,
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any action or matter expressly required by the Delaware General Corporation Law
to be submitted to stockholders for approval or adopting, amending or repealing
any bylaw of the Corporation; and unless the resolution designating the
committee, these bylaws or the Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors, when required. Unless otherwise specified in the Board
resolution appointing the Committee, all provisions of the Delaware General
Corporation Law and these Bylaws relating to meetings, action without meetings,
notice (and waiver thereof), and quorum and voting requirements of the Board of
Directors apply, as well, to such committees and their members.
3.7. Compensation of Directors
The Board of Directors shall have the authority to fix the
compensation of directors. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
4. OFFICERS
4.1. Positions
The officers of the Corporation shall be a Chairperson, a President, a
Secretary and a Treasurer, and such other officers as the Board of Directors (or
an officer authorized by the Board of Directors) from time to time may appoint,
including one or more Vice Chairpersons, Executive Vice Presidents, Vice
Presidents, Assistant Secretaries and Assistant Treasurers. Each such officer
shall exercise such powers and perform such duties as shall be set forth below
and such other powers and duties as from time to time may be specified by the
Board of Directors or by any officer(s) authorized by the Board of Directors to
prescribe the duties of such other officers. Any number of offices may be held
by the same person, except that in no event shall the President and the
Secretary be the same person. As set forth below, each of the Chairperson,
President, and/or any Vice President may execute bonds, mortgages and other
contracts under the seal of the Corporation, if required, except where required
or permitted by law to be otherwise executed and except where the execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
4.2. Chairperson
The Chairperson shall (when present) preside at all meetings of the
Board of Directors and stockholders, and shall ensure that all orders and
resolutions of the Board of Directors and stockholders are carried into effect.
The Chairperson may execute bonds,
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mortgages and other contracts, under the seal of the Corporation, if required,
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be expressly delegated
by the Board of Directors to some other officer or agent of the Corporation.
4.3. President
The President shall have full responsibility and authority for
management of the day-to-day operations of the Corporation, subject to the
authority of the Board of Directors and Chairperson. The President may execute
bonds, mortgages and other contracts, under the seal of the Corporation, if
required, except where required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation.
4.4. Vice President
In the absence of the President or in the event of the President's
inability or refusal to act, the Vice President (or in the event there be more
than one Vice President, the Vice Presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President.
4.5. Secretary
The Secretary shall have responsibility for preparation of minutes of
meetings of the Board of Directors and of the stockholders and for
authenticating records of the Corporation. The Secretary shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of the
Board of Directors. The Secretary or an Assistant Secretary may also attest all
instruments signed by any other officer of the Corporation.
4.6. Assistant Secretary
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there shall
have been no such determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of the Secretary's inability or
refusal to act, perform the duties and exercise the powers of the Secretary.
4.7. Treasurer
The Treasurer shall be the chief financial officer of the Corporation
and shall have responsibility for the custody of the corporate funds and
securities and shall see to it that full and accurate accounts of receipts and
disbursements are kept in books belonging to the Corporation.
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The Treasurer shall render to the Chairperson, the President, and the Board of
Directors, upon request, an account of all financial transactions and of the
financial condition of the Corporation.
4.8. Assistant Treasurer
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors (or if
there shall have been no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer.
4.9. Term of Office
The officers of the Corporation shall hold office until their
successors are chosen and qualify or until their earlier resignation or removal.
Any officer may resign at any time upon written notice to the Corporation. Any
officer elected or appointed by the Board of Directors may be removed at any
time, with or without cause, by the affirmative vote of a majority of the Board
of Directors.
4.10. Compensation
The compensation of officers of the Corporation shall be fixed by the
Board of Directors or by any officer(s) authorized by the Board of Directors to
prescribe the compensation of such other officers.
4.11. Fidelity Bonds
The Corporation may secure the fidelity of any or all of its officers
or agents by bond or otherwise.
5. CAPITAL STOCK
5.1. Certificates of Stock; Uncertificated Shares
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution that some or all
of any or all classes or series of the Corporation's stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates, and upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
(representing the number of shares registered in certificate form) signed in the
name of the Corporation by the Chairperson, President or any Vice President, and
by the Treasurer, Secretary or any Assistant Treasurer or Assistant Secretary of
the Corporation. Any or all the signatures on the certificate may be facsimile.
In case any officer, transfer agent or
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registrar whose signature or facsimile signature appears on a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
5.2. Lost Certificates
The Board of Directors, Chairperson, President or Secretary may direct
a new certificate of stock to be issued in place of any certificate theretofore
issued by the Corporation and alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming that the
certificate of stock has been lost, stolen or destroyed. When authorizing such
issuance of a new certificate, the board or any such officer may, as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or such owner's legal representative, to
advertise the same in such manner as the board or such officer shall require
and/or to give the Corporation a bond or indemnity, in such sum or on such terms
and conditions as the board or such officer may direct, as indemnity against any
claim that may be made against the Corporation on account of the certificate
alleged to have been lost, stolen or destroyed or on account of the issuance of
such new certificate or uncertificated shares.
5.3. Record Date
5.3.1. Actions by Stockholders
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than 60 days nor less than 10 days before
the date of such meeting. If no record date is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
unless the Board of Directors fixes a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 10 days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior
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action by the Board of Directors is required by the Delaware General Corporation
Law, shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation in the
manner prescribed by Section 213(b) of the Delaware General Corporation Law. If
no record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by the Delaware General Corporation Law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
5.3.2. Payments
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
5.4. Stockholders of Record
The Corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends, to
receive notifications, to vote as such owner, and to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise may be provided by the Delaware General Corporation Law.
6. INDEMNIFICATION; INSURANCE
6.1. Authorization of Indemnification
Each person who was or is a party or is threatened to be made a party
to or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and whether
by or in the right of the Corporation or otherwise (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,
partner (limited or general) or agent of another corporation or of a
partnership, joint venture, limited liability company, trust or other
enterprise, including service with respect to an employee benefit plan, shall be
(and shall be deemed to have a contractual right to be) indemnified and held
harmless by the Corporation (and any successor to the Corporation by merger or
otherwise) to the fullest extent authorized by, and
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subject to the conditions and (except as provided herein) procedures set forth
in the Delaware General Corporation Law, as the same exists or may hereafter be
amended (but any such amendment shall not be deemed to limit or prohibit the
rights of indemnification hereunder for past acts or omissions of any such
person insofar as such amendment limits or prohibits the indemnification rights
that said law permitted the Corporation to provide prior to such amendment),
against all expenses, liabilities and losses (including attorneys' fees,
judgments, fines, ERISA taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith; provided, however, that the Corporation shall indemnify any such
-------- -------
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person (except for a suit or action pursuant to Section 6.2
hereof) only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. Persons who are not directors or officers of the
Corporation and are not so serving at the request of the Corporation may be
similarly indemnified in respect of such service to the extent authorized at any
time by the Board of Directors of the Corporation. The indemnification conferred
in this Section 6.1 also shall include the right to be paid by the Corporation
(and such successor) the expenses (including attorneys' fees) incurred in the
defense of or other involvement in any such proceeding in advance of its final
disposition; provided, however, that, if and to the extent the Delaware General
-------- -------
Corporation Law requires, the payment of such expenses (including attorneys'
fees) incurred by a director or officer 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 paid in
advance if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this Section 6.1 or otherwise; and provided
--------
further, that, such expenses incurred by other employees and agents may be so
- -------
paid in advance upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
6.2. Right of Claimant to Bring Action Against the Corporation
If a claim under Section 6.1 is not paid in full by the Corporation
within 60 days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring an action 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
action. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in connection with 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 that make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed or is otherwise not entitled to indemnification under Section 6.1, but
the burden of proving such defense shall be on the Corporation. The failure of
the Corporation (in the manner provided under the Delaware General Corporation
Law) to have made a determination prior to or after 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
Delaware General Corporation Law shall not be a defense to the action or create
a presumption that the claimant has not met the applicable standard of
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conduct. Unless otherwise specified in an agreement with the claimant, an actual
determination by the Corporation (in the manner provided under the Delaware
General Corporation Law) after the commencement of such action that the claimant
has not met such applicable standard of conduct shall not be a defense to the
action, but shall create a presumption that the claimant has not met the
applicable standard of conduct.
6.3. Non-exclusivity
The rights to indemnification and advance payment of expenses provided
by Section 6.1 hereof shall not be deemed exclusive of any other rights to which
those seeking indemnification and advance payment of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
6.4. Survival of Indemnification
The indemnification and advance payment of expenses and rights thereto
provided by, or granted pursuant to, Section 6.1 hereof shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee, partner or agent and shall inure to the
benefit of the personal representatives, heirs, executors and administrators of
such person.
6.5. Insurance
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, partner (limited or general) or agent of another
corporation or of a partnership, joint venture, limited liability company, trust
or other enterprise, against any liability asserted against such person or
incurred by such person in any such capacity, or arising out of such person's
status as such, and related expenses, whether or not the Corporation would have
the power to indemnify such person against such liability under the provisions
of the Delaware General Corporation Law.
6.6. Offset
The Corporation's obligation, if any, to indemnify or to advance
expenses to any covered officer or director who was or is serving at its request
as a director, officer, employee or agent of another company, partnership, joint
venture, trust, enterprise or nonprofit entity will be reduced by any amount
that the covered officer or director may collect as indemnification or
advancement of expenses from such other company, partnership, joint venture,
trust, enterprise or nonprofit entity.
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6.7. Effect of Amendments
Any repeal or modification of the relevant provisions of the Bylaws
will not adversely affect any right or protection thereunder of any covered
officer or director in respect of any act or omission occurring prior to the
time of such repeal or modification.
7. GENERAL PROVISIONS
7.1. Inspection of Books and Records
Any stockholder, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during the
usual hours for business to inspect for any proper purpose the Corporation's
stock ledger, a list of its stockholders, and its other books and records, and
to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a stockholder. In every instance
where an attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing authorizing the attorney or other agent to so act on behalf
of the stockholder. The demand under oath shall be directed to the Corporation
at its registered office or at its principal place of business.
7.2. Dividends
The Board of Directors may declare dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of Incorporation
and the laws of the State of Delaware.
7.3. Reserves
The directors of the Corporation may set apart, out of the funds of
the Corporation available for dividends, a reserve or reserves for any proper
purpose and may abolish any such reserve.
7.4. Execution of Instruments
All checks, drafts or other orders for the payment of money, and
promissory notes of the Corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
7.5. Fiscal Year
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
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7.6. Seal
The corporate seal shall be in such form as the Board of Directors
shall approve. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
* * * * *
The foregoing Bylaws were adopted by the Board of Directors on
December 7th, 1999.
/s/ Katherine A. Resler
___________________________________________
Secretary
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EXHIBIT 4.1
Form of
RIGHTS AGREEMENT
----------------
Rights Agreement, dated as of __________ (the "Agreement"), between
CoorsTek, Inc., a Delaware corporation (the "Company"), and [Registrar and
Transfer Agent] (the "Rights Agent").
WHEREAS, on _________ (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend of one
Right for each share of Common Stock (as hereinafter defined) of the Company
outstanding at the Close of Business (as defined herein) on the Record Date (as
defined herein), and has authorized the issuance of one Right with respect to
each share of Common Stock of the Company issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and the
Distribution Date (as hereinafter defined), each Right initially representing
the right to purchase one one-thousandth of a share of Series A Junior
Participating Preferred Stock of the Company having the rights, powers and
preferences set forth in the form of Certificate of Designation, Preferences and
Rights attached hereto as Exhibit A, upon the terms and subject to the
---------
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person,
shall be the Beneficial Owner (as such term is hereinafter defined)
of 15% or more of the shares of Common Stock then outstanding, but
shall not include (i) the Company, (ii) any Subsidiary of the
Company, or (iii) any employee benefit plan of the Company or any
Subsidiary of the Company, or any Person or entity holding shares of
Common Stock for or pursuant to the terms of any such plan to the
extent, and only to the extent, of such shares so held.
(b) "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.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire
(whether such right is
<PAGE>
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, other rights (other than these
Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or
to "beneficially own", (A) 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
(B) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after the
occurrence of a Triggering Event which Rights were acquired by
such Person or any of such Person's Affiliates or Associates
prior to the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof (the "Original Rights") or pursuant to
Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to beneficially own, any security
under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from
a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with,
the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not also then reportable by
such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof)
with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding
(whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph
(c)) or disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (c) shall
cause a person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such person's
participation in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such
acquisition.
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(d) "Board" shall mean the Board of Directors of the Company.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New York City time, on
the next succeeding Business Day.
(g) "Common Stock" when used with reference to the Company shall
mean the shares of common stock, par value $.01 per share, of the
Company. "Common Stock" when used with reference to any Person other
than the Company shall mean the class of capital stock with the
greatest aggregate voting power, or the class of equity securities or
other equity interests having power to control or direct the
management, of such Person.
(h) "Company" shall mean CoorsTek, Inc., a Delaware Corporation.
(i) "Distribution Date" shall mean the earlier of (i) the Close of
Business on the tenth day after the Stock Acquisition Date (or, if
the tenth day after the Stock Acquisition Date occurs before the
Record Date, the close of business on the Record Date), or (ii) the
Close of Business on the tenth Business Day (or, if such tenth
Business Day occurs before the Record Date, the Close of Business on
the Record Date), or such specified or unspecified later date on or
after the Record Date as may be determined by action of the Board
prior to such time as any Person becomes an Acquiring Person, after
the date that a tender or exchange offer by any Person (other than
the Company, any Subsidiary of the Company or any employee benefit
plan of the Company or of any Subsidiary of the Company or any Person
or entity holding shares of Common Stock for or pursuant to the terms
of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if upon consummation thereof, such Person would be
the beneficial owner of 15% or more of the outstanding shares of
Common Stock.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, as in effect on the date of this Agreement.
(k) "Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(l) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
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(m) "Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by
merger or otherwise) of such entity.
(n) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the
Company.
(o) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(p) "Purchase Price" shall have the meaning set forth in Sections
4(a) and 11(a)(ii) herein.
(q) "Record Date" shall mean the close of business on __________.
(r) "Redemption Period" shall have the meaning set forth in Section
23(a) hereof.
(s) "Rights Agent" shall mean Registrar and Transfer Company.
(t) "Rights Certificate" shall have the meaning set forth in
Section 3 hereof.
(u) "Rights Dividend Declaration Date" shall mean the close of
business on ____________.
(v) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(w) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.
(x) "Securities Act" shall mean the Securities Act of 1933, as
amended, as in effect on the date of this Agreement.
(y) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.
(z) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity
securities or equity interests is owned, directly or indirectly, by
such Person, or is otherwise controlled by such Person.
(aa) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
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Section 2. Appointment of Rights Agent.
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof,
shall prior to the Distribution Date also be the holders of the Common Stock) in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such Co-
Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
---------
by first-class, postage prepaid mail, to each record holder of Common Stock as
of the Close of Business on the Record Date at the address of such holder shown
on the records of the Company. With respect to certificates for shares of Common
Stock outstanding as of the Record Date, until the Distribution Date, the Rights
will be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the Distribution Date (or the earlier Expiration Date
or Final Expiration Date), the transfer of any certificate representing shares
of Common Stock in respect of which Rights have been issued shall also
constitute the transfer of the Rights associated with the shares of Common Stock
represented thereby.
(b) Rights shall be issued in respect of all shares of Common Stock
issued (whether originally issued or from the Company's treasury) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date or the Final Expiration Date. Rights shall also be issued to the extent
provided in Section 22 in respect of all shares of Common Stock which are issued
(whether originally issued or from the Company's treasury) after the
Distribution Date and prior to the Expiration Date. Certificates representing
such shares of Common Stock shall also be deemed to be certificates for Rights,
and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between CoorsTek,
Inc. (the "Company") and Registrar and Transfer Company (the "Rights
Agent") dated as of __________ (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Company will mail to the holder
of this certificate a copy of the Rights Agreement as in effect on
the date of mailing without charge after receipt of a written request
therefor.
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<PAGE>
Under certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an Acquiring
Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become null
and void. The Rights shall not be exercisable, and shall be void so
long as held, by a holder in any jurisdiction where the requisite
qualification of the issuance to such holder, or the exercise by such
holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any such certificate shall also constitute the transfer of the Rights
associated with the Common Stock represented thereby.
(c) Until the Distribution Date (i) the Rights will be evidenced
(subject to the provisions of paragraph (a) of this Section 3) by the
certificates for Common Stock registered in the names of the holders thereof
(which certificates for Common Stock shall also be deemed to be Rights
Certificates) and not by separate Rights Certificates, and (ii) the Rights will
be transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company).
(d) As soon as practicable after the Distribution Date, the Rights
Agent will send by first-class, insured, postage prepaid mail, to each record
holder of Common Stock as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Rights
Certificate, in substantially the form of Exhibit C hereto, evidencing one Right
for each share of Common Stock so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company shall make necessary and
appropriate rounding adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall be substantially
the same as Exhibit C hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject
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<PAGE>
to the provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever issued, shall be dated as of the Record Date, and on their face shall
entitle the holders thereof to purchase such number of one one-thousandths of a
share of Preferred Stock as shall be set forth therein at the price set forth
therein (such exercise price per one one-thousandth of a share, the "Purchase
Price"), but the amount and type of securities purchasable upon exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Section 3(d) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person; (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such; or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Board has determined is part of
a plan, arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and
void in the circumstances specified in Section 7(e) of such Rights
Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its President or a Vice-President either manually or by facsimile
signature, and have affixed thereto the Company's seal or a facsimile thereof
which shall be attested by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent, and issued and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such Rights
7
<PAGE>
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the earlier of the Expiration
Date or Final Expiration Date, any Rights Certificate or Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of one
one-thousandths of a share of Preferred Stock (or following a Triggering Event,
Common Stock, other securities, cash, or other assets, as the case may be) as
the Rights Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office of the Rights Agent. Neither the Rights Agent
nor the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Rights Certificate until the registered
holder shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the person
entitled thereto a Rights Certificate or Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed, or mutilated.
8
<PAGE>
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office of the Rights Agent, together with payment of the
Purchase Price for each one one-thousandth of a share of Preferred Stock (or
other securities, cash or other assets, as the case may be) as to which the
Rights are exercised, at or prior to the earlier of (i) the close of business on
, 2009 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof, (iii) the time at which such Rights
are exchanged (the "Exchange Date") as provided in Section 24 hereof, or (iv)
the time at which the Rights expire pursuant to Section 13(d) hereof (the
earliest of (i), (ii), (iii) and (iv) being herein referred to as the
"Expiration Date").
(b) Each Right shall entitle the registered holder thereof to
purchase one one-thousandth of a share of Preferred Stock, and the Purchase
Price for each one one-thousandth of a share of Preferred Stock pursuant to the
exercise of a Right shall initially be $38.00, and shall be subject to
adjustment from time to time as provided in Sections 11 and 13 hereof and shall
be payable in lawful money of the United States of America in accordance with
paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Preferred Stock (or Common Stock,
other securities, cash or other assets, as the case may be) to be purchased and
an amount equal to any applicable transfer tax in cash, or by certified check,
cashier's check or bank draft payable to the order of the Company, the Rights
Agent shall, subject to Section 18(j) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock (or make
available, if the Rights Agent is the transfer agent) certificates for the total
number of one one-thousandths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary to comply with such request, (ii) requisition from the Company the
amount of cash, if any, to be paid in lieu of issuance of fractional shares in
accordance with Section 14, (iii) promptly after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
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<PAGE>
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder and (iv) after receipt thereof, promptly
deliver such cash, if any, to or upon the order of the registered holder of such
Rights Certificate. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, which a majority of the Board, in their sole discretion,
determines is or was involved in or caused or facilitated, directly or
indirectly (including through any change in the Board), such Section 11(a)(ii)
Event, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which a majority of the Board
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action, and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
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Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or to any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any provisions of this Rights Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following a Triggering Event, shares of Common Stock
and/or other securities) that, as provided in this Agreement, including Section
11(a)(iii) hereof, will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) In the event the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
upon the exercise of Rights become listed on any national securities exchange,
the Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with this Agreement, a
registration statement under the Securities Act with respect to the Common Stock
or other securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities, and (B) the Expiration Date. The
Company will also take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the various states in
connection with the exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed ninety (90) days after the date set
forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. In addition, if the Company shall
determine that a registration statement is
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required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights until such time as a registration statement has
been declared effective. Upon any suspension of exercisability of Rights
referred to in this Section 9(c), the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer in
effect. Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable and shall be void so long as held, by a holder
in any jurisdiction where the requisite qualification to the issuance to such
holder, or the exercise by such holder, of the Rights in such jurisdiction shall
not have been obtained or be obtainable, or the exercise thereof shall not be
permitted under applicable law or a registration statement shall not have been
declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-thousandths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
non-assessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Rights Certificates
or of any certificates for a number of one one-thousandths of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of
certificates for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) in a name other
than that of, the registered holder of the Rights Certificate evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Rights Certificate at the time
of surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
Section 10. Preferred Stock Record Date.
Each person in whose name any certificate for a number of one one-
thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of such fractional
shares of Preferred Stock (or Common Stock and/or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such
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surrender and payment is a date upon which the Preferred Stock (or Common Stock
and/or other securities as the case may be) transfer books of the Company are
closed, such person shall be deemed to have become the record holder of such
shares (fractional or otherwise) on, and such certificate shall be dated, the
next succeeding Business Day on which the Preferred Stock (or Common Stock
and/or other securities as the case may be) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.
The Purchase Price, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or the number and kind of shares of
capital stock issuable on such date, as the case may be, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the aggregate adjusted
Purchase Price then in effect necessary to exercise a Right in full, the
aggregate number and kind of shares of Preferred Stock or the number and kind of
shares of capital stock, as the case may be, which, if such Right had been
exercised immediately prior to such date and at a time when the Preferred Stock
(or other capital stock, as the case may be) transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination, or reclassification. If an
event occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Sections 23 and 24 of this Agreement, in the
event that any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company, or
any Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan), alone or together with its Affiliates
and Associates, shall, at any time after the Rights Dividend
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Declaration Date, become an Acquiring Person, unless the event causing such
Person to become an Acquiring Person is a transaction set forth in Section 13(a)
hereof, or is an acquisition of shares of Common Stock pursuant to a cash tender
offer made pursuant to Section 14(d) of the Exchange Act for all outstanding
shares of Common Stock (other than shares of Common Stock beneficially owned by
the person making the offer or by its Affiliates or Associates) at a price and
on terms determined by at least two-thirds of the Board, after receiving advice
from one or more investment banking firms, to be (a) at a price which is fair to
stockholders (taking into account all factors which such members of the Board
deem relevant including, without limitation, prices which could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value) and (b) otherwise in the best interests of the Company
and its stockholders, proper provision shall be made so that promptly following
the Redemption Period (as defined in Section 23(a)), each holder of a Right
(except as provided below and in Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise thereof and payment of an amount equal to the
then current Purchase Price in accordance with the terms of this Agreement, in
lieu of a number of one one-thousandths of a share of Preferred Stock, such
number of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the then number
of one one-thousandths of a share of Preferred Stock for which a Right was or
would have been exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event, whether or not such Right was then exercisable, and (y)
dividing that product (which, following such first occurrence, shall thereafter
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement except to the extent set forth in Section 13 thereof) by 50% of
the current market price per share of Common Stock (determined pursuant to
Section 11(d) hereof) on the date of such first occurrence (such number of
shares, the "Adjustment Shares").
(iii) The Company may at its option substitute for a share of
Common Stock issuable upon the exercise of Rights in accordance with the
foregoing subparagraph (ii) such number or fractions of shares of Preferred
Stock having an aggregate market value equal to the current per share market
price of a share of Common Stock. In the event that the number of shares of
Common Stock which is authorized by the Company's Certificate of Incorporation
but not outstanding, or reserved for issuance for purposes other than upon
exercise of the Rights, is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii), the Board shall, to
the extent permitted by applicable law and by material agreements then in effect
to which the Company is a party, (A) determine the excess of (1) the value of
the Adjustment Shares issuable upon the exercise of a Right (the "Current
Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with
respect to each Right (subject to Section 7(e) hereof), make adequate provision
to substitute for some or all of the Adjustment Shares, upon exercise of a Right
and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of Preferred Stock
which the Board has deemed to have the same value as shares of Common Stock
(such shares or units of shares of Preferred Stock are herein called "common
stock equivalents")), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to the
Current Value, where such aggregate value has been determined by the Board based
upon the advice of an investment banking firm selected by the Board; provided,
however, if the
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Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's
right of redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If, upon the occurrence
of a Section 11(a)(ii) Event, the Board shall determine in good faith that it is
likely that sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, then if the Board so elects, the
thirty (30) day period set forth above may be extended to the extent necessary,
but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek stockholder approval for the authorization of
such additional shares (such period, as it may be extended, the "Substitution
Period"). To the extent that action is to be taken pursuant to the preceding
provisions of this Section 11(a)(iii), the Company (x) shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to all outstanding
Rights, and (y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution to be
made pursuant to the first sentence of this Section 11(a)(iii) and to determine
the value thereof. In the event of any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock on the Section
11(a)(ii) Trigger Date and the value of any "common stock equivalent" shall be
deemed to have the same value as the Common Stock on such date. The Board may,
but shall not be required to, establish procedures to allocate the right to
receive shares of Common Stock upon the exercise of the Rights among holders of
Rights pursuant to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within forty-five (45) calendar days after such record
date) to subscribe for or purchase Preferred Stock (or shares having the same
rights, privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock") or securities convertible into Preferred Stock at a price per
share of Preferred Stock or per share of "equivalent preferred stock" (or having
a conversion price per share of Preferred Stock, if a security convertible into
Preferred Stock) less than the current per share market price of the Preferred
Stock (as defined in Section 11(d)) on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock
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and/or equivalent preferred stock to be offered for subscription or purchase (or
into which the convertible securities so to be offered are initially
convertible). In case such subscription price may be paid in a consideration
part or all of which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock), or
subscription rights or warrants (excluding those referred to in Section 11(b)),
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the current per share market
price of the Preferred Stock (as defined in Section 11(d)) on such record date,
less the fair market value (as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such current per share
market price of the Preferred Stock. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current market price" of the Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the 30
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
Common Stock for the ten (10) consecutive Trading Days immediately following
such date; provided, however, that in the event that the current market price of
the Common Stock is determined during a period following the announcement by the
issuer of such Common Stock of (i) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities convertible into such
Common Stock (other than the Rights), or (ii) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the "current market price" shall be appropriately adjusted to
take into account ex-dividend trading. The closing price for each day
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shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the shares of
Common Stock selected by the Board. If on any such date no market maker is
making a market in the Common Stock, the fair value of such shares on such date
as determined in good faith by the Board shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading is open for the
transaction of business, or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, the term "Trading Day"
shall mean a Monday, Tuesday, Wednesday, Thursday or Friday on which banking
institutions in the State of New York are not authorized or obligated by law or
executive order to close. If the Common Stock is not publicly held or not listed
or traded, "current market price" shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Stock shall be determined in the
same manner as set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the current market
price per share of Preferred Stock cannot be determined in the manner provided
above or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the "current market price"
per share of Preferred Stock shall be conclusively deemed to be an amount equal
to 1,000 (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the current market
price per share of the Common Stock. If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded, "current market price"
per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the "current market price" of one
one-thousandth of a share of Preferred Stock shall be equal to the "current
market price" of one share of Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in such price; provided,
however, that any adjustments which by reason
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of this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of
a share of Common Stock or other share or one-millionth of a share of Preferred
Stock, as the case may be. Notwithstanding the first sentence of this Section
11(e), an adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which requires such
adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock of the Company
other than Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and
the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one one-thousandths
of a share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of a Right. Each of the Rights outstanding after such adjustment of
the number of Rights shall be exercisable for the number of one one-thousandths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of
the number of Rights shall become that number of Rights (calculated to the
nearest ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted
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or any day thereafter, but, if the Rights Certificates have been issued, shall
be at least ten (10) days later than the date of the public announcement. If
Rights Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Rights Certificates
on such record date Rights Certificates evidencing, subject to Section 14
hereof, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share and the number of one one-thousandths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then-par value, if any, of the number of
one one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and non-assessable such number of one one-thousandths of a
share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-thousandths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such a holder due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that the Board in its sole discretion shall determine to be advisable
in order that any (i) consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of any shares of Preferred Stock at less than the
current market price, (iii) issuance wholly for cash of shares of Preferred
Stock or securities which by
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their terms are convertible into or exchangeable for Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to hereinabove
in this Section 11, hereafter made by the Company to holders of its Preferred
Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
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Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any adjustment unless and
until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) Subject to Section 23 of this Agreement, in the event that,
following the Stock Acquisition Date, directly or indirectly, (x) the Company
shall consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), and the Company shall not be the continuing or surviving corporation of
such consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof), then, and in
each such case (except as may be contemplated by Section 13(d) hereof), proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall, upon the expiration of the Redemption Period (as
defined in Section 23(a)), thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and (2) dividing that product
(which product, following the first occurrence of a Section 13 Event, shall be
referred to
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as the "Purchase Price" for each Right and for all purposes of this Agreement)
by 50% of the current market price per share of the shares of Common Stock of
such Principal Party on the date of consummation of such Section 13 Event (or
the fair market value on such date or other securities or property of the
Principal Party, as provided for herein); (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof (other
than Sections 11(a)(ii) and 11(a)(iii)) shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) and Section
11(a)(iii) hereof shall be of no effect following the first occurrence of any
Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions; provided,
however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange
Act, and such Person is a direct or indirect Subsidiary of another
Person the Common Stock of which is and has been so registered,
"Principal Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Stock having the greatest aggregate market
value.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized shares of its
Common Stock which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of any such Section 13 Event, the
Principal Party will:
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(i) prepare and file a registration statement under the
Securities Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and
will use its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and (B)
remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a) hereof.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons (or a wholly owned subsidiary of any such Person or Persons)
who acquired shares of Common Stock pursuant to a cash tender offer for all
outstanding shares of Common Stock which complies with the provisions of Section
11(a)(ii) hereof, (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of Common Stock whose shares were purchased pursuant to such cash tender
offer and (iii) the form of consideration being offered to the remaining holders
of shares of Common Stock pursuant to such transaction is the same as the form
of consideration paid pursuant to such cash tender offer. Upon consummation of
any such transaction contemplated by this Section 13(d), all Rights hereunder
shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of the whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, or, in case no such sale takes place on such day, the average of the
high bid and low asked prices, in either case as reported by NASDAQ or such
other system then in use or, if on any such date the Rights are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights selected
by the Board. If on any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as determined in good faith by
the Board
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shall be used. In the event the Rights are listed or admitted to trading on a
national securities exchange, the closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the high bid and low asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to the national securities exchange on which the Rights are listed or admitted
to trading.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value
of one one-thousandth of a share of Preferred Stock shall be one one-thousandth
of the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price of one share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action.
All rights of action in respect of this Agreement, except the rights
of action vested in the Rights Agent pursuant to Section 18 and Section 20
hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights
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Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of, the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders.
Every holder of a Right by accepting the same consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate form of assignment and
the certificate contained therein duly completed and executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be affected by any notice to the contrary; and
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any government authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the Preferred
Stock or any other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer
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upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Duties of Rights Agent.
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Rights Certificates, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by any
one of the President, a Vice President, the Treasurer or the Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith, or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming
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void pursuant to Section 7(e) hereof) or any adjustment required under the
provisions of Section 11 or 13 hereof or responsible for the manner, method, or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
shares of Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or shares of Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
non-assessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, a Vice President, the Secretary
or the Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Rights Agreement and the date on or after which such action
shall be taken or such omission shall be effective. The Rights Agent shall not
be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instruction in response to such application specifying the action to be taken or
omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect, or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect, or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.
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(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 19. Compensation and Indemnification of the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises. The indemnity provided for hereunder shall survive
the expiration of the Rights and the termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person or persons.
Section 20. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent
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shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at any such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 21. Change of Rights Agent.
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon thirty (30) days' notice in
writing mailed to the Company and to each transfer agent of the Common Stock and
the Preferred Stock by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent upon thirty (30) days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall, with such
notice, submit his Rights Certificate for inspection by the Company), then the
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the State of Maryland or New York (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the State of Maryland or New York), in good standing, having a
principal office in the State of Maryland or New York which is authorized under
such laws to exercise corporate trust power and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to
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the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by the Board to
reflect any adjustment or change in the Purchase Price per share and the number
or kind of class of shares or other securities or property purchasable under the
Rights Certificates made in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date (other than upon exercise of a Right) and prior
to the redemption or expiration of the Rights, the Company (a) shall, with
respect to shares of Common Stock so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
Section 23. Redemption.
(a) The Board may, at its option, at any time during the period
commencing on the Rights Dividend Declaration Date and ending on the earlier of
(i) the Close of Business on the tenth day following the Stock Acquisition Date
(or, if the Stock Acquisition Date shall have occurred prior to the Record Date,
the Close of Business on the tenth day following the Record Date), as such
period may be extended or shortened in the discretion of the Board of Directors
(the "Redemption Period") or (ii) the Final Expiration Date, cause the Company
to redeem all but not less than all the then outstanding Rights at a redemption
price of $.001 per Right, as such amount may be appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the
"Redemption Price"); provided, however, that, if the Board authorizes redemption
of the Rights in either of the circumstances set forth in clauses (i) and (ii)
below, then such authorization shall require the concurrence of two-thirds of
the Board: (i) such authorization
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occurs on or after the time a Person becomes an Acquiring Person, or (ii) such
authorization occurs on or after the date of a change (resulting from a proxy or
consent solicitation effected in compliance with applicable law and regulations)
in a majority of the directors in office at the commencement of such
solicitation if any Person who is a participant in such solicitation has stated
(or, if a majority of the directors in office at the commencement of such
solicitation has determined in good faith) that such Person (or any of its
Affiliates or Associates) intends to take, or may consider taking, any action
which would result in such Person becoming an Acquiring Person or which would
cause the occurrence of a Triggering Event unless, concurrently with such
solicitation, such Person (or one or more of its Affiliates or Associates) is
making a cash tender offer pursuant to a Schedule 14D-1 (or any successor form)
filed with the Securities and Exchange Commission for all outstanding shares of
Common Stock not beneficially owned by such Person (or by its Affiliates or
Associates). If, following the occurrence of a Stock Acquisition Date and
following the expiration of the Company's right of redemption hereunder (i) a
Person who is an Acquiring Person shall have transferred or otherwise disposed
of a number of shares of Common Stock in one transaction or series of
transactions, not directly or indirectly involving the Company or any of its
Subsidiaries, which did not result in the occurrence of a Triggering Event such
that such Person is thereafter a Beneficial Owner of 10% or less of the
outstanding shares of Common Stock, (ii) there are no other Persons, immediately
following the occurrence of the event described in clause (i), who are Acquiring
Persons, and (iii) the Board (by a vote of two-thirds of the Board) shall so
approve, then the Company's right of redemption shall be reinstated and
thereafter be subject to the provisions of this Section 23. Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event or a Section
13 Event until such time as the Company's right of redemption hereunder has
expired. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the current market price of the Common Stock at
the time of redemption) or any other form of consideration deemed appropriate by
the Board.
(b) Immediately upon the action of the Board ordering the redemption
of the Rights, evidence of which shall have been filed with the Rights Agent and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. Promptly after the action of the
Board ordering the redemption of the Rights, the Company shall give notice of
such redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Transfer Agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. Exchange.
(a) The Board may, at its option, at any time after any Person becomes
an Acquiring Person, exchange all or part of the then outstanding and
exercisable Rights (which
31
<PAGE>
shall not include Rights that have become void pursuant to the provisions of
Section 11(a)(ii) or Section 7(l) hereof) for shares of Common Stock at an
exchange ratio of one share of Common Stock per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter referred to as the
"Exchange Ratio").
(b) Immediately upon the action of the Board ordering the exchange of
any Rights pursuant to subsection (a) of this Section 24 and without any further
action and without any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of such Rights shall be to receive
that number of shares of Common Stock equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of
Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 11(a)(ii) or
Section 7(l) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional shares would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole share of Common Stock. For
the purposes of this paragraph (d), the current market value of a whole share of
Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings) or (ii) to offer to the holders of Preferred Stock rights or
warrants to subscribe for or to purchase any additional shares of Preferred
Stock or
32
<PAGE>
shares of stock of any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding Preferred Stock),
or (iv) to effect any consolidation or merger into or with, or to effect any
sale or other transfer (or to permit one or more of its subsidiaries to effect
any sale or other transfer), in one or more transactions, of more than 50% of
the assets or earning power of the Company and its subsidiaries (taken as a
whole) to, any other Person, or (v) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
each holder of a Rights Certificate, to the extent feasible and in accordance
with Section 26 hereof, a notice of such proposed action, which shall specify
the record date for the purposes of such stock dividend, distribution of rights
or warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any such
case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the occurrence of such event which shall specify
the event and the consequences of the event to holders of Rights under Section
11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate other securities.
Section 26. Notices.
Notices or demands authorized by this Agreement to be given or made by
the Rights Agent or by the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
CoorsTek, Inc.
1600 Table Mountain Parkway
Golden, CO 80403
Attention: General Counsel
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
33
<PAGE>
Registrar and Transfer Company
______________________________
______________________________
Attention:____________________
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to any such holder at the address of such holder as shown on the
registry books of the Company.
Section 27. Supplements and Amendments.
Prior to the Distribution Date and subject to the penultimate sentence
of this Section 27, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date and subject to the penultimate sentence of
this Section 27, the Company and the Rights Agent shall at any time and from
time to time, if the Company so directs, supplement or amend this Agreement
without the approval of any holders of Rights Certificates in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
to shorten or lengthen any time period hereunder or (iv) to change or supplement
the provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Rights Certificates (other than an Acquiring Person or an Affiliate or Associate
of any such Person); provided, however, that this Agreement may not be
supplemented or amended (A) whether before or after the Distribution Date, to
lengthen a time period relating to when the Rights may be redeemed or to modify
the ability (or inability) of the Board to redeem the Rights at such time as the
Rights are not then redeemable, or (B) after the Distribution Date, to lengthen,
pursuant to clause (iii) of this sentence, any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of one one-thousandths
of a share of Preferred Stock for which a Right is exercisable. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of shares of Common Stock.
34
<PAGE>
Section 28. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Rights Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board, etc.
For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act. The Board (with, where specifically
provided for herein, a vote of two-thirds of the Board) shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board (with, where specifically provided for
herein, a vote of two-thirds of the Board) or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including without limitation a
determination to redeem or not redeem the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board (with, where specifically provided for
herein, a vote of two-thirds of the Board) in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject any director to any liability
to the holders of the Rights.
Section 30. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any Person
other than the Company, the Rights Agent and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered holders
of the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, registered holders of Common Stock).
Section 31. Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and
35
<PAGE>
the Board of Directors determines in its good faith judgment that severing the
invalid language from this Agreement would materially and adversely affect the
purpose or effect of this Agreement, the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the Close of
Business on the tenth day following the date of such determination by the Board.
Section 32. Governing Law.
This Agreement, each Right and each Rights Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with laws of such State.
Section 33. Counterparts.
This Agreement may be executed in any number of counterparts. It
shall not be necessary that the signature of or on behalf of each party appears
on each counterpart, but it shall be sufficient that the signature of or on
behalf of each party appears on one or more of the counterparts. All
counterparts shall collectively constitute a single agreement. It shall not be
necessary in any proof of this Agreement to produce or account for more than a
number of counterparts containing the respective signatures of or on behalf of
all of the parties.
Section 34. Descriptive Headings.
Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
* * * * * *
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
COORSTEK, INC.
Attest:
By _________________________ By _____________________________
_________________________ _____________________________
REGISTRAR AND TRANSFER COMPANY
Attest:
By _________________________ By _____________________________
_________________________ _____________________________
Signature Page
<PAGE>
EXHIBIT 4.2
Form of
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
COORSTEK, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, Joseph Coors, Jr., Chairman and Chief Executive Officer, of CoorsTek,
Inc., a corporation organized and existing under the General Corporation Law of
the State of Delaware, in accordance with the provisions of Section 103 thereof,
DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, the said Board of
Directors on December __, 1999, adopted the following resolution creating a
series of 100,000 shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation (the "Board") in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
voting rights or powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series, par value
----------------------
$.01 per share, shall be designated as "Series A Junior Participating Preferred
Stock" and the number of shares constituting such series shall be 100,000.
Section 2. Dividends and Distributions.
---------------------------
(A) 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
the 15th day of April, July, October and January, 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 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) $.01
or (b)
<PAGE>
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, par value
$.01 per share, of the Corporation (the "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 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 December
__, 1999 (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.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend 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 $.01 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) 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 set 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 entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment date, in either of
which event such dividends shall begin to accrue and be cumulative for such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the 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.
2
<PAGE>
Section 3. Voting Rights. The holders of shares of Series A Junior
-------------
Participating Preferred Stock shall have the following voting rights:
(A) 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 stockholders of
the Corporation. 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 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.
(B) Except as otherwise provided 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
stockholders of the Corporation.
Section 4. Certain Restrictions.
--------------------
(A) Whenever dividends or distributions payable on the Series A Junior
Participating Preferred Stock as provided in Section 2 are not paid, thereafter
and until such 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:
(i) 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; or
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (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 in proportion to the total amounts to which the holders of all such
shares are then entitled; or
(iii) 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 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
3
<PAGE>
(iv) 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.
(B) 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 (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. 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.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) 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 $38.00 per one one-thousandth share, plus any unpaid
dividends and distributions payable 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 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 (i) the Series A Liquidation Preference by (ii)
1,000 (as appropriately adjusted as set forth in subparagraph (C) below to
reflect such events as stock splits, stock dividends and recapitalizations with
respect to the Common Stock) (such number in clause (ii) immediately above being
referred to as 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 one with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) 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
4
<PAGE>
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
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.
(C) 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 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.
Section 7. 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 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.
Section 8. Redemption. The outstanding shares of Series A Junior
----------
Participating Preferred Stock may be redeemed as a whole, but not in part, at
any time, or from time to time, at the option of the Board, at a cash price per
share equal to 105% of (i) the product of the Adjustment Number times the
Average Market Value (as such term is hereinafter defined) of the Common Stock,
plus (ii) all dividends which on the redemption date are payable on the shares
to be redeemed and have not been paid or declared, and a sum sufficient for the
payment thereof set apart, without interest. The "Average Market Value" is the
average of the closing sale prices of the Common Stock during the 30-day period
immediately preceding the date before the redemption date 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, as amended, on which such
stock is listed, or, if such stock is not listed on any such exchange, the
average of the closing sale prices with respect to a share
5
<PAGE>
of Common Stock during such 30-day period, as quoted on the National Association
of Securities Dealers, Inc. Automated Quotations System or any system then in
use, or if no such quotations are available, the fair market value of the Common
Stock as determined by the Board in good faith.
Section 9. Ranking. Notwithstanding anything contained herein to the
-------
contrary, the Series A Junior Participating Preferred Stock shall rank junior to
all other series of the Corporation's Preferred Stock as to voting rights, the
payment of dividends and the distribution of assets in liquidation, unless the
terms of any such series shall provide otherwise.
Section 10. Amendment. The Certificate 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.
Section 11. Fractional Shares. Series A Junior Participating Preferred
-----------------
Stock may be issued in fractions of a share which shall entitle the holders, in
proportion to such holders 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.
* * * * *
6
<PAGE>
IN WITNESS WHEREOF, I have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this ___ day of
December, 1999.
__________________________________________
Joseph Coors, Jr.
Chairman and Chief Executive Officer
Attest:
________________________
________________________
Secretary
7
<PAGE>
Description of Officers' Life Insurance Program
-----------------------------------------------
The Company's life insurance program for executive officers is a non-qualified,
forfeitable benefit wherein the Registrant purchases life insurance on the
participating officer equal to six times his or her annual base salary and
assigns the right to designate the beneficiary of the coverage to the officer.
The Registrant is the owner of the policies and all the cash surrender value
thereon.
<PAGE>
EXHIBIT 10.2.
COORSTEK, INC.
STOCK OPTION AND INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
1. PURPOSE................................................................. 1
2. DEFINITIONS............................................................. 1
3. ADMINISTRATION OF THE PLAN.............................................. 5
3.1. Board............................................................. 5
3.2. Committee......................................................... 5
3.3. Awards............................................................ 6
3.4. No Liability...................................................... 6
4. STOCK SUBJECT TO THE PLAN............................................... 7
5. EFFECTIVE DATE AND TERM OF THE PLAN..................................... 7
5.1. Effective Date.................................................... 7
5.2. Term.............................................................. 7
6. OPTION GRANTS........................................................... 8
6.1. Company or Subsidiary Employees; Other Persons.................... 8
6.2. Successive Awards................................................. 8
6.3. Reload Options.................................................... 8
7. LIMITATIONS ON GRANTS................................................... 8
7.1. Limitation on Shares of Stock Subject to Awards and Cash Awards... 8
7.2. Limitations on Incentive Stock Options............................ 9
8. AWARD AGREEMENT......................................................... 9
9. OPTION PRICE............................................................ 9
10. VESTING, TERM AND EXERCISE OF OPTIONS................................... 10
10.1. Vesting and Option Period......................................... 10
10.2. Term.............................................................. 10
10.3. Acceleration...................................................... 10
10.4. Termination of Employment or Other Relationship................... 10
10.5. Rights in the Event of Death...................................... 11
10.6. Rights in the Event of Disability................................. 11
10.7. Rights in the Event of Retirement................................. 12
10.8. Limitations on Exercise of Option................................. 12
10.9. Method of Exercise................................................ 12
10.10.Delivery of Stock Certificates.................................... 13
11. STOCK APPRECIATION RIGHTS............................................... 13
11.1. Right to Payment.................................................. 13
11.2. Other Terms....................................................... 14
12. TRANSFERABILITY OF OPTIONS.............................................. 14
12.1. Transferability of Options........................................ 14
12.2. Family Transfers.................................................. 14
13. RESTRICTED STOCK........................................................ 15
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13.1. Grant of Restricted Stock or Restricted Stock Units............ 15
13.2. Restrictions................................................... 15
13.3. Restricted Stock Certificates.................................. 15
13.4. Rights of Holders of Restricted Stock.......................... 15
13.5. Rights of Holders of Restricted Stock Units.................... 16
13.6. Termination of Employment or Other Relationship................ 16
13.7. Rights in the Event of Death................................... 16
13.8. Rights in the Event of Disability.............................. 17
13.9. Delivery of Stock and Payment Therefor......................... 17
14. DEFERRED STOCK AWARDS................................................. 17
14.1. Nature of Deferred Stock Awards................................ 17
14.2. Election to Receive Deferred Stock Awards in Lieu of
Compensation................................................... 18
14.3. Rights as a Stockholder........................................ 18
14.4. Restrictions................................................... 18
14.5. Termination.................................................... 18
15. UNRESTRICTED STOCK AWARDS............................................. 18
15.1. Grant or Sale of Unrestricted Stock............................ 18
16. PERFORMANCE STOCK AWARDS.............................................. 19
16.1. Nature of Performance Stock Awards............................. 19
16.2. Rights as a Stockholder........................................ 19
16.3. Termination.................................................... 19
16.4. Acceleration, Waiver, Etc...................................... 19
17. DIVIDEND EQUIVALENT RIGHTS............................................ 20
17.1. Dividend Equivalent Rights..................................... 20
17.2. Interest Equivalents........................................... 20
17.3. Termination.................................................... 20
18. CERTAIN PROVISIONS APPLICABLE TO AWARDS............................... 21
18.1. Stand-Alone, Additional, Tandem, and Substitute Awards......... 21
18.2. Term of Awards................................................. 21
18.3. Form and Timing of Payment Under Awards; Deferrals............. 21
18.4. Performance and Annual Incentive Awards........................ 22
18.4.1. Performance Conditions................................ 22
18.4.2. Performance Awards Granted to Designated Covered
Employees............................................. 22
18.4.3. Annual Incentive Awards Granted to Designated Covered
Employees............................................. 24
18.4.4. Written Determinations................................ 25
18.4.5. Status of Section 18.4.3 and Section 18.4.2 Awards
Under Code Section 162(m)............................. 25
19. PARACHUTE LIMITATIONS................................................. 26
20. REQUIREMENTS OF LAW................................................... 27
20.1. General........................................................ 27
20.2. Rule 16b-3..................................................... 27
21. AMENDMENT AND TERMINATION OF THE PLAN................................. 28
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22. EFFECT OF CHANGES IN CAPITALIZATION................................... 28
22.1. Changes in Stock............................................... 28
22.2. Reorganization in Which the Company Is the Surviving Entity
and in Which No Change in Control Occurs....................... 29
22.3. Reorganization, Sale of Assets or Sale of Stock Which Involves
a Change in Control............................................ 29
22.4. Adjustments.................................................... 29
22.5. No Limitations on Company...................................... 29
23. POOLING............................................................... 30
24. DISCLAIMER OF RIGHTS.................................................. 30
25. NONEXCLUSIVITY OF THE PLAN............................................ 30
26. WITHHOLDING TAXES..................................................... 31
27. CAPTIONS.............................................................. 31
28. OTHER PROVISIONS...................................................... 31
29. NUMBER AND GENDER..................................................... 31
30. SEVERABILITY.......................................................... 32
31. GOVERNING LAW......................................................... 32
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COORSTEK, INC.
STOCK OPTION AND INCENTIVE PLAN
CoorsTek, Inc., a Delaware corporation (the "Company"), sets forth herein
the terms of the Company's Stock Option and Incentive Plan (the "Plan") as
follows:
1. PURPOSE
The purpose of the Plan is to enhance the Company's ability to attract,
retain, and compensate highly qualified officers, key employees, and other
persons, and to motivate such officers, key employees, and other persons to
serve the Company and its affiliates (as defined herein) and to expend maximum
effort to improve the business results and earnings of the Company, by providing
to such officers, key employees and other persons an opportunity to acquire or
increase a direct proprietary interest in the operations and future success of
the Company and with other financial incentives. To this end, the Plan provides
for the grant of stock options, stock appreciation rights, restricted stock,
restricted stock units, deferred stock awards, unrestricted stock awards,
performance stock awards, dividend equivalent rights, performance awards and
annual incentive awards in accordance with the terms hereof. Stock options
granted under the Plan may be non-qualified stock options or incentive stock
options, as provided herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any company
or other trade or business that controls, is controlled by or is under common
control with such person within the meaning of Rule 405 of Regulation C under
the Securities Act.
2.2 "Annual Incentive Award" means a conditional right granted to a Grantee
under Section 18.4.3 hereof to receive a cash payment, Stock or other Award,
unless otherwise determined by the Committee, after the end of a specified
fiscal year.
2.3 "Award" means a grant of an Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Deferred Stock, Unrestricted Stock,
Performance Stock, Dividend Equivalent Rights, Performance or Annual Incentive
Awards under the Plan.
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2.4 "Award Agreement" means the stock option agreement, stock appreciation
rights agreement, restricted stock agreement, restricted stock unit agreement,
deferred stock award agreement, unrestricted stock award agreement, performance
stock award agreement, dividend equivalent rights agreement, performance award
agreement, annual incentive award agreement or other written agreement between
the Company and a Grantee that evidences and sets out the terms and conditions
of an Award.
2.5 "Benefit Arrangement" shall have the meaning set forth in Section 19
hereof.
2.6 "Board" means the Board of Directors of the Company.
2.7 "Change in Control" means any of the following transactions: (i) if
beneficial ownership of 50% or more of either the outstanding shares of the
Company's common stock or the combined voting power of the Company's voting
stock is acquired by persons or entities not related to the Company without
consent of the current Board, (ii) upon the election of individuals constituting
a majority of the Board who were either not members prior to their election or
not recommended to the stockholders by the Board, (iii) upon a merger,
consolidation or sale of all or substantially all of the Company's assets, where
upon (a) at least 50% of the outstanding shares of the Company's common stock
and of the combined voting power of voting securities are not held in the same
proportion, and by the same persons as the beneficial owners prior to such
event, (b) at least 35% of the Company's common stock is held by a person that
did not hold such amount prior to the event and (c) a majority of the current
Board did not survive the event, or (iv) approval by the stockholders of the
Company of a complete liquidation or dissolution of the Company.
2.8 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.9 "Committee" means a committee of, and designated from time to time by
resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate of the Company.
2.10 "Company" means CoorsTek, Inc.
2.11 "Covered Employee" means a Grantee who is a Covered Employee within the
meaning of Section 162(m)(3) of the Code.
2.12 "Deferred Stock" means a right, granted to a Grantee under Section 14
hereof, to receive Stock, cash or a combination thereof at the end of a
specified deferral period.
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2.13 "Dividend Equivalent" means a right, granted to a Grantee under Section
17 hereof, to receive cash, Stock, other Awards or other property equal in value
to dividends paid with respect to a specified number of shares of Stock, or
other periodic payments.
2.14 "Effective Date" means October 21, 1999, the date on which the Plan was
adopted by the Board.
2.15 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.16 "Family Member" means a person who is a spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, sibling, niece, nephew, mother-in-
law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-
law, including adoptive relationships, of the Grantee, any person sharing the
Grantee's household (other than a tenant or employee), a trust in which these
persons have more than fifty percent of the beneficial interest, a foundation in
which these persons (or the Grantee) control the management of assets, and any
other entity in which these persons (or the Grantee) own more than fifty percent
of the voting interests.
2.17 "Fair Market Value" means the value of a share of Stock, determined as
follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to quotation
on the NASDAQ National Market, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading day)
or, if no sale of Stock is reported for such trading day, on the next preceding
day on which any sale shall have been reported. If the Stock is not listed on
such an exchange, quoted on such system or traded on such a market, Fair Market
Value shall be the value of the Stock as determined by the Board in good faith.
2.18 "Grant Date" means, as determined by the Board or authorized Committee,
(i) the date as of which the Board or such Committee approves an Award, (ii) the
date on which the recipient of such Award first became an employee of or
otherwise entered into a relationship with the Company or an affiliate of the
Company or (iii) such other date as may be specified by the Board or such
Committee.
2.19 "Grantee" means a person who receives or holds a grant of an Option,
Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Deferred
Stock, Unrestricted Stock, Performance Stock, Performance or Annual Incentive
Awards, or Dividend Equivalent Rights under the Plan.
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2.20 "Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.21 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.22 "Option Period" means the period during which Options may be exercised
as set forth in Section 10 hereof.
2.23 "Option Price" means the purchase price for each share of Stock subject
to an Option.
2.24 "Other Agreement" shall have the meaning set forth in Section 19
hereof.
2.25 "Outside Director" means a member of the Board who is not an officer or
employee of the Company.
2.26 "Performance Stock Award" means Awards granted pursuant to Section 16.
2.27 "Plan" means this CoorsTek, Inc. Stock Option and Incentive Plan.
2.28 "Reporting Person" means a person who is required to file reports under
Section 16(a) of the Exchange Act.
2.29 "Restricted Period" means the period during which Restricted Stock or
Restricted Stock Units are subject to restrictions or conditions pursuant to
Section 13.2 hereof.
2.30 "Restricted Stock" means shares of Stock, awarded to a Grantee pursuant
to Section 13 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.31 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to
Section 13 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.32 "Retirement" means a termination of employment from the Company or an
affiliate under a Company retirement plan.
2.33 "Securities Act" means the Securities Act of 1933, as now in effect or
as hereafter amended.
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2.34 "Stock" means the common stock, par value $.01 per share, of the
Company.
2.35 "Stock Appreciation Rights" or "SAR" means a right granted to a Grantee
under Section 11 hereof.
2.36 "Subsidiary" means any "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code.
2.37 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in Section 10.2 hereof.
2.38 "Unrestricted Stock Award" means any Award granted pursuant to Section
15.
3. ADMINISTRATION OF THE PLAN
3.1. Board
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's certificate of
incorporation and by-laws and applicable law. The Board shall have full power
and authority to take all actions and to make all determinations required or
provided for under the Plan, any Award or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Award or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Company's articles of incorporation and by-laws
and applicable law. The interpretation and construction by the Board of any
provision of the Plan, any Award or any Award Agreement shall be final and
conclusive. As permitted by law, the Board may delegate its authority under the
Plan to a member of the Board of Directors or an executive officer of the
Company.
3.2. Committee.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in Section 3.1 above and in other applicable provisions, as the Board
shall determine, consistent with the certificate of incorporation and by-laws of
the Corporation and applicable law. In the event that the Plan, any Award or
any Award Agreement entered into hereunder provides for any action to be taken
by or
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determination to be made by the Board, such action may be taken or such
determination may be made by the Committee if the power and authority to do so
has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive. As
permitted by law, the Committee may delegate its authority under the Plan to a
member of the Board of Directors or an executive officer of the Company.
3.3. Awards
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority (i) to designate Grantees, (ii) to determine the type
or types of Awards to be made to a Grantee, (iii) to determine the number of
shares of Stock to be subject to an Award, (iv) to establish the terms and
conditions of each Award (including, but not limited to, the exercise price of
any Option, the nature and duration of any restriction or condition (or
provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of an Award or the shares of Stock subject thereto, and any terms or
conditions that may be necessary to qualify Options as Incentive Stock Options),
(v) to prescribe the form of each Award Agreement evidencing an Award, and (vi)
to amend, modify, or supplement the terms of any outstanding Award. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Awards to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom. As a condition to any subsequent Award, the Board shall have the right,
at its discretion, to require Grantees to return to the Company Awards
previously made under the Plan. Subject to the terms and conditions of the
Plan, any such new Award shall be upon such terms and conditions as are
specified by the Board at the time the new Award is made.
3.4. No Liability.
No member of the Board or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award or Award
Agreement.
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4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 22 hereof, the number of shares
of Stock available for issuance under the Plan shall be one million plus the
number of shares of Stock that are subject to Options and Stock Units that are
substituted for options to purchase shares and receive shares of the common
stock of ACX Technologies, Inc. ("ACX") in connection with the distribution by
ACX to its shareholders of all of the Stock held by ACX. No more than ten
percent 10% of the shares of Stock reserved for issuance under the Plan may be
granted pursuant to Awards other than Options. In no event, except as subject
to adjustment as provided in Section 22 shall more than one million shares of
Stock be cumulatively available for issuance pursuant to the exercise of
Incentive Stock Options. Stock issued or to be issued under the Plan shall be
authorized but unissued shares. If any shares covered by an Award are not
purchased or are forfeited, or if an Award otherwise terminates without delivery
of any Stock subject thereto, then the number of shares of Stock counted against
the aggregate number of shares available under the Plan with respect to such
Award shall, to the extent of any such forfeiture or termination, again be
available for making Awards under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. Effective Date.
The Plan shall be effective as of the Effective Date, subject to approval of
the Plan within one year of the Effective Date, by a majority of the votes cast
on the proposal at a meeting of stockholders, provided that the total votes cast
represent a majority of all shares entitled to vote. Upon approval of the Plan
by the stockholders of the Company as set forth above, all Awards made under the
Plan on or after the Effective Date shall be fully effective as if the
stockholders of the Company had approved the Plan on the Effective Date. If the
stockholders fail to approve the Plan within one year after the Effective Date,
any Awards made hereunder shall be null and void and of no effect.
5.2. Term.
The Plan has no termination date; however, no Incentive Stock Option may be
granted on or after the tenth anniversary of the Effective Date.
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6. OPTION GRANTS
6.1. Company or Subsidiary Employees; Other Persons
Subject to Section 7, Awards may be made under the Plan to: (i) any
employee of the Company or of any Subsidiary, including any such employee who is
an officer or director of the Company or of any Subsidiary, as the Board shall
determine and designate from time to time, and (ii) any other individual whose
participation in the Plan is determined to be in the best interests of the
Company by the Board.
6.2. Successive Awards.
An eligible person may receive more than one Award, subject to such
restrictions as are provided herein.
6.3. Reload Options.
At the discretion of the Board and subject to such restrictions, terms and
conditions as the Board may establish, Options granted under the Plan may
include a "reload" feature pursuant to which a Grantee exercising an Option by
the delivery of a number of shares of Stock in accordance with Section 10.9
hereof would automatically be granted an additional Option (with an exercise
price equal to the Fair Market Value of the Stock on the date the additional
Option is granted and with such other terms as the Board may provide) to
purchase that number of shares of Stock equal to the number delivered to
exercise the original Option with an Option term equal to the remainder of the
original Option term unless the Board otherwise determines in the Option Award
Agreement for the original grant.
7. LIMITATIONS ON GRANTS
7.1. Limitation on Shares of Stock Subject to Awards and Cash Awards.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, except as subject to adjustment as
provided in Section 22, the maximum number of shares of Stock subject to Options
that can be awarded under the Plan to any person eligible for an Award under
Section 6 hereof is 600,000 shares per year. During any time when the Company
has a class of equity security registered under Section 12 of the Exchange Act,
except as subject to adjustment as provided in Section 22, the maximum number of
shares that can be awarded under the Plan, other than pursuant to an Option to
any person eligible for an Award under Section 6 hereof is 100,000 per year.
The maximum amount that may be earned as an Annual Incentive Award or other cash
Award in any fiscal year by any one Grantee shall be $1,000,000 and the maximum
amount that may
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be earned as a Performance Award or other cash Award in respect of a performance
period by any one Grantee shall be $1,000,000.
7.2. Limitations on Incentive Stock Options.
An Option shall constitute an Incentive Stock Option only (i) if the Grantee
of such Option is an employee of the Company or any Subsidiary of the Company;
(ii) to the extent specifically provided in the related Award Agreement; and
(iii) to the extent that the aggregate Fair Market Value (determined at the time
the Option is granted) of the shares of Stock with respect to which all
Incentive Stock Options held by such Grantee become exercisable for the first
time during any calendar year (under the Plan and all other plans of the
Grantee's employer and its affiliates) does not exceed $100,000. This
limitation shall be applied by taking Options into account in the order in which
they were granted.
8. AWARD AGREEMENT
Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or
forms as the Board shall from time to time determine. Award Agreements granted
from time to time or at the same time need not contain similar provisions but
shall be consistent with the terms of the Plan. Each Award Agreement evidencing
an Award of Options shall specify whether such Options are intended to be non-
qualified stock options or Incentive Stock Options, and in the absence of such
specification, such options shall be deemed non-qualified stock options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated in
the Award Agreement evidencing such Option. The Option Price shall be the
aggregate Fair Market Value on the Grant Date of the shares of Stock subject to
the Option; provided, however, that in the event that a Grantee would otherwise
-------- -------
be ineligible to receive an Incentive Stock Option by reason of the provisions
of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than
ten percent of the Company's outstanding Stock), the Option Price of an Option
granted to such Grantee that is intended to be an Incentive Stock Option shall
be not less than the greater of the par value of a share of Stock or 110 percent
of the Fair Market Value of a share of Stock on the Grant Date. In no case
shall the Option Price of any Option be less than the par value of a share of
Stock.
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10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1. Vesting and Option Period.
Subject to Sections 10.2 and 22.3 hereof, each Option granted under the Plan
shall become exercisable at such times and under such conditions as shall be
determined by the Board and stated in the Award Agreement. For purposes of this
Section 10.1, fractional numbers of shares of Stock subject to an Option shall
be rounded down to the next nearest whole number. The period during which any
Option shall be exercisable shall constitute the "Option Period" with respect to
such Option.
10.2. Term.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
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otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
10.3. Acceleration.
Any limitation on the exercise of an Option contained in any Award Agreement
may be rescinded, modified or waived by the Board, in its sole discretion, at
any time and from time to time after the Grant Date of such Option, so as to
accelerate the time at which the Option may be exercised. Notwithstanding any
other provision of the Plan, no Option shall be exercisable in whole or in part
prior to the date the Plan is approved by the stockholders of the Company as
provided in Section 5.1 hereof.
10.4. Termination of Employment or Other Relationship.
Upon the termination of a Grantee's employment or other relationship with
the Company other than by reason of: (i) death; (ii) or "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code); or (iii)
Retirement, any Option or portion thereof held by such Grantee that has not
vested in accordance with the provisions of Section 10.1 hereof shall terminate
immediately, and any Option or portion thereof that has vested in accordance
with the provisions of Section 10.1 hereof but has not been exercised shall
terminate at the close of business on the 90th day following the Grantee's
termination of employment or other relationship, unless the Board, in its
discretion, extends the period during which the Option may be exercised (which
period may not be extended beyond the original term of the Option). Upon
termination of an Option or portion thereof, the Grantee shall have no further
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right to purchase shares of Stock pursuant to such Option or portion thereof.
Whether a leave of absence or leave on military or government service shall
constitute a termination of employment or other relationship for purposes of the
Plan shall be determined by the Board, which determination shall be final and
conclusive. For purposes of the Plan, a termination of employment, service or
other relationship shall not be deemed to occur if the Grantee is immediately
thereafter a director of the Company.
If the employment of the Grantee is terminated for cause, as determined by
the Company, any Option whether vested or unvested shall thereafter be void for
all purposes. As used in this subsection, "cause" shall mean, as determined by
the Company, a violation of the Company's established policies and procedures or
a breach of the Grantee's fiduciary duty to the Company.
10.5. Rights in the Event of Death.
If a Grantee dies while employed by or providing services to the Company,
any Option or portion thereof held by such Grantee that has not vested in
accordance with the provisions of Section 10.1 hereof shall terminate
immediately, and any Option or portion thereof that has vested in accordance
with the provisions of Section 10.1 hereof but has not been exercised shall
terminate at the close of business one year following the Grantee's death,
unless the Board, in its discretion, extends the period during which the Option
may be exercised (which period may not be extended beyond the original term of
the Option). Upon termination of an Option or portion thereof, the Grantee
shall have no further right to purchase shares of Stock pursuant to such Option
or portion thereof. The executors or Boards or legatees or distributees of such
Grantee's estate shall have the right, at any time within one year after the
date of such Grantee's death (or such longer period as the Board, in its
discretion, may determine prior to the expiration of such one-year period) and
prior to termination of the Option pursuant to Section 10.2 above, to exercise
any Option held by such Grantee at the date of such Grantee's death.
10.6. Rights in the Event of Disability.
Unless otherwise stated in the applicable Award Agreement, if a Grantee
terminates employment or other relationship with the Company by reason of the
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Grantee, any Option or portion thereof held by such Grantee that
has not vested in accordance with the provisions of Section 10.1 hereof shall
terminate immediately, and any Option or portion thereof that has vested in
accordance with the provisions of Section 10.1 hereof but has not been exercised
shall terminate one year following the Grantee's termination of employment or
service, unless the Board, in its discretion, extends the period during which
the Option may be exercised (which period may not be extended beyond the
original term of the Option). Upon termination of an Option or portion thereof,
the Grantee shall have no further right to purchase shares of Stock pursuant to
such Option or portion thereof. Whether a termination of employment or service
is to be considered by reason of "permanent and
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total disability" for purposes of the Plan shall be determined by the Board,
which determination shall be final and conclusive.
10.7. Rights in the Event of Retirement.
Unless otherwise stated in the applicable Award Agreement, if a Grantee
terminates employment or other relationship with the Company by reason of his or
her Retirement, any Option or portion thereof held by such Grantee that has not
vested in accordance with the provisions of Section 10.1 hereof shall terminate
immediately, and any Option or portion thereof that has vested in accordance
with the provisions of Section 10.1 hereof but has not been exercised shall
terminate one year following the Grantee's termination of employment or other
relationship, unless the Board, in its discretion, extends the period during
which the Option may be exercised (which period may not be extended beyond the
original term of the Option). Upon termination of an Option or portion thereof,
the Grantee shall have no further right to purchase shares of Stock pursuant to
such Option or portion thereof.
10.8. Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by the
stockholders of the Company as provided herein, or after ten years following the
date upon which the Option is granted, or after the occurrence of an event
referred to in Section 22 hereof which results in termination of the Option.
10.9. Method of Exercise.
An Option that is exercisable may be exercised by the Grantee's delivery to
the Company of written notice of exercise on any business day, at the Company's
principal office, addressed to the attention of the Board. Such notice shall
specify the number of shares of Stock with respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of the
shares for which the Option is being exercised. The minimum number of shares of
Stock with respect to which an Option may be exercised, in whole or in part, at
any time shall be the lesser of (i) 100 shares or such lesser number set forth
in the applicable Award Agreement and (ii) the maximum number of shares
available for purchase under the Option at the time of exercise. Payment of the
Option Price for the shares purchased pursuant to the exercise of an Option
shall be made (i) in cash or in cash equivalents; (ii) through the tender to the
Company of a written statement of attestation, in such form as may be prescribed
for this purpose by the Committee, signed by the Grantee and certifying that the
Grantee is electing to use a specified number of shares of Stock then owned by
the Grantee to pay the purchase price of the Stock purchased pursuant to the
Option and that the Grantee is electing to have issued to him or her the
additional shares of Stock, in excess of the Option Price, to which the Grantee
is entitled as a result of the exercise of the Option; provided, however, that
no shares of Stock owned by a Grantee may be used for this purpose unless such
Stock has been
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held by Grantee for more than six months; for purposes of determining the extent
to which the Option Price has been paid thereby, the shares of Stock shall be
valued at their Fair Market Value on the date of exercise; or (iii) by a
combination of the methods described in (i) and (ii). The Board may provide, by
inclusion of appropriate language in an Award Agreement, that payment in full of
the Option Price need not accompany the written notice of exercise provided that
the notice of exercise directs that the certificate or certificates for the
shares of Stock for which the Option is exercised be delivered to a licensed
broker acceptable to the Company as the agent for the individual exercising the
Option and, at the time such certificate or certificates are delivered, the
broker tenders to the Company cash (or cash equivalents acceptable to the
Company) equal to the Option Price for the shares of Stock purchased pursuant to
the exercise of the Option plus the amount (if any) of federal and/or other
taxes which the Company may in its judgment, be required to withhold with
respect to the exercise of the Option. An attempt to exercise any Option granted
hereunder other than as set forth above shall be invalid and of no force and
effect. Unless otherwise stated in the applicable Award Agreement, an individual
holding or exercising an Option shall have none of the rights of a stockholder
(for example, the right to receive cash or dividend payments or distributions
attributable to the subject shares of Stock or to direct the voting of the
subject shares of Stock ) until the shares of Stock covered thereby are fully
paid and issued to him. Except as provided in Section 22 hereof, no adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date of such issuance.
10.10. Delivery of Stock Certificates.
Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
stock certificate or certificates evidencing his or her ownership of the shares
of Stock subject to the Option.
11. Stock Appreciation Rights
The Board each is authorized to grant SARs to Grantees on the following
terms and conditions:
11.1. Right to Payment.
A SAR shall confer on the Grantee to whom it is granted a right to receive,
upon exercise thereof, the excess of (A) the Fair Market Value of one share of
Stock on the date of exercise over (B) the grant price of the SAR as determined
by the Board. The grant price of an SAR shall not be less than the Fair Market
Value of a share of Stock on the date of grant except as provided in Section
18.1.
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11.2. Other Terms.
The Board shall determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be exercised in whole
or in part (including based on achievement of performance goals and/or future
service requirements), the time or times at which SARs shall cease to be or
become exercisable following termination of employment or upon other conditions,
the method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be
delivered to Grantees, whether or not a SAR shall be in tandem or in combination
with any other Award, and any other terms and conditions of any SAR. SARs may
be either freestanding or in tandem with other Awards.
12. TRANSFERABILITY OF OPTIONS
12.1. Transferability of Options
Except as provided in Section 12.2, during the lifetime of a Grantee, only
the Grantee (or, in the event of legal incapacity or incompetency, the Grantee's
guardian or legal representative) may exercise an Option. Except as provided in
Section 12.2, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.
12.2. Family Transfers.
If authorized in the applicable Award Agreement, a Grantee may transfer, not
for value, all or part of an Option which is not an Incentive Stock Option to
any Family Member. For the purpose of this Section 12.2, a "not for value"
transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic
relations order in settlement of marital property rights; or (iii) a transfer to
an entity in which more than fifty percent of the voting interests are owned by
Family Members (or the Grantee) in exchange for an interest in that entity.
Following a transfer under this Section 12.2, any such Option shall continue to
be subject to the same terms and conditions as were applicable immediately prior
to transfer. Subsequent transfers of transferred Options are prohibited except
to Family Members of the original Grantee in accordance with this Section 12.2
or by will or the laws of descent and distribution. The events of termination of
employment or other relationship of Section 10.4 hereof shall continue to be
applied with respect to the original Grantee, following which the Option shall
be exercisable by the transferee only to the extent, and for the periods
specified in Sections 10.4, 10.5, or 10.6.
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13. RESTRICTED STOCK
13.1. Grant of Restricted Stock or Restricted Stock Units.
The Board may from time to time grant Restricted Stock or Restricted Stock
Units to persons eligible to receive Awards under Section 6 hereof, subject to
such restrictions, conditions and other terms as the Board may determine.
13.2. Restrictions.
At the time a grant of Restricted Stock or Restricted Stock Units is made,
the Board shall establish a period of time (the "Restricted Period") applicable
to such Restricted Stock or Restricted Stock Units. Each Award of Restricted
Stock or Restricted Stock Units may be subject to a different Restricted Period.
The Board may, in its sole discretion, at the time a grant of Restricted Stock
or Restricted Stock Units is made, prescribe restrictions in addition to or
other than the expiration of the Restricted Period, including the satisfaction
of corporate or individual performance objectives, which may be applicable to
all or any portion of the Restricted Stock or Restricted Stock Units in
accordance with Section 18.4.1 and 18.4.2. Neither Restricted Stock nor
Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Board with respect to
such Restricted Stock or Restricted Stock Units.
13.3. Restricted Stock Certificates.
The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Board may provide in an Award Agreement
that either (i) the Secretary of the Company shall hold such certificates for
the Grantee's benefit until such time as the Restricted Stock is forfeited to
the Company or the restrictions lapse, or (ii) such certificates shall be
delivered to the Grantee, provided, however, that such certificates shall bear a
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legend or legends that complies with the applicable securities laws and
regulations and makes appropriate reference to the restrictions imposed under
the Plan and the Award Agreement.
13.4. Rights of Holders of Restricted Stock.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The Board
may provide that any dividends paid on Restricted Stock must be reinvested in
shares of Stock, which may or may not be subject to the same vesting conditions
and restrictions applicable to such Restricted Stock. All distributions, if
any, received by a Grantee with respect to Restricted Stock as a result of any
stock split, stock dividend, combination of
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shares, or other similar transaction shall be subject to the restrictions
applicable to the original Grant.
13.5. Rights of Holders of Restricted Stock Units.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock Units shall have no rights as stockholders of the Company. The
Board may provide in an Award Agreement evidencing a grant of Restricted Stock
Units that the holder of such Restricted Stock Units shall be entitled to
receive, upon the Company's payment of a cash dividend on its outstanding Stock,
a cash payment for each Restricted Stock Unit held equal to the per-share
dividend paid on the Stock. Such Award Agreement may also provide that such
cash payment will be deemed reinvested in additional Restricted Stock Units at a
price per unit equal to the Fair Market Value of a share of Stock on the date
that such dividend is paid.
13.6. Termination of Employment or Other Relationship.
Upon the termination of a Grantee's employment or other relationship with
the Company other than by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Restricted Stock or
Restricted Stock Units held by such Grantee that has not vested, or with respect
to which all applicable restrictions and conditions have not lapsed, shall
immediately be deemed forfeited, unless the Board, in its discretion, determines
otherwise. Upon forfeiture of Restricted Stock or Restricted Stock Units, the
Grantee shall have no further rights with respect to such Grant, including but
not limited to any right to vote Restricted Stock or any right to receive
dividends with respect to shares of Restricted Stock or Restricted Stock Units.
Whether a leave of absence or leave on military or government service shall
constitute a termination of employment or other relationship for purposes of the
Plan shall be determined by the Board, which determination shall be final and
conclusive. For purposes of the Plan, a termination of employment, service or
other relationship shall not be deemed to occur if the Grantee is immediately
thereafter a director of the Company.
13.7. Rights in the Event of Death.
Unless otherwise provided in the Award Agreement, if a Grantee dies while
employed by the Company, any Restricted Stock or Restricted Stock Units held by
such Grantee that has not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed
forfeited, unless the Board, in its discretion, determines otherwise. Upon
forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have
no further rights with respect to such Grant, including but not limited to any
right to vote Restricted Stock or any right to receive dividends with respect to
shares of Restricted Stock or Restricted Stock Units. Restricted Stock or
Restricted Stock Units granted to such Grantee which are fully vest on the date
of death, and the shares of Stock represented thereby shall be deliverable in
accordance with the terms of the Plan to the executors, administrators, legatees
or distributees of the Grantee's estate.
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13.8. Rights in the Event of Disability.
Unless otherwise provided in the Award Agreement, if a Grantee terminates
employment or other relationship with the Company by reason of the "permanent
and total disability" (within the meaning of Section 22(e)(3) of the Code) of
such Grantee, any Restricted Stock or Restricted Stock Units held by such
Grantee that has not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed
forfeited, unless the Board, in its discretion, determines otherwise. Upon
forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have
no further rights with respect to such Grant, including but not limited to any
right to vote Restricted Stock or any right to receive dividends with respect to
shares of Restricted Stock or Restricted Stock Units. Whether a termination of
employment or service is to be considered by reason of "permanent and total
disability" for purposes of the Plan shall be determined by the Board, which
determination shall be final and conclusive.
13.9. Delivery of Stock and Payment Therefor.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to shares of Restricted Stock or Restricted Stock Units shall lapse,
and, unless otherwise provided in the Award Agreement, upon payment by the
Grantee to the Company, in cash or by check, of the aggregate par value of the
shares of Stock represented by such Restricted Stock or Restricted Stock Units
(or such other higher purchase price determined by the Board), a stock
certificate for such shares shall be delivered, free of all such restrictions,
to the Grantee or the Grantee's beneficiary or estate, as the case may be.
14. DEFERRED STOCK AWARDS
14.1. Nature of Deferred Stock Awards.
A Deferred Stock Award is an Award of phantom stock units to a Grantee,
subject to restrictions and conditions as the Board may determine at the time of
grant. Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of a Deferred Stock Award is contingent on the Grantee
executing the Deferred Stock Award Agreement. The terms and conditions of each
such agreement shall be determined by the Board, and such terms and conditions
may differ among individual Awards and Grantees. At the end of the deferral
period, the Deferred Stock Award, to the extent vested, shall be paid to the
Grantee in the form of shares of Stock.
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14.2. Election to Receive Deferred Stock Awards in Lieu of Compensation.
The Board may, in its sole discretion, permit a Grantee to elect to receive
a portion of the cash compensation or Restricted Stock Award otherwise due to
such Grantee in the form of a Deferred Stock Award. Any such election shall be
made in writing and shall be delivered to the Company no later than the date
specified by the Board and in accordance with rules and procedures established
by the Board. The Board shall have the sole right to determine whether and under
what circumstances to permit such elections and to impose such limitations and
other terms and conditions thereon as the Board deems appropriate.
14.3. Rights as a Stockholder.
During the deferral period, a Grantee shall have no rights as a Stockholder;
provided, however, that the Grantee may be credited with Dividend Equivalent
Rights with respect to the phantom Stock units underlying his Deferred Stock
Award, subject to such terms and conditions as the Board may determine.
14.4. Restrictions.
A Deferred Stock Award may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of during the deferral period.
14.5. Termination.
Except as may otherwise be provided by the Board either in the Award
Agreement or, in writing after the Award Agreement is issued, a Grantee's right
in all Deferred Stock Awards that have not vested shall automatically terminate
upon the Grantee's termination of employment or other relationship with the
Company for any reason.
15. UNRESTRICTED STOCK AWARDS
15.1. Grant or Sale of Unrestricted Stock.
The Board may, in its sole discretion, grant (or sell at par value or such
other higher purchase price determined by the Board) an Unrestricted Stock Award
to any Grantee pursuant to which such Grantee may receive shares of Stock free
of any restrictions ("Unrestricted Stock") under the Plan. Unrestricted Stock
Awards may be granted or sold as described in the preceding sentence in respect
of past services or other valid consideration, or in lieu of any cash
compensation due to such Grantee.
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16. PERFORMANCE Stock AWARDS
16.1. Nature of Performance Stock Awards.
A Performance Stock Award is an Award entitling the recipient to acquire
shares of Stock upon the attainment of specified performance goals. The Board
may make Performance Stock Awards independent of or in connection with the
granting of any other Award under the Plan. The Board in its sole discretion
shall determine whether and to whom Performance Stock Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Stock; provided, however, that the Board
may rely on the performance goals and other standards applicable to other
performance unit plans of the Company in setting the standards for Performance
Stock Awards under the Plan.
16.2. Rights as a Stockholder.
A Grantee receiving a Performance Stock Award shall have the rights of a
Stockholder only as to shares actually received by the Grantee under the Plan
and not with respect to shares subject to the Award but not actually received by
the Grantee. A Grantee shall be entitled to receive a Stock certificate
evidencing the acquisition of Stock under a Performance Stock Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Performance Stock Award (or in a performance plan adopted by the Board).
16.3. Termination.
Except as may otherwise be provided by the Board either in the Award
Agreement in writing after the Award Agreement is issued, a Grantee's rights in
all Performance Stock Awards shall automatically terminate upon the Grantee's
termination of employment or other relationship with the Company and its
Subsidiaries for any reason.
16.4. Acceleration, Waiver, Etc.
At any time prior to the Grantee's termination of employment (or other
business relationship) by the Company and its Subsidiaries, the Board may in its
sole discretion accelerate, waive or amend any or all of the goals, restrictions
or conditions imposed under any Performance Stock Award.
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17. DIVIDEND EQUIVALENT RIGHTS
17.1. Dividend Equivalent Rights.
A Dividend Equivalent Right is an Award entitling the recipient to receive
credits based on cash distributions that would have been paid on the shares of
Stock specified in the Dividend Equivalent Right (or other award to which it
relates) if such shares had been issued to and held by the recipient. A Dividend
Equivalent Right may be granted hereunder to any Grantee as a component of
another Award or as a freestanding award. The terms and conditions of Dividend
Equivalent Rights shall be specified in the grant. Dividend Equivalents credited
to the holder of a Dividend Equivalent Right may be paid currently or may be
deemed to be reinvested in additional shares of Stock, which may thereafter
accrue additional equivalents. Any such reinvestment shall be at Fair Market
Value on the date of reinvestment. Dividend Equivalent Rights may be settled in
cash or Stock or a combination thereof, in a single installment or installments,
all determined in the sole discretion of the Board. A Dividend Equivalent Right
granted as a component of another Award may provide that such Dividend
Equivalent Right shall be settled upon exercise, settlement, or payment of, or
lapse of restrictions on, such other award, and that such Dividend Equivalent
Right shall expire or be forfeited or annulled under the same conditions as such
other award. A Dividend Equivalent Right granted as a component of another Award
may also contain terms and conditions different from such other award.
17.2. Interest Equivalents.
Any Award under this Plan that is settled in whole or in part in cash on a
deferred basis may provide in the grant for interest equivalents to be credited
with respect to such cash payment. Interest equivalents may be compounded and
shall be paid upon such terms and conditions as may be specified by the grant.
17.3. Termination.
Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee's rights
in all Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the Grantee's termination of employment or other relationship
with the Company and its Subsidiaries for any reason.
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18. CERTAIN PROVISIONS APPLICABLE TO AWARDS
18.1. Stand-Alone, Additional, Tandem, and Substitute Awards
Awards granted under the Plan may, in the discretion of the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any Subsidiary, or any business entity to be acquired by the Company or
a Subsidiary, or any other right of a Grantee to receive payment from the
Company or any Subsidiary. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award, the Board shall require the surrender of such other
Award in consideration for the grant of the new Award. In addition, Awards may
be granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any Subsidiary, in which the value
of Stock subject to the Award is equivalent in value to the cash compensation
(for example, Deferred Stock or Restricted Stock), or in which the exercise
price, grant price or purchase price of the Award in the nature of a right that
may be exercised is equal to the Fair Market Value of the underlying Stock minus
the value of the cash compensation surrendered (for example, Options granted
with an exercise price "discounted" by the amount of the cash compensation
surrendered).
18.2. Term of Awards
The term of each Award shall be for such period as may be determined by the
Board; provided that in no event shall the term of any Option or SAR exceed a
period of ten years (or such shorter term as may be required in respect of an
ISO under Section 422 of the Code).
18.3. Form and Timing of Payment Under Awards; Deferrals
Subject to the terms of the Plan and any applicable Award Agreement,
payments to be made by the Company or a Subsidiary upon the exercise of an
Option or other Award or settlement of an Award may be made in such forms as the
Board shall determine, including, without limitation, cash, Stock, other Awards
or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Board or upon occurrence of one or more specified
events. Installment or deferred payments may be required by the Board or
permitted at the election of the Grantee on terms and conditions established by
the Board. Payments may include, without limitation, provisions for the payment
or crediting of a reasonable interest rate on installment or deferred payments
or the grant or crediting of Dividend Equivalents
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or other amounts in respect of installment or deferred payments denominated in
Stock.
18.4. Performance and Annual Incentive Awards
18.4.1. Performance Conditions
The right of a Grantee to exercise or receive a grant or settlement
of any Award, and the timing thereof, may be subject to such performance
conditions as may be specified by the Board. The Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 18.4.2 and 18.4.3 hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). If and to the extent required under Code Section 162(m), any
power or authority relating to a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m), shall be exercised by the
Committee and not the Board.
18.4.2. Performance Awards Granted to Designated Covered Employees
If and to the extent that the Committee determines that a
Performance Award to be granted to a Grantee who is designated by the Committee
as likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section
18.4.2.
(i) Performance Goals Generally. The performance goals for
such Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect
to each of such criteria, as specified by the Committee consistent
with this Section 18.4.2. Performance goals shall be objective and
shall otherwise meet the requirements of Code Section 162(m) and
regulations thereunder including the requirement that the level or
levels of performance targeted by the Committee result in the
achievement of performance goals being "substantially uncertain."
The Committee may determine that such Performance Awards shall be
granted, exercised and/or settled upon achievement of any one
performance goal or that two or more of the performance goals must
be achieved as a condition to grant, exercise and/or settlement of
such Performance Awards. Performance goals may differ for
Performance Awards granted to any one Grantee or to different
Grantees.
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(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis, and/or
specified subsidiaries or business units of the Company (except with
respect to the total stockholder return and earnings per share
criteria), shall be used exclusively by the Committee in
establishing performance goals for such Performance Awards: (1)
total stockholder return; (2) such total stockholder return as
compared to total return (on a comparable basis) of a publicly
available index such as, but not limited to, the Standard & Poor's
500 Stock Index; (3) net income; (4) pretax earnings; (5) earnings
before interest expense, taxes, depreciation and amortization; (6)
pretax operating earnings after interest expense and before bonuses,
service fees, and extraordinary or special items; (7) operating
margin; (8) earnings per share; (9) return on equity; (10) return on
capital; (11) return on investment; (12) operating earnings; (13)
working capital; (14) growth in revenue; (15) growth in sales; (16)
return on net assets employed; (17) net operating profit after taxes
less the cost of capital; (18) cash flow; and (19) ratio of debt to
stockholders' equity. One or more of the foregoing business criteria
shall also be exclusively used in establishing performance goals for
Annual Incentive Awards granted to a Covered Employee under Section
18.4.3 hereof that are intended to qualify as "performance-based
compensation" under Code Section 162(m).
(iii) Performance Period; Timing For Establishing
Performance Goals. Achievement of performance goals in respect of
such Performance Awards shall be measured over a performance period
of up to ten years, as specified by the Committee. Performance goals
shall be established not later than 90 days after the beginning of
any performance period applicable to such Performance Awards, or at
such other date as may be required or permitted for "performance-
based compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may
establish a Performance Award pool, which shall be an unfunded pool,
for purposes of measuring Company performance in connection with
Performance Awards. The amount of such Performance Award pool shall
be based upon the achievement of a performance goal or goals based
on one or more of the business criteria set forth in Section
18.4.2(ii) hereof during the given performance period, as specified
by the Committee in accordance with Section 18.4.2(iii) hereof. The
Committee may specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not
bear a strictly mathematical relationship to such business criteria.
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(v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in cash, Stock, other
Awards or other property, in the discretion of the Committee. The
Committee may, in its discretion, reduce the amount of a settlement
otherwise to be made in connection with such Performance Awards. The
Committee shall specify the circumstances in which such Performance
Awards shall be paid or forfeited in the event of termination of
employment by the Grantee prior to the end of a performance period
or settlement of Performance Awards.
18.4.3. Annual Incentive Awards Granted to Designated Covered
Employees.
If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to a Grantee who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Annual Incentive Award shall be contingent upon achievement
of preestablished performance goals and other terms set forth in this Section
18.4.3.
(i) Annual Incentive Award Pool. The Committee may
establish an Annual Incentive Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in connection
with Annual Incentive Awards. The amount of such Annual Incentive
Award pool shall be based upon the achievement of a performance goal
or goals based on one or more of the business criteria set forth in
18.4.2(ii) hereof during the given performance period, as specified
by the Committee in accordance with 18.4.2(iii) hereof. The
Committee may specify the amount of the Annual Incentive Award pool
as a percentage of any such business criteria, a percentage thereof
in excess of a threshold amount, or as another amount which need not
bear a strictly mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than
the end of the 90th day of each fiscal year, or at such other date
as may be required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 18.4.3(i) hereof
or as individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the
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achievement of a performance goal or goals based on one or more of
the business criteria set forth in Section 18.4.2(ii) hereof in the
given performance year, as specified by the Committee; in other
cases, such amount shall be based on such criteria as shall be
established by the Committee. In all cases, the maximum Annual
Incentive Award of any Grantee shall be subject to the limitation
set forth in Section 7.1 hereof.
(iii) Payout of Annual Incentive Awards. After the end
of each fiscal year, the Committee shall determine the amount, if
any, of (A) the Annual Incentive Award pool, and the maximum amount
of potential Annual Incentive Award payable to each Grantee in the
Annual Incentive Award pool, or (B) the amount of potential Annual
Incentive Award otherwise payable to each Grantee. The Committee
may, in its discretion, determine that the amount payable to any
Grantee as an Annual Incentive Award shall be reduced from the
amount of his or her potential Annual Incentive Award, including a
determination to make no Award whatsoever. The Committee shall
specify the circumstances in which an Annual Incentive Award shall
be paid or forfeited in the event of termination of employment by
the Grantee prior to the end of a fiscal year or settlement of such
Annual Incentive Award.
18.4.4. Written Determinations.
All determinations by the Committee as to the establishment of
performance goals, the amount of any Performance Award pool or potential
individual Performance Awards and as to the achievement of performance goals
relating to Performance Awards under Section 18.4.2, and the amount of any
Annual Incentive Award pool or potential individual Annual Incentive Awards and
the amount of final Annual Incentive Awards under Section 18.4.3, shall be made
in writing in the case of any Award intended to qualify under Code Section
162(m). To the extent required to comply with Code Section 162(m), the
Committee may delegate any responsibility relating to such Performance Awards or
Annual Incentive Awards.
18.4.5. Status of Section 18.4.3 and Section 18.4.2 Awards
Under Code Section 162(m)
It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Section 18.4.2 and Section 18.4.3 hereof granted to
persons who are designated by the Committee as likely to be Covered Employees
within the meaning of Code Section 162(m) and regulations thereunder shall, if
so designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
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thereunder. Accordingly, the terms of Section 18.4.2 and Section 18.4.3,
including the definitions of Covered Employee and other terms used therein,
shall be interpreted in a manner consistent with Code Section 162(m) and
regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Grantee will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual Incentive
Award, as likely to be a Covered Employee with respect to that fiscal year. If
any provision of the Plan or any agreement relating to such Performance Awards
or Annual Incentive Awards does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements.
19. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
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Grantee's sole discretion, to designate those rights, payments, or benefits
under this Plan, any Other Agreements, and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
Grantee under this Plan be deemed to be a Parachute Payment.
20. REQUIREMENTS OF LAW
20.1. General.
The Company shall not be required to sell or issue any shares of Stock
under any Award if the sale or issuance of such shares would constitute a
violation by the Grantee, any other individual exercising an Option, or the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing, registration or qualification of any shares subject to an Award
upon any securities exchange or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Award
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company,
and any delay caused thereby shall in no way affect the date of termination of
the Award. Specifically, in connection with the Securities Act, upon the
exercise of any Option or the delivery of any shares of Stock underlying an
Award, unless a registration statement under such Act is in effect with respect
to the shares of Stock covered by such Award, the Company shall not be required
to sell or issue such shares unless the Board has received evidence satisfactory
to it that the Grantee or any other individual exercising an Option may acquire
such shares pursuant to an exemption from registration under the Securities Act.
Any determination in this connection by the Board shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable until
the shares of Stock covered by such Option are registered or are exempt from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction apply) shall be deemed conditioned upon the effectiveness
of such registration or the availability of such an exemption.
20.2. Rule 16b-3.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Awards pursuant to the Plan and the exercise of Options granted hereunder will
qualify for
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the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that
any provision of the Plan or action by the Board does not comply with the
requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Board, and shall not affect the
validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the
Board may exercise its discretion to modify this Plan in any respect necessary
to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement.
21. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Awards have not been
made; provided, however, that the Board shall not, without approval of the
-------- -------
Company's stockholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul an Award if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this Section 21 or
Section 22 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Award theretofore awarded under the Plan.
22. EFFECT OF CHANGES IN CAPITALIZATION
22.1. Changes in Stock.
If the number of outstanding shares of Stock is increased or decreased or
the shares of Stock are changed into or exchanged for a different number or kind
of shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date, the number and kinds of shares
for which grants of Options and other Awards may be made under the Plan shall be
adjusted proportionately and accordingly by the Company. In addition, the number
and kind of shares for which Awards are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of an Option outstanding but
shall include a corresponding proportionate adjustment in the Option Price per
share.
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22.2. Reorganization in Which the Company Is the Surviving Entity and in
Which No Change in Control Occurs.
Subject to Section 22.3 hereof, if the Company shall be the surviving
entity in any reorganization, merger, or consolidation of the Company with one
or more other entities in which no Change in Control Occurs, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing an Award, any
restrictions applicable to such Award shall apply as well to any replacement
shares received by the Grantee as a result of the reorganization, merger or
consolidation.
22.3. Reorganization, Sale of Assets or Sale of Stock Which Involves a
Change in Control.
Upon the dissolution or liquidation of the Company or upon any transaction
approved by the Board that results in a Change in Control, and unless otherwise
provided by the Board in an Award Agreement, upon consummation of any such
event, the Plan and all outstanding but unexercised Options shall terminate,
except to the extent provision is made in writing in connection with such
transaction for the continuation of the Plan or the assumption of such Options
theretofore granted, or for the substitution for such Options of new options
covering the stock of a successor entity, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kinds of shares or units and
exercise prices, in which event the Plan and Options theretofore granted shall
continue in the manner and under the terms so provided. The Board shall send
written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which the Company gives
notice thereof to its stockholders.
22.4. Adjustments.
Adjustments under this Section 22 related to shares of Stock or securities
of the Company shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share.
22.5. No Limitations on Company.
The making of Awards pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
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reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.
23. Pooling
In the event any provision of the Plan or the Award Agreement would prevent
the use of pooling of interests accounting in a corporate transaction involving
the Company and such transaction is contingent upon pooling of interests
accounting, then that provision shall be deemed amended or revoked to the extent
required to preserve such pooling of interests. The Company may require in an
Award Agreement that a Grantee who receives an Award under the Plan shall, upon
advice from the Company, take (or refrain from taking, as appropriate) all
actions necessary or desirable to ensure that pooling of interests accounting is
available.
24. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Award or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Award
granted under the Plan shall be affected by any change of duties or position of
the Grantee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to
require the Company to transfer any amounts to a third party trustee or
otherwise hold any amounts in trust or escrow for payment to any Grantee or
beneficiary under the terms of the Plan. No Grantee shall have any of the
rights of a stockholder with respect to the shares of Stock subject to an Option
except to the extent the certificates for such shares of Stock shall have been
issued upon the exercise of the Option.
25. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or
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particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
26. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any shares of Stock upon the exercise of an Option or pursuant to an
Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay
to the Company or the Subsidiary, as the case may be, any amount that the
Company or the Subsidiary may reasonably determine to be necessary to satisfy
such withholding obligation. Subject to the prior approval of the Company or
the Subsidiary, which may be withheld by the Company or the Subsidiary, as the
case may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company or the Subsidiary
to withhold shares of Stock otherwise issuable to the Grantee or (ii) by
delivering to the Company or the Subsidiary shares of Stock already owned by the
Grantee. The shares of Stock so delivered or withheld shall have an aggregate
Fair Market Value equal to such withholding obligations, however in no event
shall such aggregate Fair Market Value exceed the statutory withholding rate.
The Fair Market Value of the shares of Stock used to satisfy such withholding
obligation shall be determined by the Company or the Subsidiary as of the date
that the amount of tax to be withheld is to be determined. A Grantee who has
made an election pursuant to this Section 26 may satisfy his or her withholding
obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.
27. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
28. OTHER PROVISIONS
Each Award granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
29. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include the
plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.
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30. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
31. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Awards granted hereunder shall be governed by the laws of the State of
Delaware (without giving effect to the choice of law provisions thereof).
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The Plan was duly adopted and approved by the Board of Directors of the
Company as of the 21st day of October, 1999.
/s/ Katherine A. Resler
-----------------------------------------
Katherine A. Resler
Secretary
The Plan was duly approved by the stockholders of the Company on the 21st
day of October, 1999.
/s/ Jill B.W. Sisson
-----------------------------------------
Jill B.W. Sisson
Secretary
<PAGE>
COORSTEK, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective: November 1, 1999
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS................................................1
2. PARTICIPATION, DEFERRAL AND MATCHING.......................3
2.1 Election to Participate...............................3
2.2 Amount of Deferral....................................3
2.3 Employer Contribution.................................3
2.4 Withholding...........................................4
2.5 Minimum Period of Deferral............................4
3. DEFERRED COMPENSATION ACCOUNTS.............................4
3.1 Accounts..............................................4
3.2 Employee Deferral Account.............................4
3.3 Employer Contribution Account.........................5
3.4 Account Credits and Debits............................5
3.5 Trust Accounts........................................5
3.6 Subaccounts...........................................5
4. SUPPLEMENTAL BENEFITS......................................5
4.1 Section 415 Benefit...................................5
4.2 Section 401(a)(17) Benefit............................6
5. VESTING....................................................6
5.1 Employee Deferral Account.............................6
5.2 Employer Contribution Account.........................7
6. INVESTMENT EXPERIENCE......................................7
7. PAYMENT OF FUNDS...........................................8
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7.1 Payment Method...........................................8
7.2 Death. Disability. Retirement............................10
7.3 Resignation or Discharge.................................10
7.4 Hardship.................................................10
7.5 Change of Control........................................11
8. ADMINISTRATION................................................11
8.1 Committee................................................11
8.2 Rules for Administration.................................11
8.3 Committee Action.........................................12
8.4 Delegation...............................................12
8.5 Services.................................................12
8.6 Indemnification..........................................12
8.7 Claims Procedure.........................................12
9. AMENDMENT AND TERMINATION.....................................13
10. GENERAL PROVISIONS...........................................14
10.1 Limitation of Rights...................................14
10.2 Employment Rights......................................14
10.3 Assignment, Pledge or Encumbrance......................14
10.4 Minor or Incompetent...................................14
10.5 Beneficiary............................................15
10.6 Binding Provisions.....................................15
10.7 Notices................................................15
10.8 Governing Law..........................................15
10.9 Pronouns...............................................15
11. EFFECTIVE DATE...............................................15
<PAGE>
1. DEFINITIONS
1.1 "Affiliate" means any legal entity controlled, directly or
indirectly, by the Company.
1.2 "Beneficiary" means any person(s) or legal entity(ies) designated
by the Participant or otherwise determined in accordance with Section 10.5.
1.3 "Board of Directors" means the Board of Directors of the Company.
1.4 "Bonus Payment(s)" for any Plan Year means any compensation in
excess of Earnings awarded to an Eligible Employee under any Company incentive
plan, heretofore or hereafter adopted, with respect to a Plan Year beginning
after December 31, 1999.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Committee" means the Administrative Committee which administers
the Plan in accordance with Section 8.
1.7 "Company" means CoorsTek, Inc., a Delaware Corporation, or any
successor thereto.
1.8 "Continuous Service" means the total uninterrupted service of a
Participant with the Company or an Affiliate from the date of employment to the
date of his Separation from Service.
1.9 "Disability" means "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code.
1.10 "Earnings" for any Plan Year means the base salary of an Eligible
Employee for such Plan Year, including any authorized deferrals and payroll
deductions, and excluding any Bonus Payments or the value of any perquisites.
1.11 "Eligible Employee" for each Plan Year means: (i) any employee of
the Company whose accrued normal retirement benefit under the Retirement Plan is
limited by the benefit limitations of Code Section 415 or Code Section
401(a)(17), as to those benefits limited by Code Sections 415 and 401(a)(17)
and, (ii) an officer or other key management employee of the Employer designated
by the Committee as eligible to participate in the Plan for such Plan Year or
portion thereof.
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1.12 "Employee Deferral Account" means any accounts maintained under
the Plan for a Participant pursuant to Section 3.2.
1.13 "Employer" means the Company and any subsidiary thereof which
shall be designated by the Board of Directors as a participating employer under
the Plan.
1.14 "Employer Contribution Account" means any account maintained for
a Participant pursuant to Section 3.3.
1.15 "401(k) Plan" means the Company's Savings and Investment Plan.
1.16 "Participant" for any Plan Year means an Eligible Employee who
elects to participate in the Plan for that Plan Year in accordance with Section
2.1.
1.17 "Plan" means CoorsTek, Inc. Executive Deferred Compensation Plan
as embodied herein and as amended from time to time.
1.18 "Plan Year" means each twelve month period ending December 31, of
any calendar year.
1.19 "Retirement" means "retirement" as defined in the Company's
Retirement Plan.
1.20 "Section 401(a)(17) Benefit" means the benefit determined in
accordance with Section 4.2 of the Plan.
1.21 "Section 415 Benefit" means the benefit determined in accordance
with Section 4.1 of the Plan.
1.22 "Separation from Service" means termination of a Participant's
employment with the Employer by reason of Retirement, Disability, death,
resignation, discharge or otherwise. Transfer to employment with an Affiliate
shall not be deemed to be Separation from Service.
1.23 "Trust" means the trust, which may be established by the Company,
that identifies the Plan as a plan with respect to which assets are to be held
by the Trustee.
1.24 "Trustees" means the trustee or trustees or their successors
under the Trust.
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2. PARTICIPATION, DEFERRAL AND MATCHING
2.1 Election to Participate
Each Eligible Employee may elect to participate for the Plan Year or part
of a Plan Year for which he is eligible by delivering to the Committee a
written notice, at such time and in such form as approved by the Committee,
electing to participate and specifying the amount of Earnings or any Bonus
Payments he elects to defer for such Plan Year or part of a Plan Year. An
election to defer Earnings shall be made at least 30 days prior to the
commencement of the Plan Year or at any time prior to a calendar quarter of
a Plan Year (with respect to an Employee who first becomes a Participant
during a Plan Year) with respect to which an election to participate is
made. An election to defer any Bonus Payment must be made by the June 30th
prior to the commencement of the Plan Year in which such Bonus Payment
would be paid if awarded (or up to 30 days after the date an Employee first
becomes a Participant).
2.2 Amount of Deferral
(a) Each Eligible Employee who elects to participate in the Plan for a Plan
Year, or part of a Plan Year, may elect to defer, subject to a minimum
deferral of $1,000, an amount not to exceed: (a) 100% of Earnings for such
Plan Year, plus (b) 100% of Bonus Payments awarded in or with respect to
such Plan Year.
(b) Notwithstanding the foregoing Section 2.2(a), each Eligible Employee who
elects to make a deferral contribution to the Plan in any Plan Year shall
also for such Plan Year elect to make a contribution to the 401(k) Plan in
an amount equal to the maximum elective contribution permitted under the
terms of the 401(k) Plan. In no event shall: (i) amounts credited to an
Employee's Deferral Account with respect to any Plan Year be distributed
out of the Plan and contributed to the 401(k) Plan, or (ii) amounts
distributed out of the 401(k) Plan by reason of the deferral limit and
nondiscrimination rules applicable to the 401(k) Plan under the Code be
contributed to the Plan.
2.3 Employer Contribution
(a) The Employer shall credit to each Participant's Employer Contribution
Account an amount determined by the Committee in its discretion. The
Committee shall notify the Eligible Employee of the maximum amount of the
Employer Contribution to which he shall be entitled at
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the time the Committee informs such employee that he is an Eligible
Employee
(b) The Employer Contribution shall be credited to the Employer
Contribution Account at the same time the Eligible Employee's deferred
Earnings, if any, are credited to his Employee Deferral Account or
otherwise as determined by the Committee but not less frequently than
every three (3) months. No Employer Contribution shall be made with
respect to any deferred Bonus Payments.
2.4 Withholding
The amount of Earnings or Bonus Payments which an Eligible Employee elects
to defer under Section 2.1 shall be withheld from Earnings or Bonus
Payments in accordance with such rules and procedures as the Committee
shall specify.
2.5 Minimum Period of Deferral
An election to defer Earnings or a Bonus Payment (including a change in a
prior election) must be made for a period no less than twenty four (24)
months from the date the amount would otherwise have been payable to the
Participant.
3. DEFERRED COMPENSATION ACCOUNTS
3.1 Accounts
The Committee shall establish an Employee Deferral Account and an Employer
Contribution Account for each Participant for all periods during which such
Participant elects to participate in the Plan.
3.2 Employee Deferral Account
Each Participant's Employee Deferral Account shall be credited with an
amount equal to all of the Participant's Earnings or Bonus Payments
deferred as of the dates such amounts would, but for the election to defer,
have been payable to the Participant, and shall be credited or debited with
any amounts deemed attributable to the investment experience of that
Account.
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3.3 Employer Contribution Account
Each Participant's Employer Contribution Account shall be credited with an
amount equal to the Employer Contribution under Section 2.3, and shall be
credited or debited with any amounts deemed attributable to the investment
experience of that Account.
3.4 Account Credits and Debits
All amounts credited to the Employee Deferral Accounts and Employer
Contribution Accounts shall at all times be the sole and absolute property
of the Company, subject to the terms of any Trust with respect thereto.
The Employee Deferral Accounts and the Employer Contribution Accounts shall
be debited to the extent of any withdrawals made pursuant to Section 7.
3.5 Trust Accounts
The Commmitee may but need not establish a Trust. If a Trust has been
established the Committee may cause the Trustee to maintain and invest
separate asset accounts or subaccounts corresponding to each Participant's
Employee Deferral Account and Employer Contribution Account.
3.6 Subaccounts
The Committee may establish subaccounts or separate accounts for each
Participant as may be appropriate for the proper administration of the
Plan.
4. Supplemental Benefits
4.1 Section 415 Benefit
(a) If the pension payable to the Participant from the Retirement Plan is
limited by Code Section 415, the Participant shall receive a Section
415 Benefit from the Plan equal to the Participant's accrued normal
retirement benefit calculated under the terms of the Retirement Plan
without regard to any limitations under Code Section 415, reduced by
the Participant's accrued normal retirement benefit payable under the
Retirement Plan.
(b) Payment of any Participant's Section 415 Benefit calculated under
Section 4.1(a) above shall be made at the same time and in the same
manner as the Participant's benefit under the Retirement Plan. Any
actuarial adjustment to the Participant's benefit under the Plan
shall
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be on the same basis as actuarial adjustments on the Participant's
Retirement Plan benefit.
(c) If any death benefit payable under the Retirement Plan prior to
commencement of the Participant's benefits under the Retirement Plan
is limited due to Code Section 415 limitations, the amount by which
the death benefit payable under the Retirement Plan is so limited
shall be payable under the Plan at the same time and in the same
manner as the death benefit payable under the Retirement Plan.
4.2 Section 401(a)(17) Benefit
(a) If the pension payable to the Participant from the Retirement Plan is
limited by Code Section 401(a)(17), the Participant shall receive a
Section 401(a)(17) Benefit from the Plan equal to the Participant's
accrued normal retirement benefit calculated under the terms of the
Retirement Plan without regard to any limitations under Code Section
401(a)(17), reduced by: (i) the Participant's accrued normal
retirement benefit payable under the Retirement Plan, and (ii) by the
Participant's Section 415 Benefit under the Plan.
(b) Payment of any Participant's Section 401(a)(17) Benefit calculated
under Section 4.2(a) above shall be made at the same time and in the
same manner as the Participant's benefit under the Retirement Plan.
Any actuarial adjustment to the Participant's benefit under the Plan
shall be on the same basis as actuarial adjustments on the
Participant's Retirement Plan benefit.
(c) If any death benefit payable under the Retirement Plan prior to
commencement of the Participant's benefits under the Retirement Plan
is limited due to Code Section 401(a)(17) limitations, the amount by
which the death benefit payable under the Retirement Plan is so
limited shall be payable under the Plan at the same time and in the
same manner as the death be nefit payable under the Retirement Plan.
5. VESTING
5.1 Employee Deferral Account
A Participant shall be immediately 100% vested in all amounts credited to
his Employee Deferral Account.
6
<PAGE>
5.2 Employer Contribution Account
(a) A Participant shall be vested in the amount credited to the Employer
Contribution Account established for him in accordance with the
following schedule:
Years of Continuous Service Vested Percentage
--------------------------- -----------------
Less than 1 0
At least 1 20
At least 2 40
At least 3 60
At least 4 80
5 or more 100
(b) Notwithstanding the provisions of Section 5.2(a), the amount credited
to a Participant's Employer Contribution Account shall be 100% vested
in the event of (i) Separation from Service by reason of Retirement,
Disability, or death of a Participant, (ii) termination of the Plan,
or (iii) a "Change in Control" (as defined below). A "Change in
Control" shall mean and include the following with respect to the
Company or any successor thereto:
(i) if beneficial ownership of 50% or more of either the outstanding
shares of the Company's common stock or the combined voting power of
the Company's voting stock is acquired by persons or entities not
related to the Company without consent of the current Board, (ii) upon
the election of individuals constituting a majority of the Board who
were either not members prior to their election or not recommended to
the stockholders by the Board, (iii) upon a merger, consolidation or
sale of all or substantially all of the Company's assets, where upon
(a) at least 50% of the outstanding shares of the Company's common
stock and of the combined voting power of voting securities are not
held in the same proportion, and by the same persons as the beneficial
owners prior to such event, (b) at least 35% of the Company's common
stock is held by a person that did not hold such amount prior to the
event and (c) a majority of the current Board did not survive the
event, or (iv) approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
6. INVESTMENT EXPERIENCE
In its sole discretion, the Committee may designate investments in which
each Participant's Accounts may be deemed to be invested. From such designated
investments each Participant may select from time to time the investments in
which his Accounts will be deemed to be invested. Based on such selection, the
7
<PAGE>
Committee will credit or debit to each Participant's Accounts, as provided in
Sections 3.2 and 3.3, the amounts by which the Participant's Accounts would have
increased or decreased if they had been invested in the investments designated
by the Participant. The selection of investments is to be used only for the
purpose of valuing each Participant's Accounts. The Company and the Committee
are under no obligation to acquire or provide any of the investments designated
by a Participant, and any investments actually made by the Committee will be
made solely in the name of the Company and will remain the property of the
Company subject to the terms of any Trust. During any period when the Company
does not designate investments in which each Participant's Account may be deemed
invested, the Company shall credit interest on each Participant's Employee
Deferral Account and Employer Contribution Account at a rate equivalent to the
average rate for 10-year U.S. Treasury notes during the month preceding the
month the amount would otherwise be paid to the Participant if not deferred,
plus two points. All taxes required to be paid in connection with the deemed
investment experience of Employee Deferral Accounts and Employer Contribution
Accounts shall be paid by the Employer. At least as often as the last business
day of each calendar quarter, the Committee shall provide the Participant with a
statement of his account, in such reasonable detail as the Committee shall deem
appropriate, showing the income, gains and losses (realized and unrealized),
amounts of deferrals, and distributions from his Employee Deferral Account and
Employer Contribution Account since the prior statement.
7. PAYMENT OF FUNDS
7.1 Payment Method
(a) Separation From Service. At the time an Eligible Employee elects to
------------------------
participate in the Plan in accordance with Section 2.1, he shall also
elect, in such form as approved by the Committee, one of the following
methods for the payment of the vested portion of his Employee Deferral
Account and Employer Contribution Account commencing within five years
of his Separation from Service:
(1) A lump sum payment;
(2) Pro-rata annual installment payments for a period not to exceed
10 years after Separation from Service, with each installment
equal to the unpaid balance of such accounts divided by the
number of remaining payments; and, if the Participant dies
before all payments are made, the remaining payments to be made
to his Beneficiary.
8
<PAGE>
A Participant may elect one method of payment to himself and a
different method of payment to his Beneficiary.
(b) During Employment. In addition to the election with respect to the
method of payment upon Separation from Service specified in Section
7.1(a), with respect to all amounts deferred under the Plan, each
Participant may elect, at the time and in such manner as approved by
the Committee one of the following methods to receive payment of the
vested portion of his Employee Deferral Account and Employer
Contribution Account attributable to a Plan Year during his term of
employment:
(1) A lump sum payment;
(2) Pro-rata annual installment payments for a period not to exceed
10 years with each installment equal to the unpaid balance of
such accounts divided by the number of remaining payments;
(3) One or more installments in an amount or amounts and at the date
or dates elected by the Eligible Employee.
(c) Changes in Election
(1) A Participant may request a change in his election as to the date
or method of payment, by written notice to the Committee, subject
to approval by the Committee in its sole discretion, at any time
prior to the June 30th prior to the commencement of the Plan Year
in which: (a) Separation from Service occurs if Payment following
Separation from Service is selected or (b) distributions would
otherwise commence if Payment During Employment is selected.
Notwithstanding the foregoing, if a Participant's Separation from
Service for any reason other than death occurs in the same Plan
Year as the election or request for a change in election of the
date or method of payment to himself, such election may be
disregarded by the Committee.
(2) A Participant who requests a change as to the date of payment
must request a payment date that is at least twenty four (24)
months after the date of payment previously elected by the
Participant.
(3) Notwithstanding the foregoing, a Participant who has separated
from service due to Retirement, or who would have satisfied the
Company's requirements for Retirement if he had not previously
separated from service prior to Retirement, may after Retirement
change the date of payment from a prior election but only in the
9
<PAGE>
event of a hardship, as defined in Section 7.4 below or due to a
change in financial circumstances established to the satisfaction of
the Committee. A change in financial circumstances means a change
in the availability of reasonably expected financial assets or a
substantial change in reasonably expected expenses that, in the
judgment of the Committee, justifies a change in the date or method
of payment to reflect to the change.
7.2 Death; Disability; Retirement
Upon a Participant's Separation from Service by reason of his death,
Disability or Retirement, the Company shall pay to him, or to his
Beneficiary in the case of his death, his Employee Deferral Account and
Employer Contribution Account as of the date of Separation from Service.
Payment shall be made by the method and on the date(s) previously elected
by the Participant, or in the sole discretion of the Committee, in a lump
sum.
Lump sum payments shall be made on the last day of the calendar quarter in
which the Participant's Separation from Service occurs.
7.3 Resignation or Discharge
Notwithstanding the provisions of Section 7.1(a), upon a Participant's
Separation from Service by reason of his resignation or discharge, the
Company shall pay to him the vested portion of his Employee Deferral
Account and Employer Contribution Account as of the Date of Separation
from Service resulting from his resignation or discharge.
Payment shall be made to the Participant in a lump sum or in installments,
in the discretion of the Committee on or commencing on the last day of the
calendar quarter in which his resignation or discharge occurs.
Notwithstanding the foregoing, the Committee, at its option, may defer
payment of the Participant's Employee Deferral Account and Employer
Contribution Account to the time(s) previously selected by such
Participant pursuant to Sections 7.1(a) and 7.1(b) if such resignation or
discharge would constitute a change in financial circumstances (as defined
in Section 7.1(c)(3)).
7.4 Hardship
(a) Upon application by a Participant and approval thereof by the
Committee, the Participant may withdraw, upon a showing of hardship,
part or all of the amount then credited in the Employee Deferral
Account and the amount in his Employer Contribution Account.
10
<PAGE>
(b) For purposes of Section 7.4(a), "hardship" shall mean severe financial
hardship to a Participant resulting from a sudden and unexpected
illness or accident of the Participant or of a dependent (as defined in
Section 152(a) of the Code) of the Participant, loss of the
Participant's property due to casualty, or other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond
the control of the Participant, which hardship may not be relieved
through reimbursement or compensation by insurance or otherwise, by
liquidation of the Participant's assets (to the extent such liquidation
would not itself cause severe financial hardship), or by cessation of
deferrals under the Plan.
7.5 Change of Control
Notwithstanding anything to the contrary contained in this Plan upon the
consummation of a Change of Control as defined in Section 5.2(b), each
Participant's Employee Deferral Account and Employer Contribution Account
shall be immediately vested and distributed to him in a lump sum
distribution within 90 days following the consummation of such Change in
Control or in the event there is a Trust in effect with respect to the
Plan, in accordance with the terms of the Trust.
8. ADMINISTRATION
8.1 Committee
The general administration of the Plan and the responsibility for carrying
out its provisions shall be placed in the Compensation Committee of the
Board of Directors of the Company. The initial Administrative Committee
shall consist of the Chief Executive Officer and President of the Company
until such time as the Company has appointed the Compensation Committee.
8.2 Rules for Administration
Subject to the limitations of the Plan, the Committee may from time to
time establish rules and procedures for the administration and
interpretation of the Plan and the transaction of its business as the
Committee may deem necessary or appropriate.
Without limiting the generality of the foregoing, such rules shall include
rules and procedures contained in any Annual Participant Election Form or
similar document approved by the Committee. The determination of the
Committee as to any disputed question shall be conclusive.
11
<PAGE>
8.3 Committee Action
Any act which the Plan authorizes or requires the Committee to do may be
done by a majority of its members. The action of such majority, expressed
from time to time by a vote at a meeting (a) in person, (b) by telephone
or other means by which all members may hear one another or (c) in writing
without a meeting, shall constitute the action of the Committee and shall
have the same effect for all purposes as if assented to by all members of
the Committee at the time in office.
8.4 Delegation
The members of the Committee may authorize one or more of their number to
execute or deliver any instrument, make any payment or perform any other
act which the Plan authorizes or requires the Committee to do.
8.5 Services
The Committee may employ or retain agents to perform such clerical,
accounting, trust, trustee and other services as they may require in
carrying out the provisions of the Plan.
8.6 Indemnification
The Company shall indemnify and save harmless each member of the Committee
against all expenses and liabilities arising out of membership on the
Committee, excepting only expenses and liabilities arising from his own
gross negligence or willful misconduct, as determined by the Board of
Directors.
8.7 Claims Procedure
A Participant who believes that he is entitled to benefits under the Plan
which have not been paid must file a written claim for such benefits. All
claims for benefits shall be in writing and shall be filed with the
Committee. If the Committee wholly or partially denies a Participant's
claim for benefits, the Committee shall give the claimant written notice
within sixty (60) days after the Plan's receipt of the claim setting
forth:
(1) the specific reason(s) for the denial;
(2) specific reference to pertinent Plan provisions on which the denial is
based;
12
<PAGE>
(3) a description of any additional material or information which must be
submitted to perfect the claim, and an explanation of why such material or
information is necessary; and
(4) an explanation of the Plan's claim review procedure.
In the event of a benefit claim denial, the Company shall appoint a person
who is not regularly involved in the Company's administration of the Plan
to serve as claim reviewer. The claimant shall have sixty (60) days after
the day on which such written notice of denial is handed or mailed to him
by the Committee, in which to apply (in person or by authorized
representative) in writing to the claim reviewer for a full and fair review
of the denial of his claim. In connection with such review, the claimant
(or his representative) shall be afforded reasonable opportunity to review
pertinent documents, and may submit issues and comments in writing. The
claim reviewer shall arrange to meet personally with the claimant and/or
representative within thirty (30) days after the claim reviewer's receipt
of such written request for review for the purpose of hearing the
claimant's contentions and receiving such relevant evidence as the claimant
may wish to offer.
The claim reviewer shall issue his decision on review within sixty (60)
days after meeting with the claimant or personal representative, unless in
the sole discretion of the claim reviewer special circumstances require an
extension to not later than one hundred twenty (120) days after such
meeting. The decision shall be in writing and shall set forth specific
reasons for the decision and specific references to pertinent Plan
provisions on which the decision is based.
All of the time periods mentioned in this Section may be extended by the
Committee in its discretion.
9. AMENDMENT AND TERMINATION
The Company, by action of the Board of Directors, may at any time or from
time to time modify or amend any or all of the provisions of the Plan or may at
any time terminate the Plan provided that the Company may not amend Sections 5
or 7.5 to decrease any Participant rights under such Sections 5 and 7.5. No such
action shall adversely affect the accrued or vested rights of any Participant
hereunder without his consent thereto.
13
<PAGE>
10. GENERAL PROVISIONS
10.1 Limitation of Rights
No Participant or other Eligible Employee shall have any right to any
payment or benefit hereunder except to the extent provided in the Plan.
10.2 Employment Rights
The employment rights of any Participant or other Eligible Employee shall
not be enlarged, guaranteed or affected by reason of any of the
provisions of the Plan.
10.3 Assignment, Pledge or Encumbrance
Assignment, pledge or other encumbrance of any payments or benefits under
the Plan shall not be permitted or recognized and, to the extent
permitted by law, no such payments or benefits shall be subject to legal
process or attachment for the payment of any claim of any person entitled
to receive the same, except to the extent such assignment or other
encumbrance is in favor of the Company to secure a loan or other
extension of credit from the Company to the Participant.
10.4 Minor or Incompetent
If the Committee determines that any person to whom a payment is due
hereunder is a minor or is incompetent by reason of physical or mental
disability, the Committee shall have the power to cause the payments
becoming due to such person to be made to another for the benefit of such
minor or incompetent without responsibility of the Company or the
Committee to see to the application of such payment, unless claim prior
to such payment is made therefor by a duly appointed legal
representative. Payments made pursuant to such power shall operate as a
complete discharge of the Company and the Committee.
14
<PAGE>
10.5 Beneficiary
Each Participant may designate, by written notice to the Committee, any
person(s) or legal entity(ies), including his estate, as his Beneficiary
under the Plan. A Participant may revoke his designation of a Beneficiary
or change his Beneficiary at any time prior to his death by written
notice to the Committee If no person or legal entity shall be designated
by a Participant as his Beneficiary or if no designated Beneficiary
survives him, his Beneficiary shall be his estate.
10.6 Binding Provisions
The provisions of this Plan shall be binding upon each Participant as a
consequence of his election to participate in the Plan, and upon the
Company, and their respective heirs, executors, administrators, and
assigns.
10.7 Notices
Any election made or notice given by a Participant pursuant to the Plan
shall be in writing to the Committee or to such representative as may be
designated by it for such purpose and shall be deemed to have been made
or given on the date received by the Committee or its representative.
10.8 Governing Law
Certain matter under the Plan are governed by the Employee Retirement
Income Security Act of 1974. All other interpretations of the Plan or of
any of its provisions shall be construed under the laws of the State of
Delaware, but not including the choice of law provisions thereof.
10.9 Pronouns
The masculine pronoun shall be deemed to include the feminine wherever it
appears in the Plan unless a different meaning is required by the
context.
11. Effective Date
This Plan shall be effective November 1, 1999.
* * * * *
15
<PAGE>
AMENDED SALARY CONTINUATION AGREEMENT
-------------------------------------
THIS AMENDED AGREEMENT, effective as of December 9, 1999, is among ACX
Technologies, Inc., a Colorado corporation ("ACX"), CoorsTek, Inc., a Delaware
corporation (the "Company" or "CoorsTek"), and John K. Coors, (the "Executive").
RECITALS
1. The Executive is presently employed by CoorsTek, an affiliate of ACX.
2. The Executive and ACX are parties to a salary continuation agreement,
effective October 1, 1994 (the "Prior Agreement"), pursuant to which ACX has
agreed to provide the Executive with certain ACX stock units and nonqualified
stock options.
3. The Company intends to spin off CoorsTek to the owners of the common
stock of ACX on or about December 31, 1999. Following the spinoff, CoorsTek
desires to tie the Executive's benefits more closely to CoorsTek's performance.
4. By entering into this Amended Agreement, the Executive is electing to
convert the shares pursuant to the Prior Agreement from the $0.01 par value
common stock of ACX (the "ACX Stock") into $.01 par value common stock of
CoorsTek ("CoorsTek Stock").
5. ACX, CoorsTek, and the Executive now wish to enter into this Amended
Agreement to amend the Prior Agreement in certain respects and to replace the
Prior Agreement with this Amended Agreement.
AGREEMENT
In consideration of the Executive's continued services to CoorsTek, the
mutual covenants contained herein and other good and valuable consideration, the
parties agree as follows, effective as of the spin-off:
1. Benefit. As of December 31, 1999, the Executive holds 18,156 ACX
-------
stock units representing the right to receive 18,156 shares of ACX
Stock.
2. Conversion of 18,156 ACX Stock Units to CoorsTek Stock Units. By
------------------------------------------------------------
entering into this agreement, Executive hereby elects to convert the
Executive's 18,156 shares of ACX stock units to CoorsTek stock units.
The conversion will be calculated by valuing the ACX stock units at
the closing price of the ACX Stock as reported on the New York Stock
Exchange on December 30, 1999, or if later, the day before CoorsTek
Stock begins trading on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") in the regular
<PAGE>
market (the "ACX Pre-Spin Price") and by valuing the CoorsTek stock
units at the closing price of the CoorsTek Stock as reported on NASDAQ
on the first day of trading on NASDAQ (the "CoorsTek Post-Spin
Price"). The number of CoorsTek stock units to be issued to Executive
shall be determined by multiplying the 18,156 shares times the ACX
Pre-Spin Price and dividing by the CoorsTek Post-Spin Price and by
rounding a fractional share up to the next whole share.
4. Vesting of CoorsTek Stock Units. The CoorsTek stock units shall vest
-------------------------------
based on the Executive's age and years of service as follows:
4.1 Vesting shall be determined initially based on the Executive's
age according to the following schedule:
Age Vested Percentage
----------------------------------
Less than 50 0%
50 50%
51 55%
52 60%
53 65%
54 70%
55 75%
56 80%
57 85%
58 90%
59 95%
60 and older 100%
4.2 Vesting, determined according to the schedule above, shall be
modified based on years of service so that if the Executive has
fewer than ten years of service, a portion of the vested CoorsTek
stock units determined above will be forfeited. The percentage
of CoorsTek stock units that remain vested is determined by the
following schedule:
Years of Service Vested Percentage
-------------------------------------
Fewer than 5 0%
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
For example, an Executive who terminates employment at age 51 with 5 years
of service will be 27.5% vested (55% x 50%).
2
<PAGE>
4.3 Upon a "change in control" (as defined in the CoorsTek, Inc.
Stock Option and Incentive Plan), the CoorsTek stock units shall
be 100% vested without regard to the Executive's age or service.
4.4 For purposes of this Amended Agreement, "Year of Service" shall
mean vesting service as defined under the CoorsTek, Inc.
Retirement Plan (the "Retirement Plan") or any successor defined
benefit plan, or if the Retirement Plan is terminated without the
establishment of a successor defined benefit plan, any other
qualified retirement plan maintained by CoorsTek. If the
Retirement Plan is amended to provide for additional or imputed
Years of Service and if the Executive retires under the
Retirement Plan and receives credit for such additional Years of
Service, then such additional Years of Service shall also be
credited for purposes of this Amended Agreement. Service shall
also include (i) all service with ACX on and after December 28,
1992 and (ii) all service prior to December 28, 1992, with Adolph
Coors Company and its subsidiaries.
5. Forfeiture. Notwithstanding the provisions of Section 4 above, if the
----------
Executive's employment is terminated by death or for cause, as
determined by CoorsTek, the CoorsTek stock units shall be forfeited in
their entirety. As used in this Section 5, "cause" shall mean a gross
violation, as determined by CoorsTek, of CoorsTek's established
policies and procedures, provided that the effect of this Section 5
shall be limited to determining the consequences of a termination and
that nothing in this Section 5 shall restrict or otherwise interfere
with CoorsTek's discretion with respect to the termination of the
Executive.
6. Payment.
-------
6.1 Upon termination of employment for any reason other than by death
or for cause, the Executive shall be entitled to receive a number
of shares of CoorsTek Stock, pursuant to the CoorsTek, Inc. Stock
Option and Incentive Plan, equal to the number of his CoorsTek
stock units that are then vested. The CoorsTek Stock shall be
issued in one block within 30 days after retirement which is the
time previously elected by the Executive under the Prior
Agreement. Notwithstanding the foregoing, if the Executive is
required to be separately reported in CoorsTek's annual proxy
statement, the issuance of CoorsTek Stock to the Executive shall
be effected no earlier than the first day of the calendar year in
which CoorsTek's deduction with respect to the CoorsTek Stock
issued is not limited by Code (S) 162(m).
6.2 (a) Upon a "change in control" (as defined in the CoorsTek, Inc.
Stock Option and Incentive Plan), the Executive shall be issued a
number of shares of CoorsTek Stock, pursuant to the CoorsTek,
Inc. Stock Option
3
<PAGE>
and Incentive Plan, equal to the number of his CoorsTek stock
units. The shares shall be issued immediately after the change in
control.
(b) If all or any portion of the capital stock or assets of
CoorsTek are disposed of and if, as a result of the disposition
and immediately after the disposition, the Executive is not
employed by CoorsTek, a subsidiary of CoorsTek, or an affiliate
of CoorsTek, the Executive's unvested CoorsTek stock units shall
become fully vested without regard to the Executive's age and
years of service. The Executive shall be issued a number of
shares of CoorsTek Stock, pursuant to the CoorsTek Stock Option
and Incentive Plan, equal to the number of his CoorsTek stock
units. The CoorsTek Stock shall be issued immediately after the
disposition. If, however, immediately after the disposition, the
Executive becomes employed by CoorsTek, a subsidiary of CoorsTek,
or an affiliate of CoorsTek, the Executive's unvested CoorsTek
stock units shall not become fully vested as a result of the
disposition, but shall continue to vest according to Section 4 of
this Amended Agreement.
6.3 The Company shall issue irrevocable instructions to the Company's
transfer agent to issue certificates to the Executive for a
number of shares of CoorsTek Stock equal to the number of vested
CoorsTek stock units on the 15th calendar day after the Executive
terminates employment. Notwithstanding the foregoing, if the
Executive is required to be separately reported in CoorsTek's
annual proxy statement, the issuance of CoorsTek Stock to the
Executive shall be effected no earlier than the first day of the
calendar year in which CoorsTek's deduction with respect to the
CoorsTek Stock issued is not limited by Code (S) 162(m). The day
on which the Company issues the irrevocable instructions shall be
the day on which the CoorsTek Stock shall be valued for purposes
of determining the Executive's taxable compensation unless, based
on all the facts and circumstances, the Committee (as defined in
Section 11.3 below) determines that the trading prices on that
day do not adequately reflect CoorsTek Stock's fair market value
in which case the Committee shall determine how the Stock shall
be valued.
6.4 If the Executive dies before payment of the amount due under this
Amended Agreement is completed, the amount remaining shall be
paid to the Executive's beneficiary as set forth in the
Executive's Beneficiary Designation designated under the Prior
Agreement and attached as Appendix A. The Executive may change
his Beneficiary Designation at any time and from time to time
without the consent of any previously designated beneficiary. If
the Executive dies after termination of employment, the
irrevocable instructions shall be given to the transfer agent at
the time provided in Section 6.3. If necessary, the transfer
agent
4
<PAGE>
shall be given follow-up instructions to issue the certificate in
the name of the Executive's beneficiary.
6.6 The Executive shall not have any rights as a stockholder with
respect to any shares of CoorsTek Stock represented by a CoorsTek
stock unit until the Executive becomes the holder of record of
such CoorsTek Stock, and no adjustments shall be made for
dividends or other distributions or other rights as to which
there is a record date preceding the date the Executive becomes
the holder of record of the CoorsTek Stock.
7. Unfunded General Obligation of the Company. The amounts payable under
------------------------------------------
this Amended Agreement are unfunded general obligations of CoorsTek.
CoorsTek shall not be required to fund its obligations under this
Amended Agreement in any manner, and the Executive shall have no right
or interest in any asset of CoorsTek, but shall be only an unsecured
general creditor of CoorsTek with respect to all amounts due in
accordance with the provisions of this Amended Agreement. Nothing
contained in this Amended Agreement and no action taken pursuant to
the provisions of this Amended Agreement shall create or be construed
to create a trust of any kind, or fiduciary relationship between
CoorsTek and the Executive, or any other person.
8. No Assignment. Neither the Executive nor his beneficiary shall have
-------------
any right to assign, transfer, pledge, encumber, or dispose of the
right to receive payments under this Amended Agreement and any attempt
to so anticipate, alienate, sell transfer, assign, pledge, encumber or
charge prior to such receipt shall be void. CoorsTek shall not be
liable in any manner for or subject to the debts, contracts,
liabilities, engagements or torts of any person entitled to the
payment of any amounts under this Amended Agreement.
9. Withholding of Applicable Taxes. All payments hereunder shall be
-------------------------------
subject to withholding of all applicable taxes and such amounts shall
be withheld from amounts payable hereunder, whether to the Executive
or his beneficiary. The Executive may elect to satisfy the
withholding obligation with CoorsTek Stock, pursuant to the CoorsTek,
Inc. Stock Option and Incentive Plan.
10. Amendment. This Amended Agreement may be amended, altered or revoked
---------
only by a written instrument executed by CoorsTek and the Executive.
11. Miscellaneous Provisions.
------------------------
11.1 Effect on Other Benefit Plans. Any payments under this Amended
-----------------------------
Agreement shall not be deemed salary or other compensation
received by or payable to the Executive for the purpose of
computing benefits to which the Executive may be entitled under
any other pension plan, benefit plan or other similar arrangement
of CoorsTek for the benefit of its employees.
5
<PAGE>
11.2 No Contract of Employment. This Amended Agreement shall not be
-------------------------
construed as a contract of employment nor does it restrict the
right of CoorsTek to discharge the Executive for cause or for any
other reason or the right of the Executive to terminate his
employment with CoorsTek.
11.3 Compensation Committee to Administer Amended Agreement. The
------------------------------------------------------
Compensation Committee (the "Committee") of the Board of
Directors of CoorsTek shall administer and interpret this Amended
Agreement and no member of the Committee shall be liable to any
person for any action taken or omitted with respect to the
interpretation and administration of this Amended Agreement
unless attributable to the Committee member's own willful
misconduct or gross negligence.
11.4 Committee May Grant Additional Stock Units and Options. If the
------------------------------------------------------
Executive receives a large salary increase as part of a promotion
or otherwise, the Committee may, in its sole discretion, grant
additional CoorsTek stock units and options as part of this
Amended Agreement if it believes such an increase in stock units
and options is justified.
11.5 Replacement of Prior Agreement. This Amended Agreement shall
------------------------------
replace the Prior Agreement in its entirety and rescinds all
obligations under the Prior Agreement. This Amended Agreement
contains the entire agreement of the parties hereto with respect
to the subject matter of this Amended Agreement.
11.6 Interpretive Rules. The headings and underlined section titles
------------------
are included solely for convenience of reference, and shall have
no significance in the interpretation of this Amended Agreement.
Where appropriate in this Amended Agreement, words used in the
singular shall include the plural and words used in the masculine
shall include the feminine. If any provision of this Amended
Agreement is illegal and invalid for any reason, such illegality
or invalidity shall not affect the remaining provisions. On the
contrary, such remaining provisions shall be fully severable, and
this Amended Agreement shall be construed and enforced as if such
illegal or invalid provision never had been a part of this
Amended Agreement.
11.7 ACX. ACX is a party to this Amended Agreement solely for the
---
purpose of effecting the amendment and replacement of the Prior
Agreement, in its entirety, by this Amended Agreement.
11.8 Governing Law. This Amended Agreement shall be construed in
-------------
accordance with and administered under the laws of the State of
Colorado.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended Agreement
this 9th day of December, 1999, to be effective as of the effective date of
the spin-off.
ACX TECHNOLOGIES, INC.
By: /s/ Jill B.W. Sisson
--------------------
Jill B.W. Sisson
Title: Secretary
---------
COORSTEK, INC.
By: /s/ Katherine A. Resler
-----------------------
Katherine A. Resler
Title: Secretary
---------
EXECUTIVE
/s/ John K. Coors
-----------------
John K. Coors
7
<PAGE>
EXHIBIT 10.8
AMENDED SALARY CONTINUATION AGREEMENT
-------------------------------------
THIS AMENDED AGREEMENT, effective as of December 9, 1999, is among ACX
Technologies, Inc., a Colorado corporation ("ACX"), CoorsTek, Inc., a Delaware
corporation (the "Company" or "CoorsTek"), and Joseph Coors, Jr., (the
"Executive").
RECITALS
1. The Executive and ACX are parties to a salary continuation agreement,
effective October 1, 1994 (the "Prior Agreement"), pursuant to which ACX has
agreed to provide the Executive with certain ACX stock units and nonqualified
stock options.
2. The Company intends to spin off CoorsTek to the owners of the common
stock of ACX on or about December 31, 1999. Following the spinoff, CoorsTek
desires to tie the Executive's benefits more closely to CoorsTek's performance.
3. The Executive is presently employed by ACX, but will become an employee
of CoorsTek upon the spinoff of CoorsTek.
4. By entering into this Amended Agreement, the Executive is electing to
convert the shares pursuant to the Prior Agreement from the $0.01 par value
common stock of ACX (the "ACX Stock") into $.01 par value common stock of
CoorsTek ("CoorsTek Stock").
5. ACX, CoorsTek, and the Executive now wish to enter into this Amended
Agreement to amend the Prior Agreement in certain respects and to replace the
Prior Agreement with this Amended Agreement.
AGREEMENT
In consideration of the Executive's continued services to CoorsTek, the
mutual covenants contained herein and other good and valuable consideration, the
parties agree as follows, effective as of the spin-off:
1. Benefit. As of December 31, 1999, the Executive holds 64,032 ACX
-------
stock units representing the right to receive 64,032 shares of ACX
Stock.
2. Conversion of 64,032 ACX Stock Units to CoorsTek Stock Units. By
------------------------------------------------------------
entering into this agreement, Executive hereby elects to convert the
Executive's 64,032 shares of ACX stock units to CoorsTek stock units.
The conversion will be calculated by valuing the ACX stock units at
the closing price of the ACX Stock as reported on the New York Stock
Exchange on December 30, 1999, or if later, the day before CoorsTek
Stock begins trading on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") in the regular
<PAGE>
market (the "ACX Pre-Spin Price") and by valuing the CoorsTek stock
units at the closing price of the CoorsTek Stock as reported on NASDAQ
on the first day of trading on NASDAQ (the "CoorsTek Post-Spin
Price"). The number of CoorsTek stock units to be issued to Executive
shall be determined by multiplying the 64,032 shares times the ACX
Pre-Spin Price and dividing by the CoorsTek Post-Spin Price and by
rounding a fractional share up to the next whole share.
4. Vesting of CoorsTek Stock Units. The CoorsTek stock units shall vest
-------------------------------
based on the Executive's age and years of service as follows:
4.1 Vesting shall be determined initially based on the Executive's
age according to the following schedule:
Age Vested Percentage
-------------------------------------
Less than 50 0%
50 50%
51 55%
52 60%
53 65%
54 70%
55 75%
56 80%
57 85%
58 90%
59 95%
60 and older 100%
4.2 Vesting, determined according to the schedule above, shall be
modified based on years of service so that if the Executive has
fewer than ten years of service, a portion of the vested CoorsTek
stock units determined above will be forfeited. The percentage
of CoorsTek stock units that remain vested is determined by the
following schedule:
Years of Service Vested Percentage
-------------------------------------
Fewer than 5 0%
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
For example, an Executive who terminates employment at age 51 with 5 years
of service will be 27.5% vested (55% x 50%).
2
<PAGE>
4.3 Upon a "change in control" (as defined in the CoorsTek, Inc.
Stock Option and Incentive Plan), the CoorsTek stock units shall
be 100% vested without regard to the Executive's age or service.
4.4 For purposes of this Amended Agreement, "Year of Service" shall
mean vesting service as defined under the CoorsTek, Inc.
Retirement Plan (the "Retirement Plan") or any successor defined
benefit plan, or if the Retirement Plan is terminated without the
establishment of a successor defined benefit plan, any other
qualified retirement plan maintained by CoorsTek. If the
Retirement Plan is amended to provide for additional or imputed
Years of Service and if the Executive retires under the
Retirement Plan and receives credit for such additional Years of
Service, then such additional Years of Service shall also be
credited for purposes of this Amended Agreement. Service shall
also include (i) all service with ACX on and after December 28,
1992 and (ii) all service prior to December 28, 1992, with Adolph
Coors Company and its subsidiaries.
5. Forfeiture. Notwithstanding the provisions of Section 4 above, if the
----------
Executive's employment is terminated by death or for cause, as
determined by CoorsTek, the CoorsTek stock units shall be forfeited in
their entirety. As used in this Section 5, "cause" shall mean a gross
violation, as determined by CoorsTek, of CoorsTek's established
policies and procedures, provided that the effect of this Section 5
shall be limited to determining the consequences of a termination and
that nothing in this Section 5 shall restrict or otherwise interfere
with CoorsTek's discretion with respect to the termination of the
Executive.
6. Payment.
-------
6.1 Upon termination of employment for any reason other than by death
or for cause, the Executive shall be entitled to receive a number
of shares of CoorsTek Stock, pursuant to the CoorsTek, Inc. Stock
Option and Incentive Plan, equal to the number of his CoorsTek
stock units that are then vested. The CoorsTek Stock shall be
issued in one block within 30 days after retirement which is the
time previously elected by the Executive under the Prior
Agreement. Notwithstanding the foregoing, if the Executive is
required to be separately reported in CoorsTek's annual proxy
statement, the issuance of CoorsTek Stock to the Executive shall
be effected no earlier than the first day of the calendar year in
which CoorsTek's deduction with respect to the CoorsTek Stock
issued is not limited by Code (S) 162(m).
6.2 (a) Upon a "change in control" (as defined in the CoorsTek, Inc.
Stock Option and Incentive Plan), the Executive shall be issued a
number of shares of CoorsTek Stock, pursuant to the CoorsTek,
Inc. Stock Option
3
<PAGE>
and Incentive Plan, equal to the number of his CoorsTek stock
units. The shares shall be issued immediately after the change in
control.
(b) If all or any portion of the capital stock or assets of
CoorsTek are disposed of and if, as a result of the disposition
and immediately after the disposition, the Executive is not
employed by CoorsTek, a subsidiary of CoorsTek, or an affiliate
of CoorsTek, the Executive's unvested CoorsTek stock units shall
become fully vested without regard to the Executive's age and
years of service. The Executive shall be issued a number of
shares of CoorsTek Stock, pursuant to the CoorsTek Stock Option
and Incentive Plan, equal to the number of his CoorsTek stock
units. The CoorsTek Stock shall be issued immediately after the
disposition. If, however, immediately after the disposition, the
Executive becomes employed by CoorsTek, a subsidiary of CoorsTek,
or an affiliate of CoorsTek, the Executive's unvested CoorsTek
stock units shall not become fully vested as a result of the
disposition, but shall continue to vest according to Section 4 of
this Amended Agreement.
6.3 The Company shall issue irrevocable instructions to the Company's
transfer agent to issue certificates to the Executive for a
number of shares of CoorsTek Stock equal to the number of vested
CoorsTek stock units on the 15th calendar day after the Executive
terminates employment. Notwithstanding the foregoing, if the
Executive is required to be separately reported in CoorsTek's
annual proxy statement, the issuance of CoorsTek Stock to the
Executive shall be effected no earlier than the first day of the
calendar year in which CoorsTek's deduction with respect to the
CoorsTek Stock issued is not limited by Code (S) 162(m). The day
on which the Company issues the irrevocable instructions shall be
the day on which the CoorsTek Stock shall be valued for purposes
of determining the Executive's taxable compensation unless, based
on all the facts and circumstances, the Committee (as defined in
Section 11.3 below) determines that the trading prices on that
day do not adequately reflect CoorsTek Stock's fair market value
in which case the Committee shall determine how the Stock shall
be valued.
6.4 If the Executive dies before payment of the amount due under this
Amended Agreement is completed, the amount remaining shall be
paid to the Executive's beneficiary as set forth in the
Executive's Beneficiary Designation designated under the Prior
Agreement and attached as Appendix A. The Executive may change
his Beneficiary Designation at any time and from time to time
without the consent of any previously designated beneficiary. If
the Executive dies after termination of employment, the
irrevocable instructions shall be given to the transfer agent at
the time provided in Section 6.3. If necessary, the transfer
agent
4
<PAGE>
shall be given follow-up instructions to issue the certificate in
the name of the Executive's beneficiary.
6.6 The Executive shall not have any rights as a stockholder with
respect to any shares of CoorsTek Stock represented by a CoorsTek
stock unit until the Executive becomes the holder of record of
such CoorsTek Stock, and no adjustments shall be made for
dividends or other distributions or other rights as to which
there is a record date preceding the date the Executive becomes
the holder of record of the CoorsTek Stock.
7. Unfunded General Obligation of the Company. The amounts payable under
------------------------------------------
this Amended Agreement are unfunded general obligations of CoorsTek.
CoorsTek shall not be required to fund its obligations under this
Amended Agreement in any manner, and the Executive shall have no right
or interest in any asset of CoorsTek, but shall be only an unsecured
general creditor of CoorsTek with respect to all amounts due in
accordance with the provisions of this Amended Agreement. Nothing
contained in this Amended Agreement and no action taken pursuant to
the provisions of this Amended Agreement shall create or be construed
to create a trust of any kind, or fiduciary relationship between
CoorsTek and the Executive, or any other person.
8. No Assignment. Neither the Executive nor his beneficiary shall have
-------------
any right to assign, transfer, pledge, encumber, or dispose of the
right to receive payments under this Amended Agreement and any attempt
to so anticipate, alienate, sell transfer, assign, pledge, encumber or
charge prior to such receipt shall be void. CoorsTek shall not be
liable in any manner for or subject to the debts, contracts,
liabilities, engagements or torts of any person entitled to the
payment of any amounts under this Amended Agreement.
9. Withholding of Applicable Taxes. All payments hereunder shall be
-------------------------------
subject to withholding of all applicable taxes and such amounts shall
be withheld from amounts payable hereunder, whether to the Executive
or his beneficiary. The Executive may elect to satisfy the
withholding obligation with CoorsTek Stock, pursuant to the CoorsTek,
Inc. Stock Option and Incentive Plan.
10. Amendment. This Amended Agreement may be amended, altered or revoked
---------
only by a written instrument executed by CoorsTek and the Executive.
11. Miscellaneous Provisions.
------------------------
11.1 Effect on Other Benefit Plans. Any payments under this Amended
-----------------------------
Agreement shall not be deemed salary or other compensation
received by or payable to the Executive for the purpose of
computing benefits to which the Executive may be entitled under
any other pension plan, benefit plan or other similar arrangement
of CoorsTek for the benefit of its employees.
5
<PAGE>
11.2 No Contract of Employment. This Amended Agreement shall not be
-------------------------
construed as a contract of employment nor does it restrict the
right of CoorsTek to discharge the Executive for cause or for any
other reason or the right of the Executive to terminate his
employment with CoorsTek.
11.3 Compensation Committee to Administer Amended Agreement. The
------------------------------------------------------
Compensation Committee (the "Committee") of the Board of
Directors of CoorsTek shall administer and interpret this Amended
Agreement and no member of the Committee shall be liable to any
person for any action taken or omitted with respect to the
interpretation and administration of this Amended Agreement
unless attributable to the Committee member's own willful
misconduct or gross negligence.
11.4 Committee May Grant Additional Stock Units and Options. If the
------------------------------------------------------
Executive receives a large salary increase as part of a promotion
or otherwise, the Committee may, in its sole discretion, grant
additional CoorsTek stock units and options as part of this
Amended Agreement if it believes such an increase in stock units
and options is justified.
11.5 Replacement of Prior Agreement. This Amended Agreement shall
------------------------------
replace the Prior Agreement in its entirety and rescinds all
obligations under the Prior Agreement. This Amended Agreement
contains the entire agreement of the parties hereto with respect
to the subject matter of this Amended Agreement.
11.6 Interpretive Rules. The headings and underlined section titles
------------------
are included solely for convenience of reference, and shall have
no significance in the interpretation of this Amended Agreement.
Where appropriate in this Amended Agreement, words used in the
singular shall include the plural and words used in the masculine
shall include the feminine. If any provision of this Amended
Agreement is illegal and invalid for any reason, such illegality
or invalidity shall not affect the remaining provisions. On the
contrary, such remaining provisions shall be fully severable, and
this Amended Agreement shall be construed and enforced as if such
illegal or invalid provision never had been a part of this
Amended Agreement.
11.7 ACX. ACX is a party to this Amended Agreement solely for the
---
purpose of effecting the amendment and replacement of the Prior
Agreement, in its entirety, by this Amended Agreement.
11.8 Governing Law. This Amended Agreement shall be construed in
-------------
accordance with and administered under the laws of the State of
Colorado.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended Agreement
this 9th day of December, 1999, to be effective as of the effective date of
the spin-off.
ACX TECHNOLOGIES, INC.
By: /s/ Jill B.W. Sisson
--------------------
Jill B.W. Sisson
Title: Secretary
---------
COORSTEK, INC.
By: /s/ Katherine A. Resler
-----------------------
Katherine A. Resler
Title: Secretary
---------
EXECUTIVE
/s/ Joseph Coors, Jr.
---------------------
Joseph Coors, Jr.
7
<PAGE>
EMPLOYMENT AGREEMENT
This agreement is between CoorsTek, Inc. ("Coors" or "CTI") and John K.
Coors ("Executive"), and shall be effective as of September 1, 1999 (the
"Effective Date").
1. Appointment. Executive shall serve as CTI's President or in such
-- -----------
position(s) as CTI's Chief Executive Officer or Board of Directors (the "Board")
shall in their sole discretion designate from time to time. Executive shall at
all times faithfully and to the best of his abilities and experience, and in
accordance with the standards and ethics of the business in which CTI is
engaged, perform all duties that may be required of him by this agreement, CTI's
policies and procedures, and the directives of CTI's Board and Chief Executive
Officer.
2. Compensation.
-- ------------
Salary and Salary Review. Executive's base salary shall be $300,000
per year, payable in equal installments in accordance with Coor's standard
payroll practice, less customary or legally required withholdings and any
setoffs necessary to satisfy any debt owed by Executive to CTI.
a. Annual Bonus. Executive shall participate in such bonus programs
as Coors may from time to time make available to its executive employees.
b. Stock Options. Executive shall participate in such equity plans
as CTI may from time to time make available to its executive employees.
3. Fringe benefits.
-- ---------------
a. Insurance. Executive and his dependents shall be eligible for
coverage under the group insurance plans made available from time to time to
CTI's executive and management employees. The premiums for the coverage of
Executive and his dependents under that plan shall be paid pursuant to the
formula in place for other executive and management employees covered by CTI's
group insurance plans.
b. Vehicle Allowance and Miscellaneous Benefits. Coors shall
provide Executive with an allowance of $18,000 per year, payable in equal
installments at the same time Executive's salary installments are paid, and
shall receive any additional fringe benefits that other CTI executive or
management employees may from time to time receive.
c. Expenses. Subject to CTI's policies and procedures for the
reimbursement of business expenses incurred by its executive and management
employees, CTI shall reimburse Executive for all reasonable and necessary
expenses incurred by Executive in connection with his performance of his duties
under this agreement.
4. Paid Leave. During each year of Executive's continuous, full-time
-- ----------
employment, he shall earn 25 days of paid vacation time per year. This paid
leave shall be subject to the terms and conditions of any Coors' vacation plan
or policy that may from time to time apply to CTI's executive employees.
1
<PAGE>
5. Conflicting Activities. During the term of this agreement, Executive
-- ----------------------
shall not engage in any activity that conflicts with, appears to conflict with,
or is detrimental or appears to be detrimental to Coor's best interests, as
determined by CTI in its sole discretion.
6. Source of Payments. All payments to be made to Executive under this
-- ------------------
agreement shall be paid from Coor's general funds. No special or separate fund
shall be established and no other segregation of assets shall be made to assure
payment. Neither this agreement nor any action taken hereunder shall be
construed to create a trust of any kind. To the extent that any person has any
right to receive payments from CTI under this agreement, that right shall be no
greater that the right of any unsecured creditor of Coors.
7. Relationship Between this Agreement and Other Coors Publications. In
-- ----------------------------------------------------------------
the event of any conflict between any term of this agreement and any CTI
contract, policy, procedure, guideline or other publication, the terms of this
agreement shall control.
8. Term and Termination.
-- --------------------
a. Term. The term of this agreement shall be 3 years.
b. Termination by Consent. This agreement may be terminated at any
time by the parties' mutual agreement, expressed in writing.
c. Termination Without Cause.
i. CTI may in its sole discretion terminate this agreement at
any time without cause. If CTI does so, after Executive executes a legal
release in the form attached to this agreement, as that legal release may be
modified or amended from time to time to ensure a final, complete and
enforceable release of all claims that Executive has or may have against CTI
relating to or arising in any way from Executive's employment with CTI, and
provided that Executive does not thereafter revoke that legal release as
permitted by its terms, CTI shall pay Executive severance compensation equal to
the greater of the amount that would be payable to Executive pursuant to
paragraph 2 for the remainder of the term of this Agreement OR 12 months of
Executive's base salary under paragraph 2, above, in a lump-sum, less legally
required withholdings, no later than thirty days after the termination date. In
addition, CTI shall pay Executive up to $25,000 in outplacement services
provided to Executive by a third-party outplacement consultant or consulting
service. Executive shall reasonably select the outplacement provider and
contract for outplacement services, and shall forward invoices for outplacement
services to CTI, which shall promptly pay the invoiced amount directly to the
outplacement provider.
ii. If CTI terminates this agreement at any time without cause
under this subparagraph, pays Executive all salary and vacation compensation
earned and unpaid as of the termination date, and offers to pay Executive
severance compensation in the amount and on the terms specified above, Coor's
acts in doing so shall be in complete accord and satisfaction of any claim that
Executive has or may at any time have for compensation or payments of any kind
from CTI arising from or relating in whole or part to Executive's employment
with CTI and/or this
2
<PAGE>
agreement.
d. Termination for Cause. CTI may terminate this agreement
effective immediately, with Coor's only obligation being the payment of salary
and accrued, unused vacation compensation earned as of the date of termination
and without liability for severance compensation of any kind, if Executive
violates any term of this agreement or commits a material violation of any CTI
policy, procedure or guideline, of which Executive had prior written notice, or
engages in any of the following forms of misconduct: conviction of any felony or
of any misdemeanor involving dishonesty or moral turpitude; theft or misuse of
CTI's property or time; use of alcohol or controlled substances on CTI's
premises or appearing on such premises while intoxicated or under the influence
of drugs not prescribed by a physician, or after having abused prescribed
medications; illegal use of any controlled substance; discriminatory or
harassing behavior, whether or not illegal under federal, state or local law;
willful misconduct; or falsifying any document or making any false or misleading
statement relating to Executive's employment by CTI.
e. Termination for Change of Control. In the event that Executive's
employment is terminated other than for cause, or Executive's total compensation
package and/or responsibilities are substantially reduced, within one year of a
Change of Control as defined in CoorsTek, Inc.'s Stock Option and Incentive
Plan, as that Plan may be amended from time to time, after Executive executes a
legal release in the form attached to this agreement, as that legal release may
be modified or amended from time to time to ensure a final, complete and
enforceable release of all claims that Executive has or may have against CTI
relating to or arising in any way from Executive's employment with CTI, and
provided that Executive does not thereafter revoke that legal release as
permitted by its terms, CTI shall pay Executive severance compensation equal to
24 months of Executive's current base salary, in a lump-sum, less legally
required withholdings, no later than thirty days after the termination date. In
addition, CTI shall pay Executive up to $25,000 in outplacement services
provided to Executive by a third-party outplacement consultant or consulting
service. Executive shall reasonably select the outplacement provider and
contract for outplacement services, and shall forward invoices for outplacement
services to CTI, which shall promptly pay the invoiced amount directly to the
outplacement provider.
9. Successors and Assigns. CTI, its successors and assigns may in their
-- ---------- --- -------
sole discretion assign this agreement to any person or entity, with or without
Executive's consent. This agreement thereafter shall bind, and inure to the
benefit of, CTI's successor or assign. Executive shall not assign either this
agreement or any right or obligation arising thereunder.
10. Miscellaneous.
--- -------------
a. Governing Law. This agreement, and all other disputes or issues
arising from or relating in any way to CTI's relationship with Executive, shall
be governed by the internal laws of the State of Colorado, irrespective of the
choice of law rules of any jurisdiction.
b. Severability. If any court of competent jurisdiction declares any
provision of this agreement invalid or
3
<PAGE>
unenforceable, the remainder of the agreement shall remain fully enforceable. To
the extent that any court concludes that any provision of this agreement is void
or voidable, the court shall reform such provision(s) to render the provision(s)
enforceable, but only to the extent absolutely necessary to render the
provision(s) enforceable.
c. Integration. This agreement constitutes the entire agreement of
the parties and a complete merger of prior negotiations and agreements and,
except as provided in the preceding subparagraph, shall not be modified by word
or deed, except in a writing signed by Executive and CTI's Chief Executive
Officer.
d. Waiver. No provision of this agreement shall be deemed waived,
nor shall there be an estoppel against the enforcement of any such provision,
except by a writing signed by the party charged with the waiver or estoppel.
No waiver shall be deemed continuing unless specifically stated therein, and the
written waiver shall operate only as to the specific term or condition waived,
and not for the future or as to any act other than that specifically waived.
e. Construction. Headings in this agreement are for convenience
only and shall not control the meaning of this agreement. Whenever applicable,
masculine and neutral pronouns shall equally apply to the feminine genders; the
singular shall include the plural and the plural shall include the singular.
The parties have reviewed and understand this agreement, and each has had a
full opportunity to negotiate the agreement's terms and to consult with counsel
of their own choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
agreement should be construed against the agreement's drafter, and agree that
this agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
f. Disputes. Any action arising from or relating any way to this
agreement, or otherwise arising from or relating to Executive's employment with
CTI, shall be tried only in the state or federal courts situated in Denver,
Colorado. The parties consent to jurisdiction and venue in those courts to the
greatest extent possible under law.
EXECUTIVE COORSTEK, INC.
/s/ John K. Coors By: /s/ Joseph Coors, Jr.
________________________________ ____________________________
John K. Coors Joseph Coors, Jr.
As its: Chief Executive Officer
Date: 9/1/99 Date: 9/1/99
_____________________ _____________________
4
<PAGE>
LEGAL RELEASE
This Legal Release ("Agreement") is between John K. Coors ("Executive") and
CoorsTek, Inc., its subsidiaries, affiliates and predecessors, and their
respective officers, directors, employees, agents, representatives and insurers
(collectively "CTI").
1. Executive acknowledges that CTI has offered to provide Executive the
severance compensation (the "Benefit") specified by the employment contract
between CTI and Executive (the "Employment Contract"), in part in order to
resolve all claims that Executive has or may have against CTI, and that
Executive understands the terms and conditions of the Benefit.
2. Executive agrees that he wishes to receive the Benefit, that his decision
to do so is entirely voluntary, that he has not been pressured into accepting
the Benefit, and that he has enough information about the Benefit to decide
whether to sign this Agreement. If, for any reason, Executive believes that the
his acceptance of the Benefit is not entirely voluntary, or if he believes that
he does not have enough information, then he should not sign this Agreement.
3. Executive agrees that by signing this Agreement he will give up his right
to bring any legal claim against CTI of any nature, including all claims
relating in any way, directly or indirectly, to Executive's employment
relationship with CTI, including his separation from employment. Executive
agrees that this Agreement is intended to be interpreted in the broadest
possible manner in favor of CTI, including all actual or potential legal claims
that Executive has or may have against CTI, except as specifically provided
otherwise in this Agreement. Specifically, Executive agrees that he fully and
forever releases all of his legal rights and claims against CTI, whether or not
presently known to him, including future legal rights and claims, if based in
whole or part on acts or omissions occurring before Executive delivers this
signed Agreement to CTI, in any way relating to Executive's employment with CTI,
including his separation from employment, except for his right to the Benefit,
his vested rights, if any, in any CTI-sponsored pension plan, and his rights
under COBRA, if any, to continued participation, at his expense, in certain
employee benefit plans sponsored by CTI. Executive agrees that the legal rights
and claims that he is giving up include, but are not limited to, his rights, if
any, under all federal, state and local statutes, rules and regulations that
prohibit discrimination on the basis of gender, race, national origin, religion,
disability and age, such as the Age Discrimination in Employment Act of 1987,
Title VII of the Civil Rights Act of 1964, as amended ("Title VII"), the
Rehabilitation Act of 1973, the Americans With Disabilities Act, the Family and
Medical Leave Act, the Equal Pay Act, and any other federal, state or local
civil rights statute or ordinance that applies or may apply to Executive or CTI,
as well as all common law rights and claims, such as breach of contract, express
or implied, tort, whether negligent or intentional, wrongful discharge,
defamation, infliction of emotional distress, and any claim for fraud, omission
or misrepresentation concerning the Benefit. Executive also states and agrees
that he has not experienced any illness, injury, or disability relating to or
arising in whole or part from his employment with CTI that is or may be
compensable under the worker's compensation laws of any state, and that he will
not file a worker's compensation claim asserting the existence of any such
illness, injury, or disability.
1
<PAGE>
4. Executive agrees that the Benefit that he is accepting by signing this
Agreement has value to him, that he would not be entitled to the Benefit without
signing this Agreement, that he will receive the Benefit in exchange for the
benefit that will accrue to CTI from Executive's execution of this Agreement,
and that when CTI pays him the Benefit, CTI will withhold all applicable
federal, state and local taxes.
5. Executive agrees that the only benefit that he is to receive by signing
this Agreement is the Benefit, and that in signing this Agreement he did not
rely on any information, oral or written, from anyone other than the information
set forth in this Agreement and the Employment Contract, and the advice, if any,
of Executive's counsel.
6. Executive agrees that, if he brings any kind of legal claim against CTI
that he has given up by signing this Agreement, then he will be violating this
Agreement and therefore must pay all legal fees, other costs and expenses
incurred by CTI in defending against all such claims.
7. Executive represents that he has not previously assigned or transferred any
of the legal rights and claims that he has given up by signing this Agreement,
and agrees that this Agreement also binds all persons who might assert a legal
right or claim on his behalf, such as his heirs, personal representatives and
assigns, now and in the future.
8. Executive agrees that CTI will not provide him with recall rights or any
other right to future employment at CTI or any affiliate, and that Executive
will not be given any preference or priority with respect to any future job
openings that may arise. Executive also agrees that if he later is rehired by
CTI, CTI may in its sole discretion require Executive to return to CTI all or a
portion of the Benefit as a condition of the rehiring.
9. Executive understands and agrees that by signing this Agreement he is
giving up the right to sue CTI for age discrimination. Executive has up to
twenty-one days after he receives this Agreement to consider whether to sign
this Agreement. During that time Executive understands that he should consider
whether he wishes to sign this Agreement, and may wish to review the terms of
the Benefit set forth above and in the Employment Contract. Executive agrees
that, after he has signed and delivered this Agreement to CTI, this Agreement
will not be effective or enforceable until the end of a seven (7) day revocation
period beginning the day that Executive delivers this Agreement to CTI, and that
he will not receive the Benefit until that seven-day period has expired. During
that seven-day period, Executive may revoke this Agreement, without reason and
in his sole judgment, but he may do so only by delivering a written statement of
revocation to CTI. If CTI does not receive such a written statement of
revocation by the end of the revocation period, then this Agreement will become
legally enforceable and Executive may not thereafter revoke this Agreement.
10. Executive agrees that: (a) this Agreement and the Employment Contract
constitute the entire agreement between Executive and CTI concerning severance
compensation and the other subjects raised therein, without regard to any other
oral or written information that Executive may have received about this
Agreement; (b) if any part of this Agreement is declared to be unenforceable,
all other provisions of this Agreement shall remain enforceable; and (c) this
Agreement shall be governed by federal law and by the internal law of the State
of Colorado, irrespective of the choice of law rules of any jurisdiction.
2
<PAGE>
Acknowledgment
Executive's signature below acknowledges that he has read this document fully,
that he understands and agrees to its contents, that he understands that it is a
legally binding document, and that he has been advised to consult a lawyer of
his choosing before signing this Agreement, and has had a full and fair
opportunity to do so.
Signed: /s/ John K. Coors
___________________________
John K. Coors
Date: 9/1/99
____________________________
3
<PAGE>
EMPLOYMENT AGREEMENT
This agreement is between CoorsTek, Inc. ("Coors" or "CTI") and Joseph
Coors, Jr. ("Executive"), and shall be effective as of September 1, 1999 (the
"Effective Date").
1. Appointment. Executive shall serve as CTI's Chief Executive Officer or in
- -- -----------
such position(s) as CTI's Board of Directors (the "Board") shall in their sole
discretion designate from time to time. Executive shall at all times faithfully
and to the best of his abilities and experience, and in accordance with the
standards and ethics of the business in which CTI is engaged, perform all duties
that may be required of him by this agreement, CTI's policies and procedures,
and the directives of CTI's Board.
2. Compensation.
- -- ------------
a. Salary and Salary Review. Executive's base salary shall be $510,000
per year, payable in equal installments in accordance with Coor's standard
payroll practice, less customary or legally required withholdings and any
setoffs necessary to satisfy any debt owed by Executive to CTI.
a. Annual Bonus. Executive shall participate in such bonus programs as Coors
may from time to time make available to its executive employees.
b. Stock Options. Executive shall participate in such equity plans
as CTI may from time to time make available to its executive employees.
3. Fringe benefits.
- -- ---------------
a. Insurance. Executive and his dependents shall be eligible for
coverage under the group insurance plans made available from time to time to
CTI's executive and management employees. The premiums for the coverage of
Executive and his dependents under that plan shall be paid pursuant to the
formula in place for other executive and management employees covered by CTI's
group insurance plans.
b. Vehicle Allowance and Miscellaneous Benefits. Coors shall
provide Executive with an allowance of $18,000 per year, payable in equal
installments at the same time Executive's salary installments are paid, and
shall receive any additional fringe benefits that other CTI executive or
management employees may from time to time receive.
c. Expenses. Subject to CTI's policies and procedures for the
reimbursement of business expenses incurred by its executive and management
employees, CTI shall reimburse Executive for all reasonable and necessary
expenses incurred by Executive in connection with his performance of his duties
under this agreement.
4. Paid Leave. During each year of Executive's continuous, full-time
-- ----------
employment, he shall earn 25 days of paid vacation time per year.
This paid leave shall be subject to the terms and conditions of any
Coors' vacation plan or policy that may from time to time apply to
CTI's executive employees.
<PAGE>
5. Conflicting Activities. During the term of this agreement, Executive
-- ----------------------
shall not engage in any activity that conflicts with, appears to conflict with,
or is detrimental or appears to be detrimental to Coor's best interests, as
determined by CTI in its sole discretion.
6. Source of Payments. All payments to be made to Executive under this
-- ------------------
agreement shall be paid from Coor's general funds. No special or separate fund
shall be established and no other segregation of assets shall be made to assure
payment. Neither this agreement nor any action taken hereunder shall be
construed to create a trust of any kind. To the extent that any person has any
right to receive payments from CTI under this agreement, that right shall be no
greater that the right of any unsecured creditor of Coors.
7. Relationship Between this Agreement and Other Coors Publications. In
- -- ----------------------------------------------------------------
the event of any conflict between any term of this agreement and any CTI
contract, policy, procedure, guideline or other publication, the terms of this
agreement shall control.
8. Term and Termination.
- -- --------------------
a. Term. The term of this agreement shall be 3 years.
b. Termination by Consent. This agreement may be terminated at any
time by the parties' mutual agreement, expressed in writing.
c. Termination Without Cause.
i. CTI may in its sole discretion terminate this agreement at
any time without cause. If CTI does so, after Executive executes a legal
release in the form attached to this agreement, as that legal release may be
modified or amended from time to time to ensure a final, complete and
enforceable release of all claims that Executive has or may have against CTI
relating to or arising in any way from Executive's employment with CTI, and
provided that Executive does not thereafter revoke that legal release as
permitted by its terms, CTI shall pay Executive severance compensation equal to
the greater of the amount that would be payable to Executive pursuant to
paragraph 2 for the remainder of the term of this Agreement OR 12 months of
Executive's base salary under paragraph 2, above, in a lump-sum, less legally
required withholdings, no later than thirty days after the termination date. In
addition, CTI shall pay Executive up to $25,000 in outplacement services
provided to Executive by a third-party outplacement consultant or consulting
service. Executive shall reasonably select the outplacement provider and
contract for outplacement services, and shall forward invoices for outplacement
services to CTI, which shall promptly pay the invoiced amount directly to the
outplacement provider.
ii. If CTI terminates this agreement at any time without cause
under this subparagraph, pays Executive all salary and vacation compensation
earned and unpaid as of the termination date, and offers to pay Executive
severance compensation in the amount and on the terms specified above, Coor's
acts in doing so shall be in complete accord and satisfaction of any claim that
Executive has or may at any time have for compensation or payments of any kind
from CTI arising from or relating in whole or part to Executive's employment
with CTI and/or this agreement.
2
<PAGE>
a. d. Termination for Cause. CTI may terminate this agreement
effective immediately, with Coor's only obligation being the payment of salary
and accrued, unused vacation compensation earned as of the date of termination
and without liability for severance compensation of any kind, if Executive
violates any term of this agreement or commits a material violation of any CTI
policy, procedure or guideline, of which Executive had prior written notice, or
engages in any of the following forms of misconduct: conviction of any felony or
of any misdemeanor involving dishonesty or moral turpitude; theft or misuse of
CTI's property or time; use of alcohol or controlled substances on CTI's
premises or appearing on such premises while intoxicated or under the influence
of drugs not prescribed by a physician, or after having abused prescribed
medications; illegal use of any controlled substance; discriminatory or
harassing behavior, whether or not illegal under federal, state or local law;
willful misconduct; or falsifying any document or making any false or misleading
statement relating to Executive's employment by CTI.
e. Termination for Change of Control. In the event that Executive's
employment is terminated other than for cause, or Executive's total compensation
package and/or responsibilities are substantially reduced, within one year of a
Change of Control as defined in CoorsTek, Inc.'s Stock Option and Incentive
Plan, as that Plan may be amended from time to time, after Executive executes a
legal release in the form attached to this agreement, as that legal release may
be modified or amended from time to time to ensure a final, complete and
enforceable release of all claims that Executive has or may have against CTI
relating to or arising in any way from Executive's employment with CTI, and
provided that Executive does not thereafter revoke that legal release as
permitted by its terms, CTI shall pay Executive severance compensation equal to
24 months of Executive's current base salary, in a lump-sum, less legally
required withholdings, no later than thirty days after the termination date. In
addition, CTI shall pay Executive up to $25,000 in outplacement services
provided to Executive by a third-party outplacement consultant or consulting
service. Executive shall reasonably select the outplacement provider and
contract for outplacement services, and shall forward invoices for outplacement
services to CTI, which shall promptly pay the invoiced amount directly to the
outplacement provider.
9. Successors and Assigns. CTI, its successors and assigns may in their
- -- ---------- --- -------
sole discretion assign this agreement to any person or entity, with or without
Executive's consent. This agreement thereafter shall bind, and inure to the
benefit of, CTI's successor or assign. Executive shall not assign either this
agreement or any right or obligation arising thereunder.
10. Miscellaneous.
- --- -------------
a. Governing Law. This agreement, and all other disputes or issues
arising from or relating in any way to CTI's relationship with Executive, shall
be governed by the internal laws of the State of Colorado, irrespective of the
choice of law rules of any jurisdiction.
b. Severability. If any court of competent jurisdiction declares any
provision of this agreement invalid or
unenforceable, the remainder of the
agreement shall remain fully enforceable. To the extent that any court
concludes that any provision of this agreement is void or voidable, the court
shall reform such provision(s) to render the
3
<PAGE>
provision(s) enforceable, but only
to the extent absolutely necessary to render the provision(s) enforceable.
c. Integration. This agreement constitutes the entire agreement of
the parties and a complete merger of prior negotiations and agreements and,
except as provided in the preceding subparagraph, shall not be modified by word
or deed, except in a writing signed by Executive and CTI's Board of Directors.
d. Waiver. No provision of this agreement shall be deemed waived,
nor shall there be an estoppel against the enforcement of any such provision,
except by a writing signed by the party charged with the waiver or estoppel.
No waiver shall be deemed continuing unless specifically stated therein, and the
written waiver shall operate only as to the specific term or condition waived,
and not for the future or as to any act other than that specifically waived.
e. Construction. Headings in this agreement are for convenience
only and shall not control the meaning of this agreement. Whenever applicable,
masculine and neutral pronouns shall equally apply to the feminine genders; the
singular shall include the plural and the plural shall include the singular.
The parties have reviewed and understand this agreement, and each has had a
full opportunity to negotiate the agreement's terms and to consult with counsel
of their own choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
agreement should be construed against the agreement's drafter, and agree that
this agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
f. Disputes. Any action arising from or relating any way to this
agreement, or otherwise arising from or relating to Executive's employment with
CTI, shall be tried only in the state or federal courts situated in Denver,
Colorado. The parties consent to jurisdiction and venue in those courts to the
greatest extent possible under law.
EXECUTIVE COORSTEK, INC.
/s/ Joseph Coors, Jr. By: /s/ John K. Coors
________________________________ ----------------------------
Joseph Coors, Jr. John K. Coors
As its: President
Date: 9/1/99 Date: 9/1/99
_____________________ _____________________
4
<PAGE>
LEGAL RELEASE
This Legal Release ("Agreement") is between Joseph Coors, Jr. ("Executive")
and CoorsTek, Inc., its subsidiaries, affiliates and predecessors, and their
respective officers, directors, employees, agents, representatives and insurers
(collectively "CTI").
1. Executive acknowledges that CTI has offered to provide Executive the
severance compensation (the "Benefit") specified by the employment contract
between CTI and Executive (the "Employment Contract"), in part in order to
resolve all claims that Executive has or may have against CTI, and that
Executive understands the terms and conditions of the Benefit.
2. Executive agrees that he wishes to receive the Benefit, that his decision
to do so is entirely voluntary, that he has not been pressured into accepting
the Benefit, and that he has enough information about the Benefit to decide
whether to sign this Agreement. If, for any reason, Executive believes that the
his acceptance of the Benefit is not entirely voluntary, or if he believes that
he does not have enough information, then he should not sign this Agreement.
3. Executive agrees that by signing this Agreement he will give up his right
to bring any legal claim against CTI of any nature, including all claims
relating in any way, directly or indirectly, to Executive's employment
relationship with CTI, including his separation from employment. Executive
agrees that this Agreement is intended to be interpreted in the broadest
possible manner in favor of CTI, including all actual or potential legal claims
that Executive has or may have against CTI, except as specifically provided
otherwise in this Agreement. Specifically, Executive agrees that he fully and
forever releases all of his legal rights and claims against CTI, whether or not
presently known to him, including future legal rights and claims, if based in
whole or part on acts or omissions occurring before Executive delivers this
signed Agreement to CTI, in any way relating to Executive's employment with CTI,
including his separation from employment, except for his right to the Benefit,
his vested rights, if any, in any CTI-sponsored pension plan, and his rights
under COBRA, if any, to continued participation, at his expense, in certain
employee benefit plans sponsored by CTI. Executive agrees that the legal rights
and claims that he is giving up include, but are not limited to, his rights, if
any, under all federal, state and local statutes, rules and regulations that
prohibit discrimination on the basis of gender, race, national origin, religion,
disability and age, such as the Age Discrimination in Employment Act of 1987,
Title VII of the Civil Rights Act of 1964, as amended ("Title VII"), the
Rehabilitation Act of 1973, the Americans With Disabilities Act, the Family and
Medical Leave Act, the Equal Pay Act, and any other federal, state or local
civil rights statute or ordinance that applies or may apply to Executive or CTI,
as well as all common law rights and claims, such as breach of contract, express
or implied, tort, whether negligent or intentional, wrongful discharge,
defamation, infliction of emotional distress, and any claim for fraud, omission
or misrepresentation concerning the Benefit. Executive also states and agrees
that he has not experienced any illness, injury, or disability relating to or
arising in whole or part from his employment with CTI that is or may be
compensable under the worker's compensation laws of any state, and that he will
not file a worker's compensation claim asserting the existence of any such
illness, injury, or disability.
1
<PAGE>
4. Executive agrees that the Benefit that he is accepting by signing this
Agreement has value to him, that he would not be entitled to the Benefit without
signing this Agreement, that he will receive the Benefit in exchange for the
benefit that will accrue to CTI from Executive's execution of this Agreement,
and that when CTI pays him the Benefit, CTI will withhold all applicable
federal, state and local taxes.
5. Executive agrees that the only benefit that he is to receive by signing
this Agreement is the Benefit, and that in signing this Agreement he did not
rely on any information, oral or written, from anyone other than the information
set forth in this Agreement and the Employment Contract, and the advice, if any,
of Executive's counsel.
6. Executive agrees that, if he brings any kind of legal claim against CTI
that he has given up by signing this Agreement, then he will be violating this
Agreement and therefore must pay all legal fees, other costs and expenses
incurred by CTI in defending against all such claims.
7. Executive represents that he has not previously assigned or transferred any
of the legal rights and claims that he has given up by signing this Agreement,
and agrees that this Agreement also binds all persons who might assert a legal
right or claim on his behalf, such as his heirs, personal representatives and
assigns, now and in the future.
8. Executive agrees that CTI will not provide him with recall rights or any
other right to future employment at CTI or any affiliate, and that Executive
will not be given any preference or priority with respect to any future job
openings that may arise. Executive also agrees that if he later is rehired by
CTI, CTI may in its sole discretion require Executive to return to CTI all or a
portion of the Benefit as a condition of the rehiring.
9. Executive understands and agrees that by signing this Agreement he is
giving up the right to sue CTI for age discrimination. Executive has up to
twenty-one days after he receives this Agreement to consider whether to sign
this Agreement. During that time Executive understands that he should consider
whether he wishes to sign this Agreement, and may wish to review the terms of
the Benefit set forth above and in the Employment Contract. Executive agrees
that, after he has signed and delivered this Agreement to CTI, this Agreement
will not be effective or enforceable until the end of a seven (7) day revocation
period beginning the day that Executive delivers this Agreement to CTI, and that
he will not receive the Benefit until that seven-day period has expired. During
that seven-day period, Executive may revoke this Agreement, without reason and
in his sole judgment, but he may do so only by delivering a written statement of
revocation to CTI. If CTI does not receive such a written statement of
revocation by the end of the revocation period, then this Agreement will become
legally enforceable and Executive may not thereafter revoke this Agreement.
10. Executive agrees that: (a) this Agreement and the Employment Contract
constitute the entire agreement between Executive and CTI concerning severance
compensation and the other subjects raised therein, without regard to any other
oral or written information that Executive may have received about this
Agreement; (b) if any part of this Agreement is declared to be unenforceable,
all other provisions of this Agreement shall remain enforceable; and (c) this
Agreement shall be governed by federal law and by the internal law of the State
of Colorado, irrespective of the choice of law rules of any jurisdiction.
2
<PAGE>
Acknowledgment
Executive's signature below acknowledges that he has read this document fully,
that he understands and agrees to its contents, that he understands that it is a
legally binding document, and that he has been advised to consult a lawyer of
his choosing before signing this Agreement, and has had a full and fair
opportunity to do so.
Signed: /s/ Joseph Coors, Jr.
-------------------------
Joseph Coors, Jr.
Date: 9/1/99
----------------------
<PAGE>
EMPLOYMENT AGREEMENT
This agreement is between CoorsTek, Inc. ("Coors" or "CTI") and Derek C.
Johnson ("Executive"), and shall be effective as of September 1, 1999 (the
"Effective Date").
1. Appointment. Executive shall serve as CTI's Executive Vice President
-- -----------
of Sales and Marketing and Operations or in such position(s) as CTI's Chief
Executive Officer or Board of Directors (the "Board") shall in their sole
discretion designate from time to time. Executive shall at all times faithfully
and to the best of his abilities and experience, and in accordance with the
standards and ethics of the business in which CTI is engaged, perform all duties
that may be required of him by this agreement, CTI's policies and procedures,
and the directives of CTI's Board and Chief Executive Officer.
2. Compensation.
-- ------------
Salary and Salary Review. Executive's base salary shall be $225,000
per year, payable in equal installments in accordance with Coor's standard
payroll practice, less customary or legally required withholdings and any
setoffs necessary to satisfy any debt owed by Executive to CTI.
a. Annual Bonus. Executive shall participate in such bonus programs
as Coors may from time to time make available to its executive employees.
b. Stock Options. Executive shall participate in such equity plans
as CTI may from time to time make available to its executive employees.
3. Fringe benefits.
-- ---------------
a. Insurance. Executive and his dependents shall be eligible for
coverage under the group insurance plans made available from time to time to
CTI's executive and management employees. The premiums for the coverage of
Executive and his dependents under that plan shall be paid pursuant to the
formula in place for other executive and management employees covered by CTI's
group insurance plans.
b. Vehicle Allowance and Miscellaneous Benefits. Coors shall
provide Executive with an allowance of $18,000 per year, payable in equal
installments at the same time Executive's salary installments are paid, and
shall receive any additional fringe benefits that other CTI executive or
management employees may from time to time receive.
c. Expenses. Subject to CTI's policies and procedures for the
reimbursement of business expenses incurred by its executive and management
employees, CTI shall reimburse Executive for all reasonable and necessary
expenses incurred by Executive in connection with his performance of his duties
under this agreement.
4. Paid Leave. During each year of Executive's continuous, full-
-- ----------
time employment, he shall earn 25 days of paid vacation time per year. This paid
leave shall be subject to the terms and conditions of any Coors' vacation plan
or policy that may from time to time apply to CTI's executive employees.
1
<PAGE>
5. Conflicting Activities. During the term of this agreement, Executive
-- ----------------------
shall not engage in any activity that conflicts with, appears to conflict with,
or is detrimental or appears to be detrimental to Coor's best interests, as
determined by CTI in its sole discretion.
6. Source of Payments. All payments to be made to Executive under this
-- ------------------
agreement shall be paid from Coor's general funds. No special or separate fund
shall be established and no other segregation of assets shall be made to assure
payment. Neither this agreement nor any action taken hereunder shall be
construed to create a trust of any kind. To the extent that any person has any
right to receive payments from CTI under this agreement, that right shall be no
greater that the right of any unsecured creditor of Coors.
7. Relationship Between this Agreement and Other Coors Publications. In
-- ----------------------------------------------------------------
the event of any conflict between any term of this agreement and any CTI
contract, policy, procedure, guideline or other publication, the terms of this
agreement shall control.
8. Term and Termination.
-- --------------------
a. Term. The term of this agreement shall be 3 years.
b. Termination by Consent. This agreement may be terminated at any
time by the parties' mutual agreement, expressed in writing.
c. Termination Without Cause.
i. CTI may in its sole discretion terminate this agreement at
any time without cause. If CTI does so, after Executive executes a legal
release in the form attached to this agreement, as that legal release may be
modified or amended from time to time to ensure a final, complete and
enforceable release of all claims that Executive has or may have against CTI
relating to or arising in any way from Executive's employment with CTI, and
provided that Executive does not thereafter revoke that legal release as
permitted by its terms, CTI shall pay Executive severance compensation equal to
the greater of the amount that would be payable to Executive pursuant to
paragraph 2 for the remainder of the term of this Agreement OR 12 months of
Executive's base salary under paragraph 2, above, in a lump-sum, less legally
required withholdings, no later than thirty days after the termination date. In
addition, CTI shall pay Executive up to $25,000 in outplacement services
provided to Executive by a third-party outplacement consultant or consulting
service. Executive shall reasonably select the outplacement provider and
contract for outplacement services, and shall forward invoices for outplacement
services to CTI, which shall promptly pay the invoiced amount directly to the
outplacement provider.
ii. If CTI terminates this agreement at any time without cause
under this subparagraph, pays Executive all salary and vacation compensation
earned and unpaid as of the termination date, and offers to pay Executive
severance compensation in the amount and on the terms specified above, Coor's
acts in doing so shall be in complete accord and satisfaction of any claim that
Executive has or may at any time have for compensation or payments of any kind
from CTI arising from or relating in whole or part to Executive's employment
with CTI and/or this agreement.
2
<PAGE>
d. Termination for Cause. CTI may terminate this agreement effective
immediately, with Coor's only obligation being the payment of salary and
accrued, unused vacation compensation earned as of the date of termination and
without liability for severance compensation of any kind, if Executive violates
any term of this agreement or commits a material violation of any CTI policy,
procedure or guideline, of which Executive had prior written notice, or engages
in any of the following forms of misconduct: conviction of any felony or of any
misdemeanor involving dishonesty or moral turpitude; theft or misuse of CTI's
property or time; use of alcohol or controlled substances on CTI's premises or
appearing on such premises while intoxicated or under the influence of drugs not
prescribed by a physician, or after having abused prescribed medications;
illegal use of any controlled substance; discriminatory or harassing behavior,
whether or not illegal under federal, state or local law; willful misconduct; or
falsifying any document or making any false or misleading statement relating to
Executive's employment by CTI.
e. Termination for Change of Control. In the event that Executive's
employment is terminated other than for cause, or Executive's total compensation
package and/or responsibilities are substantially reduced, within one year of a
Change of Control as defined in CoorsTek, Inc.'s Stock Option and Incentive
Plan, as that Plan may be amended from time to time, after Executive executes a
legal release in the form attached to this agreement, as that legal release may
be modified or amended from time to time to ensure a final, complete and
enforceable release of all claims that Executive has or may have against CTI
relating to or arising in any way from Executive's employment with CTI, and
provided that Executive does not thereafter revoke that legal release as
permitted by its terms, CTI shall pay Executive severance compensation equal to
24 months of Executive's current base salary, in a lump-sum, less legally
required withholdings, no later than thirty days after the termination date. In
addition, CTI shall pay Executive up to $25,000 in outplacement services
provided to Executive by a third-party outplacement consultant or consulting
service. Executive shall reasonably select the outplacement provider and
contract for outplacement services, and shall forward invoices for outplacement
services to CTI, which shall promptly pay the invoiced amount directly to the
outplacement provider.
9. Successors and Assigns. CTI, its successors and assigns may in their
-- ---------- --- -------
sole discretion assign this agreement to any person or entity, with or without
Executive's consent. This agreement thereafter shall bind, and inure to the
benefit of, CTI's successor or assign. Executive shall not assign either this
agreement or any right or obligation arising thereunder.
10. Miscellaneous.
--- -------------
a. Governing Law. This agreement, and all other disputes or issues
arising from or relating in any way to CTI's relationship with Executive, shall
be governed by the internal laws of the State of Colorado, irrespective of the
choice of law rules of any jurisdiction.
b. Severability. If any court of competent jurisdiction declares any
provision of this agreement invalid or unenforceable, the remainder of the
agreement shall remain fully enforceable. To the extent that any court
concludes that any provision of this agreement is void or voidable, the court
shall reform such provision(s) to render the
3
<PAGE>
provision(s) enforceable, but only to the extent absolutely necessary to render
the provision(s) enforceable.
c. Integration. This agreement constitutes the entire agreement of
the parties and a complete merger of prior negotiations and agreements and,
except as provided in the preceding subparagraph, shall not be modified by word
or deed, except in a writing signed by Executive and CTI's Chief Executive
Officer.
d. Waiver. No provision of this agreement shall be deemed waived,
nor shall there be an estoppel against the enforcement of any such provision,
except by a writing signed by the party charged with the waiver or estoppel.
No waiver shall be deemed continuing unless specifically stated therein, and the
written waiver shall operate only as to the specific term or condition waived,
and not for the future or as to any act other than that specifically waived.
e. Construction. Headings in this agreement are for convenience
only and shall not control the meaning of this agreement. Whenever applicable,
masculine and neutral pronouns shall equally apply to the feminine genders; the
singular shall include the plural and the plural shall include the singular.
The parties have reviewed and understand this agreement, and each has had a
full opportunity to negotiate the agreement's terms and to consult with counsel
of their own choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
agreement should be construed against the agreement's drafter, and agree that
this agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
f. Disputes. Any action arising from or relating any way to this
agreement, or otherwise arising from or relating to Executive's employment with
CTI, shall be tried only in the state or federal courts situated in Denver,
Colorado. The parties consent to jurisdiction and venue in those courts to the
greatest extent possible under law.
EXECUTIVE COORSTEK, INC.
/s/ Derek C. Johnson By: /s/ Joseph Coors, Jr.
________________________________ ____________________________
Derek C. Johnson Joseph Coors, Jr.
As its: Chief Executive Officer
Date: 9/1/99 Date: 9/1/99
_____________________ _____________________
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LEGAL RELEASE
This Legal Release ("Agreement") is between Derek C. Johnson ("Executive")
and CoorsTek, Inc., its subsidiaries, affiliates and predecessors, and their
respective officers, directors, employees, agents, representatives and insurers
(collectively "CTI").
1. Executive acknowledges that CTI has offered to provide Executive the
severance compensation (the "Benefit") specified by the employment contract
between CTI and Executive (the "Employment Contract"), in part in order to
resolve all claims that Executive has or may have against CTI, and that
Executive understands the terms and conditions of the Benefit.
2. Executive agrees that he wishes to receive the Benefit, that his decision
to do so is entirely voluntary, that he has not been pressured into accepting
the Benefit, and that he has enough information about the Benefit to decide
whether to sign this Agreement. If, for any reason, Executive believes that the
his acceptance of the Benefit is not entirely voluntary, or if he believes that
he does not have enough information, then he should not sign this Agreement.
3. Executive agrees that by signing this Agreement he will give up his right
to bring any legal claim against CTI of any nature, including all claims
relating in any way, directly or indirectly, to Executive's employment
relationship with CTI, including his separation from employment. Executive
agrees that this Agreement is intended to be interpreted in the broadest
possible manner in favor of CTI, including all actual or potential legal claims
that Executive has or may have against CTI, except as specifically provided
otherwise in this Agreement. Specifically, Executive agrees that he fully and
forever releases all of his legal rights and claims against CTI, whether or not
presently known to him, including future legal rights and claims, if based in
whole or part on acts or omissions occurring before Executive delivers this
signed Agreement to CTI, in any way relating to Executive's employment with CTI,
including his separation from employment, except for his right to the Benefit,
his vested rights, if any, in any CTI-sponsored pension plan, and his rights
under COBRA, if any, to continued participation, at his expense, in certain
employee benefit plans sponsored by CTI. Executive agrees that the legal rights
and claims that he is giving up include, but are not limited to, his rights, if
any, under all federal, state and local statutes, rules and regulations that
prohibit discrimination on the basis of gender, race, national origin, religion,
disability and age, such as the Age Discrimination in Employment Act of 1987,
Title VII of the Civil Rights Act of 1964, as amended ("Title VII"), the
Rehabilitation Act of 1973, the Americans With Disabilities Act, the Family and
Medical Leave Act, the Equal Pay Act, and any other federal, state or local
civil rights statute or ordinance that applies or may apply to Executive or CTI,
as well as all common law rights and claims, such as breach of contract, express
or implied, tort, whether negligent or intentional, wrongful discharge,
defamation, infliction of emotional distress, and any claim for fraud, omission
or misrepresentation concerning the Benefit. Executive also states and agrees
that he has not experienced any illness, injury, or disability relating to or
arising in whole or part from his employment with CTI that is or may be
compensable under the worker's compensation laws of any state, and that he will
not file a worker's compensation claim asserting the existence of any such
illness, injury, or disability.
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4. Executive agrees that the Benefit that he is accepting by signing this
Agreement has value to him, that he would not be entitled to the Benefit without
signing this Agreement, that he will receive the Benefit in exchange for the
benefit that will accrue to CTI from Executive's execution of this Agreement,
and that when CTI pays him the Benefit, CTI will withhold all applicable
federal, state and local taxes.
5. Executive agrees that the only benefit that he is to receive by signing
this Agreement is the Benefit, and that in signing this Agreement he did not
rely on any information, oral or written, from anyone other than the information
set forth in this Agreement and the Employment Contract, and the advice, if any,
of Executive's counsel.
6. Executive agrees that, if he brings any kind of legal claim against CTI
that he has given up by signing this Agreement, then he will be violating this
Agreement and therefore must pay all legal fees, other costs and expenses
incurred by CTI in defending against all such claims.
7. Executive represents that he has not previously assigned or transferred any
of the legal rights and claims that he has given up by signing this Agreement,
and agrees that this Agreement also binds all persons who might assert a legal
right or claim on his behalf, such as his heirs, personal representatives and
assigns, now and in the future.
8. Executive agrees that CTI will not provide him with recall rights or any
other right to future employment at CTI or any affiliate, and that Executive
will not be given any preference or priority with respect to any future job
openings that may arise. Executive also agrees that if he later is rehired by
CTI, CTI may in its sole discretion require Executive to return to CTI all or a
portion of the Benefit as a condition of the rehiring.
9. Executive understands and agrees that by signing this Agreement he is
giving up the right to sue CTI for age discrimination. Executive has up to
twenty-one days after he receives this Agreement to consider whether to sign
this Agreement. During that time Executive understands that he should consider
whether he wishes to sign this Agreement, and may wish to review the terms of
the Benefit set forth above and in the Employment Contract. Executive agrees
that, after he has signed and delivered this Agreement to CTI, this Agreement
will not be effective or enforceable until the end of a seven (7) day revocation
period beginning the day that Executive delivers this Agreement to CTI, and that
he will not receive the Benefit until that seven-day period has expired. During
that seven-day period, Executive may revoke this Agreement, without reason and
in his sole judgment, but he may do so only by delivering a written statement of
revocation to CTI. If CTI does not receive such a written statement of
revocation by the end of the revocation period, then this Agreement will become
legally enforceable and Executive may not thereafter revoke this Agreement.
10. Executive agrees that: (a) this Agreement and the Employment Contract
constitute the entire agreement between Executive and CTI concerning severance
compensation and the other subjects raised therein, without regard to any other
oral or written information that Executive may have received about this
Agreement; (b) if any part of this Agreement is declared to be unenforceable,
all other provisions of this Agreement shall remain enforceable; and (c) this
Agreement shall be governed by federal law and by the internal law of the State
of Colorado, irrespective of the choice of law rules of any jurisdiction.
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Acknowledgment
Executive's signature below acknowledges that he has read this document fully,
that he understands and agrees to its contents, that he understands that it is a
legally binding document, and that he has been advised to consult a lawyer of
his choosing before signing this Agreement, and has had a full and fair
opportunity to do so.
Signed: /s/ Derek C. Johnson
______________________________________
Derek C. Johnson
Date: 9/1/99
________________________________________
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EXHIBIT 10.12.
EMPLOYMENT AGREEMENT
This agreement is between CoorsTek, Inc. ("Coors" or "CTI") and Larry D.
Murphy ("Executive"), and shall be effective as of October 1, 1999 (the
"Effective Date").
1. Appointment. Executive shall serve as CTI's Executive Vice President
of Strategic Initiatives or in such position(s) as CTI's Chief Executive Officer
or Board of Directors (the "Board") shall in their sole discretion designate
from time to time. Executive shall at all times faithfully and to the best of
his abilities and experience, and in accordance with the standards and ethics of
the business in which CTI is engaged, perform all duties that may be required of
him by this agreement, CTI's policies and procedures, and the directives of
CTI's Board and Chief Executive Officer.
2. Compensation.
Salary and Salary Review. Executive's starting base salary shall be
$402,000 per year, payable in equal installments in accordance with Coor's
standard payroll practice, less customary or legally required withholdings and
any setoffs necessary to satisfy any debt owed by Executive to CTI.
a. Annual Bonus. Executive shall participate in such bonus programs
as Coors may from time to time make available to its executive employees.
b. New Officer Bonus. On Executive's first day of employment, CTI
shall pay Executive a New Officer Bonus of $25,000 in a lump sum, less customary
or legally required withholdings.
c. Stock Options. In connection with Executive's employment during
calendar 1999, CTI shall grant Executive 85,000 non-qualified stock options (the
"Option"). The price at which each share of stock covered by the Option may be
purchased shall be the Fair Market Value of the stock as defined under the ACX
Technologies, Inc. Equity Incentive Plan (the "Plan") on October 1, 1999 (the
"Grant Date"). The Option granted shall contain the standard terms and
provisions required by the Plan, together with a provision for vesting dates as
follows: 50% shall vest if ACX Technologies, Inc.'s ("ACX") stock price is
$20.00 per share on average for 30 consecutive trading days; the remaining 50%
(100% in total) shall vest if the ACX stock price is $25.00 per share on average
for 30 consecutive trading days. On the third anniversary from the Grant Date
any increment not yet exercisable as a result of the preceding sentence shall
become fully exercisable. The Option once vested shall be exercisable until the
tenth anniversary of the Grant Date, at which time the Option shall expire.
Thereafter, Executive shall participate in such equity plans as CTI may from
time to time make available to its executive employees.
3. Fringe benefits.
a. Insurance. Executive and his dependents shall be eligible for
coverage under the group insurance plans made available from time to time to
CTI's executive and management employees, beginning on October 1, 1999. The
premiums for the coverage of Executive and his dependents under that plan shall
be paid pursuant to the
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formula in place for other executive and management employees covered by CTI's
group insurance plans.
b. Vehicle Allowance and Miscellaneous Benefits. Coors shall provide
Executive with an allowance of $18,000 per year, payable in equal installments
at the same time Executive's salary installments are paid, and shall receive any
additional fringe benefits that other CTI executive or management employees may
from time to time receive.
c. Expenses. Subject to CTI's policies and procedures for the
reimbursement of business expenses incurred by its executive and management
employees, CTI shall reimburse Executive for all reasonable and necessary
expenses incurred by Executive in connection with his performance of his duties
under this agreement.
4. Paid Leave. During each year of Executive's continuous, full-time
employment, he shall earn 25 days of paid vacation time per year. This paid
leave shall be subject to the terms and conditions of any Coors' vacation plan
or policy that may from time to time apply to CTI's executive employees.
5. Living Allowance. Executive shall receive a one-time living allowance
of $100,000 for his expenses in commuting to the Golden, Colorado, area. This
allowance is in lieu of reimbursement for any relocation expenses that Executive
might incur.
6. Conflicting Activities. During the term of this agreement, Executive
shall not engage in any activity that conflicts with, appears to conflict with,
or is detrimental or appears to be detrimental to Coor's best interests, as
determined by CTI in its sole discretion.
7. Source of Payments. All payments to be made to Executive under this
agreement shall be paid from Coor's general funds. No special or separate fund
shall be established and no other segregation of assets shall be made to assure
payment. Neither this agreement nor any action taken hereunder shall be
construed to create a trust of any kind. To the extent that any person has any
right to receive payments from CTI under this agreement, that right shall be no
greater that the right of any unsecured creditor of Coors.
8. Relationship Between this Agreement and Other Coors Publications. In
the event of any conflict between any term of this agreement and any CTI
contract, policy, procedure, guideline or other publication, the terms of this
agreement shall control.
9. Term and Termination.
a. Term. The term of this agreement shall be 3 years.
b. Termination by Consent. This agreement may be terminated at any
time by the parties' mutual agreement, expressed in writing.
c. Termination Without Cause.
i. CTI may in its sole discretion terminate this agreement at
any time without cause. If CTI does so, after Executive executes a legal
release in the form
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attached to this agreement, as that legal release may be modified or amended
from time to time to ensure a final, complete and enforceable release of all
claims that Executive has or may have against CTI relating to or arising in any
way from Executive's employment with CTI, and provided that Executive does not
thereafter revoke that legal release as permitted by its terms, CTI shall pay
Executive severance compensation equal to the greater of the amount that would
be payable to Executive pursuant to paragraph 2(a) for the remainder of the term
of this Agreement OR 12 months of Executive's base salary under paragraph 2(a),
above, in a lump-sum, less legally required withholdings, no later than thirty
days after the termination date. In addition, CTI shall pay Executive up to
$25,000 in outplacement services provided to Executive by a third-party
outplacement consultant or consulting service. Executive shall reasonably select
the outplacement provider and contract for outplacement services, and shall
forward invoices for outplacement services to CTI, which shall promptly pay the
invoiced amount directly to the outplacement provider.
ii. If CTI terminates this agreement at any time without cause under
this subparagraph, pays Executive all salary and vacation compensation earned
and unpaid as of the termination date, and offers to pay Executive severance
compensation in the amount and on the terms specified above, Coor's acts in
doing so shall be in complete accord and satisfaction of any claim that
Executive has or may at any time have for compensation or payments of any kind
from CTI arising from or relating in whole or part to Executive's employment
with CTI and/or this agreement.
d. Termination for Cause. CTI may terminate this agreement effective
immediately, with Coor's only obligation being the payment of salary and
accrued, unused vacation compensation earned as of the date of termination and
without liability for severance compensation of any kind, if Executive violates
any term of this agreement or commits a material violation of any CTI policy,
procedure or guideline, of which Executive had prior written notice, or engages
in any of the following forms of misconduct: conviction of any felony or of any
misdemeanor involving dishonesty or moral turpitude; theft or misuse of CTI's
property or time; use of alcohol or controlled substances on CTI's premises or
appearing on such premises while intoxicated or under the influence of drugs not
prescribed by a physician, or after having abused prescribed medications;
illegal use of any controlled substance; discriminatory or harassing behavior,
whether or not illegal under federal, state or local law; willful misconduct; or
falsifying any document or making any false or misleading statement relating to
Executive's employment by CTI.
e. Termination for Change of Control. In the event that Executive's
employment is terminated other than for cause, or Executive's total compensation
package and/or responsibilities are substantially reduced, within one year of a
Change of Control as defined in CoorsTek, Inc.'s Stock Option and Incentive
Plan, as that Plan may be amended from time to time, after Executive executes a
legal release in the form attached to this agreement, as that legal release may
be modified or amended from time to time to ensure a final, complete and
enforceable release of all claims that Executive has or may have against CTI
relating to or arising in any way from Executive's employment with CTI, and
provided that Executive does not thereafter revoke that legal release as
permitted by its terms, CTI shall pay Executive severance compensation equal to
24 months of Executive's base salary under paragraph 2(a), above, in a lump-sum,
less legally required withholdings, no later than thirty days after the
termination date. In addition, CTI shall pay Executive up to
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$25,000 in outplacement services provided to Executive by a third-party
outplacement consultant or consulting service. Executive shall reasonably select
the outplacement provider and contract for outplacement services, and shall
forward invoices for outplacement services to CTI, which shall promptly pay the
invoiced amount directly to the outplacement provider.
10. Successors and Assigns. CTI, its successors and assigns may in their
sole discretion assign this agreement to any person or entity, with or without
Executive's consent. This agreement thereafter shall bind, and inure to the
benefit of, CTI's successor or assign. Executive shall not assign either this
agreement or any right or obligation arising thereunder.
11. Miscellaneous.
a. Governing Law. This agreement, and all other disputes or issues
arising from or relating in any way to CTI's relationship with Executive, shall
be governed by the internal laws of the State of Colorado, irrespective of the
choice of law rules of any jurisdiction.
b. Severability. If any court of competent jurisdiction declares
any provision of this agreement invalid or unenforceable, the remainder of the
agreement shall remain fully enforceable. To the extent that any court concludes
that any provision of this agreement is void or voidable, the court shall reform
such provision(s) to render the provision(s) enforceable, but only to the extent
absolutely necessary to render the provision(s) enforceable.
c. Integration. This agreement constitutes the entire agreement of
the parties and a complete merger of prior negotiations and agreements and,
except as provided in the preceding subparagraph, shall not be modified by word
or deed, except in a writing signed by Executive and CTI's Chief Executive
Officer.
d. Waiver. No provision of this agreement shall be deemed waived,
nor shall there be an estoppel against the enforcement of any such provision,
except by a writing signed by the party charged with the waiver or estoppel.
No waiver shall be deemed continuing unless specifically stated therein, and the
written waiver shall operate only as to the specific term or condition waived,
and not for the future or as to any act other than that specifically waived.
e. Construction. Headings in this agreement are for convenience
only and shall not control the meaning of this agreement. Whenever applicable,
masculine and neutral pronouns shall equally apply to the feminine genders; the
singular shall include the plural and the plural shall include the singular.
The parties have reviewed and understand this agreement, and each has had a
full opportunity to negotiate the agreement's terms and to consult with counsel
of their own choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
agreement should be construed against the agreement's drafter, and agree that
this agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
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f. Disputes. Any action arising from or relating any way to this
agreement, or otherwise arising from or relating to Executive's employment with
CTI, shall be tried only in the state or federal courts situated in Denver,
Colorado. The parties consent to jurisdiction and venue in those courts to the
greatest extent possible under law.
EXECUTIVE COORSTEK, INC.
/s/ Larry D. Murphy By: /s/ Joseph Coors, Jr.
________________________________ ____________________________
Larry D. Murphy Joseph Coors, Jr.
As its: Chief Executive Officer
Date: 10/1/99 Date: 10/1/99
_____________________ _____________________
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LEGAL RELEASE
This Legal Release ("Agreement") is between Larry D. Murphy ("Executive")
and CoorsTek, Inc., its subsidiaries, affiliates and predecessors, and their
respective officers, directors, employees, agents, representatives and insurers
(collectively "CTI").
1. Executive acknowledges that CTI has offered to provide Executive the
severance compensation (the "Benefit") specified by the employment contract
between CTI and Executive (the "Employment Contract"), in part in order to
resolve all claims that Executive has or may have against CTI, and that
Executive understands the terms and conditions of the Benefit.
2. Executive agrees that he wishes to receive the Benefit, that his decision
to do so is entirely voluntary, that he has not been pressured into accepting
the Benefit, and that he has enough information about the Benefit to decide
whether to sign this Agreement. If, for any reason, Executive believes that the
his acceptance of the Benefit is not entirely voluntary, or if he believes that
he does not have enough information, then he should not sign this Agreement.
3. Executive agrees that by signing this Agreement he will give up his right
to bring any legal claim against CTI of any nature, including all claims
relating in any way, directly or indirectly, to Executive's employment
relationship with CTI, including his separation from employment. Executive
agrees that this Agreement is intended to be interpreted in the broadest
possible manner in favor of CTI, including all actual or potential legal claims
that Executive has or may have against CTI, except as specifically provided
otherwise in this Agreement. Specifically, Executive agrees that he fully and
forever releases all of his legal rights and claims against CTI, whether or not
presently known to him, including future legal rights and claims, if based in
whole or part on acts or omissions occurring before Executive delivers this
signed Agreement to CTI, in any way relating to Executive's employment with CTI,
including his separation from employment, except for his right to the Benefit,
his vested rights, if any, in any CTI-sponsored pension plan, and his rights
under COBRA, if any, to continued participation, at his expense, in certain
employee benefit plans sponsored by CTI. Executive agrees that the legal rights
and claims that he is giving up include, but are not limited to, his rights, if
any, under all federal, state and local statutes, rules and regulations that
prohibit discrimination on the basis of gender, race, national origin, religion,
disability and age, such as the Age Discrimination in Employment Act of 1987,
Title VII of the Civil Rights Act of 1964, as amended ("Title VII"), the
Rehabilitation Act of 1973, the Americans With Disabilities Act, the Family and
Medical Leave Act, the Equal Pay Act, and any other federal, state or local
civil rights statute or ordinance that applies or may apply to Executive or CTI,
as well as all common law rights and claims, such as breach of contract, express
or implied, tort, whether negligent or intentional, wrongful discharge,
defamation, infliction of emotional distress, and any claim for fraud, omission
or misrepresentation concerning the Benefit. Executive also states and agrees
that he has not experienced any illness, injury, or disability relating to or
arising in whole or part from his employment with CTI that is or may be
compensable under the worker's compensation laws of any state, and that he will
not file a worker's compensation claim asserting the existence of any such
illness, injury, or disability.
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4. Executive agrees that the Benefit that he is accepting by signing this
Agreement has value to him, that he would not be entitled to the Benefit without
signing this Agreement, that he will receive the Benefit in exchange for the
benefit that will accrue to CTI from Executive's execution of this Agreement,
and that when CTI pays him the Benefit, CTI will withhold all applicable
federal, state and local taxes.
5. Executive agrees that the only benefit that he is to receive by signing
this Agreement is the Benefit, and that in signing this Agreement he did not
rely on any information, oral or written, from anyone other than the information
set forth in this Agreement and the Employment Contract, and the advice, if any,
of Executive's counsel.
6. Executive agrees that, if he brings any kind of legal claim against CTI
that he has given up by signing this Agreement, then he will be violating this
Agreement and therefore must pay all legal fees, other costs and expenses
incurred by CTI in defending against all such claims.
7. Executive represents that he has not previously assigned or transferred any
of the legal rights and claims that he has given up by signing this Agreement,
and agrees that this Agreement also binds all persons who might assert a legal
right or claim on his behalf, such as his heirs, personal representatives and
assigns, now and in the future.
8. Executive agrees that CTI will not provide him with recall rights or any
other right to future employment at CTI or any affiliate, and that Executive
will not be given any preference or priority with respect to any future job
openings that may arise. Executive also agrees that if he later is rehired by
CTI, CTI may in its sole discretion require Executive to return to CTI all or a
portion of the Benefit as a condition of the rehiring.
9. Executive understands and agrees that by signing this Agreement he is
giving up the right to sue CTI for age discrimination. Executive has up to
twenty-one days after he receives this Agreement to consider whether to sign
this Agreement. During that time Executive understands that he should consider
whether he wishes to sign this Agreement, and may wish to review the terms of
the Benefit set forth above and in the Employment Contract. Executive agrees
that, after he has signed and delivered this Agreement to CTI, this Agreement
will not be effective or enforceable until the end of a seven (7) day revocation
period beginning the day that Executive delivers this Agreement to CTI, and that
he will not receive the Benefit until that seven-day period has expired. During
that seven-day period, Executive may revoke this Agreement, without reason and
in his sole judgment, but he may do so only by delivering a written statement of
revocation to CTI. If CTI does not receive such a written statement of
revocation by the end of the revocation period, then this Agreement will become
legally enforceable and Executive may not thereafter revoke this Agreement.
10. Executive agrees that: (a) this Agreement and the Employment Contract
constitute the entire agreement between Executive and CTI concerning severance
compensation and the other subjects raised therein, without regard to any other
oral or written information that Executive may have received about this
Agreement; (b) if any part of this Agreement is declared to be unenforceable,
all other provisions of this Agreement shall remain enforceable; and (c) this
Agreement shall be governed by federal law and by the internal law of the State
of Colorado, irrespective of the choice of law rules of any jurisdiction.
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Acknowledgment
Executive's signature below acknowledges that he has read this document fully,
that he understands and agrees to its contents, that he understands that it is a
legally binding document, and that he has been advised to consult a lawyer of
his choosing before signing this Agreement, and has had a full and fair
opportunity to do so.
Signed: /s/ Larry D. Murphy
________________________________
Larry D. Murphy
Date: 10/1/99
___________________________________
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EMPLOYMENT AGREEMENT
This agreement is between CoorsTek, Inc. ("Coors" or "CTI") and Joseph G.
Warren, Jr. ("Executive"), and shall be effective as of August 1, 1999 (the
"Effective Date").
1. Appointment. Executive shall serve as CTI's Chief Financial Officer
or in such position(s) as CTI's Chief Executive Officer or Board of Directors
(the "Board") shall in their sole discretion designate from time to time.
Executive shall at all times faithfully and to the best of his abilities and
experience, and in accordance with the standards and ethics of the business in
which CTI is engaged, perform all duties that may be required of him by this
agreement, CTI's policies and procedures, and the directives of CTI's Board and
Chief Executive Officer.
2. Compensation.
a. Salary and Salary Review. Executive's starting base salary shall
be $240,000 per year, payable in equal installments in accordance with Coor's
standard payroll practice, less customary or legally required withholdings and
any setoffs necessary to satisfy any debt owed by Executive to CTI.
a. Annual Bonus. In connection with Executive's employment during
calendar 1999, he shall be paid a pro-rated bonus calculated pursuant to Coor's
officer annual incentive program. Thereafter, Executive shall participate in
such bonus programs as Coors may from time to time make available to its
executive employees.
b. New Officer Bonus. On Executive's first day of employment, CTI
shall pay Executive a New Officer Bonus of $25,000 in a lump sum, less customary
or legally required withholdings.
c. Stock Options. In connection with Executive's employment during
calendar 1999, CTI shall grant Executive 50,000 non-qualified stock options (the
"Option"). The price at which each share of stock covered by the Option may be
purchased shall be the Fair Market Value of the stock as defined under the ACX
Technologies, Inc. Equity Incentive Plan (the "Plan") on August 31, 1999 (the
"Grant Date"). The Option granted shall contain the standard terms and
provisions required by the Plan, together with a provision for vesting dates as
follows: 50% shall vest if ACX Technologies, Inc.'s ("ACX") stock price is
$20.00 per share on average for 30 consecutive trading days; the remaining 50%
(100% in total) shall vest if the ACX stock price is $25.00 per share on average
for 30 consecutive trading days. On the third anniversary from the Grant Date
any increment not yet exercisable as a result of the preceding sentence shall
become fully exercisable. The Option once vested shall be exercisable until the
tenth anniversary of the Grant Date, at which time the Option shall expire.
Thereafter, Executive shall participate in such equity plans as CTI may from
time to time make available to its executive employees.
3. Fringe benefits.
a. Insurance. Executive and his dependents shall be eligible for
coverage under the group insurance plans made available from time to time to
CTI's executive and management employees, beginning on August 1, 1999. The
premiums for
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the coverage of Executive and his dependents under that plan shall be paid
pursuant to the formula in place for other executive and management employees
covered by CTI's group insurance plans.
b. Vehicle Allowance and Miscellaneous Benefits. Coors shall provide
Executive with an allowance of $18,000 per year, payable in equal installments
at the same time Executive's salary installments are paid, and shall receive any
additional fringe benefits that other CTI executive or management employees may
from time to time receive.
c. Expenses. Subject to CTI's policies and procedures for the
reimbursement of business expenses incurred by its executive and management
employees, CTI shall reimburse Executive for all reasonable and necessary
expenses incurred by Executive in connection with his performance of his duties
under this agreement.
4. Paid Leave. During each year of Executive's continuous, full-time
employment, he shall earn 25 days of paid vacation time per year. This paid
leave shall be subject to the terms and conditions of any Coors' vacation plan
or policy that may from time to time apply to CTI's executive employees.
5. Relocation Expenses. Executive shall receive $85,000 for his expenses
in relocating to the Golden, Colorado, area, including expenses, such as the
payment of any agent's or broker's fee, incurred by Executive in connection with
the sale of his home. CTI may in its sole discretion provide Executive with
additional reimbursement under this paragraph if Executive documents, in a
manner satisfactory to CTI, that his expenses exceed the benefit provided.
6. Conflicting Activities. During the term of this agreement, Executive
shall not engage in any activity that conflicts with, appears to conflict with,
or is detrimental or appears to be detrimental to Coor's best interests, as
determined by CTI in its sole discretion.
7. Source of Payments. All payments to be made to Executive under this
agreement shall be paid from Coor's general funds. No special or separate fund
shall be established and no other segregation of assets shall be made to assure
payment. Neither this agreement nor any action taken hereunder shall be
construed to create a trust of any kind. To the extent that any person has any
right to receive payments from CTI under this agreement, that right shall be no
greater that the right of any unsecured creditor of Coors.
8. Relationship Between this Agreement and Other Coors Publications. In
the event of any conflict between any term of this agreement and any CTI
contract, policy, procedure, guideline or other publication, the terms of this
agreement shall control.
9. Term and Termination.
a. Term. The term of this agreement shall be 3 years.
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b. Termination by Consent. This agreement may be terminated at any time
by the parties' mutual agreement, expressed in writing.
c. Termination Without Cause.
i. CTI may in its sole discretion terminate this agreement at any
time without cause. If CTI does so, after Executive executes a legal release in
the form attached to this agreement, as that legal release may be modified or
amended from time to time to ensure a final, complete and enforceable release of
all claims that Executive has or may have against CTI relating to or arising in
any way from Executive's employment with CTI, and provided that Executive does
not thereafter revoke that legal release as permitted by its terms, CTI shall
pay Executive severance compensation equal to the greater of the amount that
would be payable to Executive pursuant to paragraph 2(a) for the remainder of
the term of this Agreement OR 12 months of Executive's base salary under
paragraph 2(a), above, in a lump-sum, less legally required withholdings, no
later than thirty days after the termination date. In addition, CTI shall pay
Executive up to $25,000 in outplacement services provided to Executive by a
third-party outplacement consultant or consulting service. Executive shall
reasonably select the outplacement provider and contract for outplacement
services, and shall forward invoices for outplacement services to CTI, which
shall promptly pay the invoiced amount directly to the outplacement provider.
ii. If CTI terminates this agreement at any time without cause under
this subparagraph, pays Executive all salary and vacation compensation earned
and unpaid as of the termination date, and offers to pay Executive severance
compensation in the amount and on the terms specified above, Coor's acts in
doing so shall be in complete accord and satisfaction of any claim that
Executive has or may at any time have for compensation or payments of any kind
from CTI arising from or relating in whole or part to Executive's employment
with CTI and/or this agreement.
d. Termination for Cause. CTI may terminate this agreement
effective immediately, with Coor's only obligation being the payment of salary
and accrued, unused vacation compensation earned as of the date of termination
and without liability for severance compensation of any kind, if Executive
violates any term of this agreement or commits a material violation of any CTI
policy, procedure or guideline, of which Executive had prior written notice, or
engages in any of the following forms of misconduct: conviction of any felony or
of any misdemeanor involving dishonesty or moral turpitude; theft or misuse of
CTI's property or time; use of alcohol or controlled substances on CTI's
premises or appearing on such premises while intoxicated or under the influence
of drugs not prescribed by a physician, or after having abused prescribed
medications; illegal use of any controlled substance; discriminatory or
harassing behavior, whether or not illegal under federal, state or local law;
willful misconduct; or falsifying any document or making any false or misleading
statement relating to Executive's employment by CTI.
e. Termination for Change of Control. In the event that Executive's
employment is terminated other than for cause, or Executive's total compensation
package and/or responsibilities are substantially reduced,
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within one year of a Change of Control as defined in CoorsTek, Inc.'s Stock
Option and Incentive Plan, as that Plan may be amended from time to time, after
Executive executes a legal release in the form attached to this agreement, as
that legal release may be modified or amended from time to time to ensure a
final, complete and enforceable release of all claims that Executive has or may
have against CTI relating to or arising in any way from Executive's employment
with CTI, and provided that Executive does not thereafter revoke that legal
release as permitted by its terms, CTI shall pay Executive severance
compensation equal to 24 months of Executive's base salary under paragraph 2(a),
above, in a lump-sum, less legally required withholdings, no later than thirty
days after the termination date. In addition, CTI shall pay Executive up to
$25,000 in outplacement services provided to Executive by a third-party
outplacement consultant or consulting service. Executive shall reasonably select
the outplacement provider and contract for outplacement services, and shall
forward invoices for outplacement services to CTI, which shall promptly pay the
invoiced amount directly to the outplacement provider.
10. Successors and Assigns. CTI, its successors and assigns may in their
sole discretion assign this agreement to any person or entity, with or without
Executive's consent. This agreement thereafter shall bind, and inure to the
benefit of, CTI's successor or assign. Executive shall not assign either this
agreement or any right or obligation arising thereunder.
11. Miscellaneous.
a. Governing Law. This agreement, and all other disputes or issues
arising from or relating in any way to CTI's relationship with Executive, shall
be governed by the internal laws of the State of Colorado, irrespective of the
choice of law rules of any jurisdiction.
b. Severability. If any court of competent jurisdiction declares any
provision of this agreement invalid or unenforceable, the remainder of the
agreement shall remain fully enforceable. To the extent that any court
concludes that any provision of this agreement is void or voidable, the court
shall reform such provision(s) to render the provision(s) enforceable, but only
to the extent absolutely necessary to render the provision(s) enforceable.
c. Integration. This agreement constitutes the entire agreement of
the parties and a complete merger of prior negotiations and agreements and,
except as provided in the preceding subparagraph, shall not be modified by word
or deed, except in a writing signed by Executive and CTI's Chief Executive
Officer.
d. Waiver. No provision of this agreement shall be deemed waived,
nor shall there be an estoppel against the enforcement of any such provision,
except by a writing signed by the party charged with the waiver or estoppel. No
waiver shall be deemed continuing unless specifically stated therein, and the
written waiver shall operate only as to the specific term or condition waived,
and not for the future or as to any act other than that specifically waived.
e. Construction. Headings in this agreement
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are for convenience only and shall not control the meaning of this agreement.
Whenever applicable, masculine and neutral pronouns shall equally apply to the
feminine genders; the singular shall include the plural and the plural shall
include the singular. The parties have reviewed and understand this agreement,
and each has had a full opportunity to negotiate the agreement's terms and to
consult with counsel of their own choosing. Therefore, the parties expressly
waive all applicable common law and statutory rules of construction that any
provision of this agreement should be construed against the agreement's drafter,
and agree that this agreement and all amendments thereto shall be construed as a
whole, according to the fair meaning of the language used.
f. Disputes. Any action arising from or relating any way to this
agreement, or otherwise arising from or relating to Executive's employment with
CTI, shall be tried only in the state or federal courts situated in Denver,
Colorado. The parties consent to jurisdiction and venue in those courts to the
greatest extent possible under law.
EXECUTIVE COORSTEK, INC.
/s/ Joseph G. Warren, Jr. By: /s/ Joseph Coors, Jr.
________________________________ ____________________________
Joseph G. Warren, Jr. Joseph Coors, Jr.
As its: Chief Executive Officer
Date: 8/1/99 Date: 8/1/99
_____________________ _____________________
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LEGAL RELEASE
This Legal Release ("Agreement") is between Joseph G. Warren, Jr.
("Executive") and CoorsTek, Inc., its subsidiaries, affiliates and predecessors,
and their respective officers, directors, employees, agents, representatives and
insurers (collectively "CTI").
1. Executive acknowledges that CTI has offered to provide Executive the
severance compensation (the "Benefit") specified by the employment contract
between CTI and Executive (the "Employment Contract"), in part in order to
resolve all claims that Executive has or may have against CTI, and that
Executive understands the terms and conditions of the Benefit.
2. Executive agrees that he wishes to receive the Benefit, that his decision
to do so is entirely voluntary, that he has not been pressured into accepting
the Benefit, and that he has enough information about the Benefit to decide
whether to sign this Agreement. If, for any reason, Executive believes that the
his acceptance of the Benefit is not entirely voluntary, or if he believes that
he does not have enough information, then he should not sign this Agreement.
3. Executive agrees that by signing this Agreement he will give up his right
to bring any legal claim against CTI of any nature, including all claims
relating in any way, directly or indirectly, to Executive's employment
relationship with CTI, including his separation from employment. Executive
agrees that this Agreement is intended to be interpreted in the broadest
possible manner in favor of CTI, including all actual or potential legal claims
that Executive has or may have against CTI, except as specifically provided
otherwise in this Agreement. Specifically, Executive agrees that he fully and
forever releases all of his legal rights and claims against CTI, whether or not
presently known to him, including future legal rights and claims, if based in
whole or part on acts or omissions occurring before Executive delivers this
signed Agreement to CTI, in any way relating to Executive's employment with CTI,
including his separation from employment, except for his right to the Benefit,
his vested rights, if any, in any CTI-sponsored pension plan, and his rights
under COBRA, if any, to continued participation, at his expense, in certain
employee benefit plans sponsored by CTI. Executive agrees that the legal rights
and claims that he is giving up include, but are not limited to, his rights, if
any, under all federal, state and local statutes, rules and regulations that
prohibit discrimination on the basis of gender, race, national origin, religion,
disability and age, such as the Age Discrimination in Employment Act of 1987,
Title VII of the Civil Rights Act of 1964, as amended ("Title VII"), the
Rehabilitation Act of 1973, the Americans With Disabilities Act, the Family and
Medical Leave Act, the Equal Pay Act, and any other federal, state or local
civil rights statute or ordinance that applies or may apply to Executive or CTI,
as well as all common law rights and claims, such as breach of contract, express
or implied, tort, whether negligent or intentional, wrongful discharge,
defamation, infliction of emotional distress, and any claim for fraud, omission
or misrepresentation concerning the Benefit. Executive also states and agrees
that he has not experienced any illness, injury, or disability relating to or
arising in whole or part from his employment with CTI that is or may be
compensable under the worker's compensation laws of any state, and that he will
not file a worker's compensation claim asserting the existence of any such
illness, injury, or disability.
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4. Executive agrees that the Benefit that he is accepting by signing this
Agreement has value to him, that he would not be entitled to the Benefit without
signing this Agreement, that he will receive the Benefit in exchange for the
benefit that will accrue to CTI from Executive's execution of this Agreement,
and that when CTI pays him the Benefit, CTI will withhold all applicable
federal, state and local taxes.
5. Executive agrees that the only benefit that he is to receive by signing
this Agreement is the Benefit, and that in signing this Agreement he did not
rely on any information, oral or written, from anyone other than the information
set forth in this Agreement and the Employment Contract, and the advice, if any,
of Executive's counsel.
6. Executive agrees that, if he brings any kind of legal claim against CTI
that he has given up by signing this Agreement, then he will be violating this
Agreement and therefore must pay all legal fees, other costs and expenses
incurred by CTI in defending against all such claims.
7. Executive represents that he has not previously assigned or transferred any
of the legal rights and claims that he has given up by signing this Agreement,
and agrees that this Agreement also binds all persons who might assert a legal
right or claim on his behalf, such as his heirs, personal representatives and
assigns, now and in the future.
8. Executive agrees that CTI will not provide him with recall rights or any
other right to future employment at CTI or any affiliate, and that Executive
will not be given any preference or priority with respect to any future job
openings that may arise. Executive also agrees that if he later is rehired by
CTI, CTI may in its sole discretion require Executive to return to CTI all or a
portion of the Benefit as a condition of the rehiring.
9. Executive understands and agrees that by signing this Agreement he is
giving up the right to sue CTI for age discrimination. Executive has up to
twenty-one days after he receives this Agreement to consider whether to sign
this Agreement. During that time Executive understands that he should consider
whether he wishes to sign this Agreement, and may wish to review the terms of
the Benefit set forth above and in the Employment Contract. Executive agrees
that, after he has signed and delivered this Agreement to CTI, this Agreement
will not be effective or enforceable until the end of a seven (7) day revocation
period beginning the day that Executive delivers this Agreement to CTI, and that
he will not receive the Benefit until that seven-day period has expired. During
that seven-day period, Executive may revoke this Agreement, without reason and
in his sole judgment, but he may do so only by delivering a written statement of
revocation to CTI. If CTI does not receive such a written statement of
revocation by the end of the revocation period, then this Agreement will become
legally enforceable and Executive may not thereafter revoke this Agreement.
10. Executive agrees that: (a) this Agreement and the Employment Contract
constitute the entire agreement between Executive and CTI concerning severance
compensation and the other subjects raised therein, without regard to any other
oral or written information that Executive may have received about this
Agreement; (b) if any part of this Agreement is declared to be unenforceable,
all other provisions of this Agreement shall remain enforceable; and (c) this
Agreement shall be governed by federal law and by the internal law of the State
of Colorado, irrespective of the choice of law rules of any jurisdiction.
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Acknowledgment
Executive's signature below acknowledges that he has read this document fully,
that he understands and agrees to its contents, that he understands that it is a
legally binding document, and that he has been advised to consult a lawyer of
his choosing before signing this Agreement, and has had a full and fair
opportunity to do so.
Signed: /s/ Joseph G. Warren, Jr.
_____________________________________
Joseph G. Warren, Jr.
Date: 8/1/99
_______________________________________
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Exhibit 21
CoorsTek, Inc.
List of Subsidiaries
State/Country
Name of Company of Incorporation
- --------------- ----------------
Alumina Ceramics, Inc. Arkansas
Coors Ceramics Electronics, Ltd. Scotland
Coors Ceramicon Designs, Ltd. Colorado
Coors Technical Ceramics Company Tennessee
Coors Wear Products, Inc. Colorado
Edwards Enterprises California
Wilbanks International, Inc. Oregon
