FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For Quarter Ended June 30, 1998
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Commission File Number: 0-2085
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BETZDEARBORN INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-1503731
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4636 Somerton Road, Trevose, PA 19053
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 355-3300
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months [or for such shorter period that the
registrant was required to file such report(s)], and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
29,785,003 Common Shares outstanding as of August 7, 1998.
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<PAGE>
BETZDEARBORN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Sales $320.0 $322.4 $619.3 $628.8
Operating Costs and Expenses:
Cost of products sold 133.1 128.9 254.3 251.1
Selling, research and administrative 148.4 140.7 292.6 277.7
Integration/restructuring -- 8.7 -- 15.3
------ ------ ------ ------
281.5 278.3 546.9 544.1
OPERATING EARNINGS 38.5 44.1 72.4 84.7
Other Income (Expense):
Interest (9.9) (11.6) (19.7) (23.0)
Investment and other (0.1) 0.2 (0.2) (0.2)
------ ------ ------ ------
(10.0) (11.4) (19.9) (23.2)
------ ------ ------ ------
EARNINGS BEFORE INCOME TAXES 28.5 32.7 52.5 61.5
Income Taxes 10.1 11.6 18.6 21.8
------ ------ ------ ------
NET EARNINGS $ 18.4 $ 21.1 $ 33.9 $ 39.7
====== ====== ====== ======
Net earnings per Common Share:
Basic $ .58 $ .69 $ 1.06 $ 1.30
====== ====== ====== ======
Diluted $ .55 $ .64 $ 1.01 $ 1.21
====== ====== ====== ======
Cash dividends declared per Common Share $ .38 $ .375 $ .76 $ .75
====== ====== ====== ======
Average number of Common Shares:
Basic 29.5 28.6 29.4 28.5
====== ====== ====== ======
Diluted 32.3 32.0 32.4 31.8
====== ====== ====== ======
</TABLE>
See notes to consolidated financial statements.
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BETZDEARBORN INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 22.7 $ 36.9
Trade accounts receivable, less allowances:
1998 -- $7.0; 1997 -- $7.2 272.9 293.0
Inventories:
Finished products and goods purchased for resale 48.1 49.2
Raw materials 47.6 45.1
-------- --------
95.7 94.3
Income taxes 20.5 19.6
Prepaid expenses and other 29.6 36.2
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TOTAL CURRENT ASSETS 441.4 480.0
PROPERTY, PLANT AND EQUIPMENT -- at cost
Land 50.3 48.9
Buildings 194.6 199.0
Machinery and equipment 578.6 562.4
Construction in progress 38.6 15.8
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862.1 826.1
Less allowance for depreciation (453.5) (424.3)
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408.6 401.8
OTHER ASSETS
Investments and other 20.9 22.8
Goodwill -- net of accumulated amortization:
1998 -- $23.7; 1997 -- $17.8 441.8 447.7
Other intangibles -- net of accumulated amortization:
1998 -- $10.2; 1997 -- $8.8 80.4 81.3
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543.1 551.8
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TOTAL ASSETS $1,393.1 $1,433.6
======== ========
</TABLE>
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BETZDEARBORN INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(In millions, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 64.6 $ 77.7
Payroll and related taxes 34.9 47.7
Notes payable 4.7 26.6
Accrued restructuring costs 12.0 15.9
Other accrued liabilities 38.7 43.7
Income taxes 6.8 7.4
Dividends payable 11.3 11.2
Current portion of long-term debt 1.3 1.3
-------- --------
TOTAL CURRENT LIABILITIES 174.3 231.5
LONG-TERM DEBT -- less portion classified as current 680.1 678.2
OTHER LONG-TERM LIABILITIES
Income taxes 16.4 14.3
Employee benefit plans 57.4 54.5
Other 4.1 2.7
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77.9 71.5
SHAREHOLDERS' EQUITY
Preferred shares, $.10 par value: authorized 1,000,000 shares;
issued 1998 -- 471,751 shares; 1997 -- 475,371 shares 94.4 95.0
Guarantee of related ESOP debt (88.0) (88.6)
Common shares, $.10 par value: authorized -- 250,000,000 shares;
issued 1998 -- 33,630,831 shares; 1997 -- 33,631,330 shares 3.4 3.4
Capital in excess of par value of shares 135.8 131.6
Retained earnings 508.7 501.1
Cost of common shares in treasury: 1998 -- 3,976,208 shares;
1997 -- 4,181,807 shares (149.2) (155.0)
Unearned compensation (4.6) (3.9)
Foreign currency translation adjustments (39.7) (31.2)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 460.8 452.4
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,393.1 $1,433.6
======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
BETZDEARBORN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $33.9 $39.7
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 33.2 32.8
Amortization 7.9 7.5
Compensation and employee benefit plans 4.6 5.4
Changes in operating assets and liabilities,
net of business acquisitions:
Accounts receivable 17.6 (41.9)
Inventories (2.8) (9.0)
Prepaid expenses and other 5.1 (6.2)
Accounts payable and accrued expenses (28.7) (16.2)
----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 70.8 12.1
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (46.0) (30.8)
Proceeds from sales of long-term assets 3.2 6.0
Purchases of businesses and long-term investments (3.5) 0.2
Other, net -- (1.0)
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NET CASH USED IN INVESTING ACTIVITIES (46.3) (25.6)
FINANCING ACTIVITIES
Borrowings under credit facilities 5.8 9.8
Net short-term repayments (21.8) --
Dividends paid (26.3) (25.2)
Proceeds from issuance of common shares,
including treasury shares 5.4 29.5
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NET CASH (USED IN)/PROVIDED BY FINANCING ACTIVITIES (36.9) 14.1
Effect of exchange rate changes on cash (1.8) (1.6)
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DECREASE IN CASH AND CASH EQUIVALENTS (14.2) (1.0)
Cash and Cash Equivalents at Beginning of Year 36.9 38.2
----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $22.7 $37.2
===== =====
</TABLE>
See notes to consolidated financial statements.
6
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes necessary for a fair presentation of
consolidated financial position, consolidated results of operations and
consolidated cash flows in conformity with generally accepted accounting
principles. The foregoing consolidated financial statements include all
adjustments, consisting only of normal recurring accruals, which, in the opinion
of management, are necessary for a fair statement of the results of the interim
periods. Certain amounts in the financial statements for the year ended December
31, 1997 have been reclassified to conform with 1998 classifications.
The Company is required starting in 1998 to report information about
comprehensive income in its annual and interim financial statements. Financial
Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income,"
requires companies to disclose in their annual reports the total, as well as the
components, of comprehensive income and in their interim reports the total
amount. The Company's components of comprehensive income are net income and
foreign currency translation adjustments which totaled to a gain of $25.6
million and $16.5 million for the quarters ended June 30, 1998 and 1997,
respectively, and a gain of $25.4 million and $10.5 million for the first six
months of 1998 and 1997, respectively.
In the fourth quarter of 1997, the Company changed its method of accounting
for business process reengineering costs incurred in connection with its ongoing
major project that combines business process reengineering and information
technology transformation. This accounting change was mandated by the consensus
position of the Financial Accounting Standards Board's Emerging Issues Task
Force (Issue No. 97-13). Effective October 1, 1997, the Company's policy is that
all such costs are expensed as incurred, whereas previously such costs were
capitalized and amortized subsequently. In the fourth quarter of 1997, business
process reengineering costs capitalized through September 30, 1997 were written
off as a cumulative effect type adjustment.
Note 2 - Common Shares Reserved for Stock Plans
At June 30, 1998, 4,986,186 and 425,599 Common Shares were reserved for
possible issuance pursuant to the exercise of stock options and grants under the
Company's Stock Option and Incentive Plans, respectively. An additional 352,785
Common Shares were reserved for purchase through payroll deductions under the
terms of the Employee Stock Purchase Plan. Further, 2,639,000 Common Shares were
reserved for possible conversion of the Series A ESOP Convertible preferred
stock.
Note 3 - Earnings per Share
In compliance with Financial Accounting Standards Board Statement No. 128,
"Earnings per Share," the Company has changed its method of computing earnings
per share and has restated the prior year to conform to the new requirements.
Basic and diluted earnings per share as calculated under Statement 128 are as
follows (in millions, except per share amounts):
7
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<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Basic Earnings per Share:
Net earnings $18.4 $21.1 $33.9 $39.7
Effect of preferred stock dividends, net of taxes (1.4) (1.4) (2.8) (2.8)
----- ----- ----- -----
Net earnings available to common shareholders $17.0 $19.7 $31.1 $36.9
===== ===== ===== =====
Average Common Shares outstanding - basic 29.5 28.6 29.4 28.5
===== ===== ===== =====
Basic Earnings per Common Share $ .58 $ .69 $1.06 $1.30
===== ===== ===== =====
Diluted Earnings per Share:
Net earnings $18.4 $21.1 $33.9 $39.7
Effect of ESOP charge to operations assuming
conversion of Series A ESOP Convertible
Preferred Shares, net of taxes (0.8) (0.6) (1.4) (1.3)
----- ----- ----- -----
Net earnings available to common shareholders $17.6 $20.5 $32.5 $38.4
===== ===== ===== =====
Average Common Shares outstanding - basic 29.5 28.6 29.4 28.5
Effect of dilutive securities:
Contingently issuable shares 0.1 0.2 0.2 0.1
Employee stock options 0.1 0.5 0.2 0.5
Assumed conversion of Series A ESOP Convertible
Preferred Shares 2.6 2.7 2.6 2.7
----- ----- ----- -----
Average Common Shares outstanding - diluted 32.3 32.0 32.4 31.8
===== ===== ===== =====
Diluted Earnings per Common Share $ .55 $ .64 $1.01 $1.21
===== ===== ===== =====
</TABLE>
Note 4 - Subsequent Event - Hercules Merger Agreement
On July 30, 1998, the Company and Hercules Incorporated ("Hercules")
announced that they had entered into an Agreement and Plan of Merger, dated as
of July 30, 1998 (the "Merger Agreement"), pursuant to which a wholly owned
subsidiary of Hercules would be merged with and into the Company (the "Merger"),
with the Company surviving the Merger as a wholly owned subsidiary of Hercules.
In the Merger, all of the Company's Common Shares (including Company Common
Shares received upon conversion of the Company's Series A ESOP Convertible
Preferred Shares) would be converted into the right to receive $72 per share in
cash. In addition, outstanding employee stock options would be cashed out in the
Merger. As a result of the Merger, Hercules will assume all of the Company's
outstanding debt, which is estimated to be approximately $700 million. The
Merger is subject to certain conditions, including approval of the Merger
Agreement and the Merger by the Company's shareholders, and receipt of
regulatory approvals. The Merger is currently expected to be consummated in the
fourth quarter of 1998.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
Introductory Note
On July 30, 1998, the Company and Hercules Incorporated ("Hercules")
announced that they had entered into an Agreement and Plan of Merger, dated as
of July 30, 1998 (the "Merger Agreement"), pursuant to which a wholly owned
subsidiary of Hercules would be merged with and into the Company (the "Merger"),
with the Company surviving the Merger as a wholly owned subsidiary of Hercules.
In the Merger, all of the Company's Common Shares (including Company Common
Shares received upon conversion of the Company's Series A ESOP Convertible
Preferred Shares) would be converted into the right to receive $72 per share in
cash. In addition, outstanding employee stock options would be cashed out in the
Merger. As a result of the Merger, Hercules will assume all of the Company's
outstanding debt, which is estimated to be approximately $700 million. The
Merger is subject to certain conditions, including approval of the Merger
Agreement and the Merger by the Company's shareholders, and receipt of
regulatory approvals. The Merger is currently expected to be consummated in the
fourth quarter of 1998.
The following Management's Discussion and Analysis does not give effect to
the proposed Merger, and, since the Company will become a subsidiary of Hercules
after the Merger, it is not possible to predict the effect of the Merger on the
Company's results of operations or financial condition.
Results of Operations
Net earnings for the quarter declined to $18.4 million from $21.1 million
in 1997 and diluted earnings per share decreased 14% to $0.55 from $0.64. Net
earnings for the first six months of 1998 decreased $5.8 million and diluted
earnings per share declined 17% to $1.01. Excluding integration expense in the
second quarter of 1997, diluted earnings per share decreased 33%. First half net
earnings and diluted earnings per share, excluding integration expenses,
declined 32% and 34%, respectively. The 1998 second quarter and first half
results of operations were unfavorably impacted by the strong U.S. dollar and by
the economic turmoil in the Asia-Pacific region.
Second quarter net sales decreased 1% from $322.4 million in 1997 to $320.0
million in 1998. Changes in average foreign exchange rates used to translate
local currency sales into U.S. dollars caused approximately a $10 million
reduction in reported sales for the second quarter of 1998. U.S. sales decreased
1% over the prior year's second quarter level, while sales outside the U.S.
decreased 1% in U.S. dollars but increased 6% in local currencies. In local
currencies, Canadian sales increased 3%, Latin American sales were up almost
14%, Asia-Pacific sales increased 4%, and European sales increased 5%.
Net sales for the first six months of 1998 decreased 1.5% from $628.8
million in 1997 to $619.3 million in 1998. First half 1998 net sales increased
approximately 2% in local currencies. Net sales within the U.S. were flat, while
sales outside the U.S. declined approximately 4% in U.S. dollars, but increased
approximately 4% in local currencies.
The second quarter results of operations in the Asia-Pacific region were
impacted by the economic conditions in this region. Second quarter U.S. dollar
net sales in the region declined $3.7 million or 19% and the gross profit margin
as a percent of sales dropped approximately 12 percentage points, resulting in a
$2.2 million reduction in operating income compared to the second quarter of
1997. The Company expects to continue to be negatively impacted by business
conditions in the Asia-Pacific region until there is a significant improvement
in local economies. The Company is unable to estimate the timing or rate of
9
<PAGE>
improvement of business conditions in the Asia-Pacific region, but will continue
to monitor and report on this situation.
Worldwide second quarter sales recorded by the Water Management Group
global business unit declined 1% in U.S. dollars but increased in the low
single-digit percentage range in local currencies. Both U.S. and non-U.S. units
recorded sales increases in the low single-digit percentage range in local
currencies over the prior year. First half 1998 Water Management Group sales
declined less than 3% in U.S. dollars and were essentially flat in local
currencies versus the first six months of last year.
The second quarter combined process chemical global business units net
sales were flat in U.S. dollars and rose in the low-single digit range in local
currencies. The U.S. reported a percentage decrease in the low single-digit
range, while units outside the U.S. reported local currency increases in the low
double-digit range. The Paper Process Group, the largest of the three global
process chemical groups, reported a local currency sales growth in the mid
single-digit range. The growth in paper process sales was partially offset by an
upper single-digit local currency sales decrease experienced by the Hydrocarbon
Process Group. The combined process chemicals net sales for the first half of
1998 were also flat in U.S. dollars, but rose in the mid single-digit range in
local currencies.
The Company's gross profit margin decreased from 60.0% of net sales in the
second quarter of 1997 to 58.4% in 1998 and from 60.1% for the six months ended
June 1997 to 58.9% for the 1998 period. These declines are partly due to lower
margins in the Asia-Pacific and Latin American regions principally from higher
costs of raw material imported into these regions which are the result of the
stronger U.S. dollar and pound sterling. Additionally, there were higher than
normal 1998 second quarter distribution costs in the U.S. and Asia. The U.S.
margin was also unfavorably impacted by lower production volumes resulting in
higher manufacturing variances.
Selling, research and administrative expenses, as a percent of net sales,
increased from 43.6% in 1997 to the current quarter's level of 46.3% and from
44.2% in the first half of 1997 to 47.2% in 1998. The increases are partly due
to new hiring after the first quarter of 1997 and expenses associated with the
Company's ongoing information technology transformation projects. For the 1998
second quarter, expenses related to the start-up of the U.S. Refinery Chemical
Team and, new product introduction costs for Dianodic(TM) Plus also contributed
to the higher cost level.
Integration expenses impacted the three and six months ended June 30, 1997
and amounted to $8.7 million and $15.3 million, respectively. These were
associated with the activities of integration teams responsible for the
integration of the Dearborn business acquired on June 28, 1996. Such teams
generally completed their activities in the first half of 1997.
Interest expense declined $1.6 million from the second quarter of 1997 and
$3.2 million on a year to date basis due, in part, to a $70 million decline in
total debt outstanding from the June 30, 1997 level. The decline is also
attributable to the lower interest costs on the Company's revolving credit
indebtedness as a result of the refinancing of this facility on October 20, 1997
as well as lower interest rates.
In April 1998, the Company acquired for cash certain assets of Index
Industries, Inc., a privately held performance additives company. The acquired
assets and related results of operations are included with the Company's
Hydrocarbon Process Group beginning April 1, 1998. This acquisition will be
10
<PAGE>
accounted for using the purchase method of accounting and is not expected to
have a material impact on the Company's results of operations or its capital
resources and liquidity.
Year 2000 Disclosure
The Company is addressing its Year 2000 exposure through cross-functional
teams chartered to identify, evaluate and remediate Year 2000 noncompliant
systems ("Year 2000 Program"). The latest targeted completion date for the
assessment and remediation of all Company systems which could be affected by the
Year 2000 is June 30, 1999 ("Target Completion Date"). At this time substantial
progress has been made on the Year 2000 Program and the Company has not
identified any factors which cause it to anticipate that it will not
substantially complete the Year 2000 Program by the Target Completion Date.
Costs of the Year 2000 Program for 1998 are anticipated to be approximately $3.5
million. The Company does not at present have an estimate of the Year 2000
Program costs for 1999, but it does not expect the costs to be material to the
Company's results of operations or financial condition.
The Company is contacting vendors and other third parties whose Year 2000
compliance may affect the operations of the Company. The Company cannot provide
assurances that its operations will not be affected by the failure of such third
parties to make their systems Year 2000 compliant or by the external environment
in general, due to the complexity of various systems and the lack of
predictability of their respective interactions and capabilities.
Euro Conversion
On January 1, 1999 eleven of the fifteen members of the European Union
("participating countries") are scheduled to establish fixed conversion rates
between their existing sovereign currencies (the "legacy currencies") and the
euro. This is the first stage of a transition process which will result, no
later than July 1, 2002, in the participating countries withdrawing their legacy
currencies, making the euro the sole legal currency of the participating
countries ("euro conversion").
The Company's business and financial systems are expected to be able to
respond to the administrative aspects of the euro conversion and the costs of
making any changes to business and financial systems of the Company are not
expected to be material.
The euro conversion may stimulate cross-border competition by increasing
cross-border price transparency, which could possibly make it more difficult for
the Company to charge different prices for the same products on a
country-by-country basis, even though the Company's costs may vary from country
to country. However, a certain amount of price transparency presently exists
with respect to the Company's products. Accordingly, the Company is unable at
this time to determine the impact, if any, the conversion to the euro will have
on the marketing or selling prices of its products.
Capital Resources and Liquidity
Net cash provided by operating activities increased by $58.7 million
compared to the first half of 1997 mainly due to a $17.6 million decline in
accounts receivable since 1997 year-end compared to a $41.9 million increase in
the first half of 1997. The decline in accounts receivable is primarily
attributable to
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<PAGE>
the lower level of sales recorded in 1998 and to ongoing efforts to reduce
accounts receivable. The Company plans to continue reducing its overall level of
accounts receivable and inventories.
Capital expenditures for the first half increased by $15.2 million over the
first half of 1997 level partially due to increased expenditures for the
installation of SAP integrated systems. The Company anticipates that 1998
capital expenditures will approximate $100 million.
In April 1998, the Company began a commercial paper program to diversify
its borrowing sources and obtain access to potentially lower interest rates. The
proceeds from the issuance of $421 million of commercial paper on April 1, 1998
were used to repay U.S. borrowings outstanding under its Revolving Credit
Agreement. At June 30, 1998, net commercial paper outstanding totaled $411.6
million with maturities ranging from one day to three months. Commercial paper
borrowings are classified as long-term debt since the Company has the intent and
ability to maintain this level of debt more than one year.
The Company anticipates that present cash and cash equivalents, cash
provided from operating activities and the $163 million of borrowings available
under the Credit Agreement will be sufficient to fund its 1998 operating,
capital expenditure, dividend and debt service cash requirements.
Impact of Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
which is required to be adopted for fiscal years beginning after December 15,
1997. Statement 131 will require the Company to disclose revenues and other
financial information pertaining to the business segments by which the Company
is managed, as well as the factors management used to determine these segments.
The Company is currently evaluating the requirements of Statement 131 to
determine how to present the required information in its financial statements
and expects to implement this statement in the fourth quarter of 1998.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued by the Financial Accounting Standards Board in June
1998. The Standard will require the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of the derivatives will either be offset
against the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings, or recognized in other comprehensive income until
the hedged item is recognized in earnings. The change in a derivative's fair
value related to the ineffective portion of a hedge, if any, will be immediately
recognized in earnings. The Company expects to adopt this Standard on or before
the beginning of its fiscal year 2000. The effect of adopting the Standard is
currently being evaluated, but is not expected to have a material effect on
the Company's financial position or results of operations.
Forward-Looking Information
This report includes forward-looking statements, as defined in the Private
Securities Litigation Reform Act of 1995, reflecting management's current
analysis and expectations, based on reasonable assumptions. Actual results could
differ materially from the Company's statements in this report regarding its
anticipated, projected or implied performance due to various factors such as
foreign currency fluctuations and the impact on profitability from economic and
market conditions, especially as it exists in the Asia-Pacific region, cash
requirements and liquidity, interest rate fluctuations that may impact the
Company's financing plans, costs of disruptions associated with the
implementation of business process reengineering and information technology
transformation projects, Year 2000 compliance, euro conversion issues, capital
expenditures, environmental remediations and litigation costs, and the
closing and impact of the Merger on operating results and capital resources.
12
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PART II OTHER INFORMATION
Item 1 - Legal Proceedings
A. Environmental
See the discussion under Item 3 - "Pending Legal Proceedings," Section
A - Environmental, of the Company's Form 10-K for the fiscal year ended December
31, 1997. There have been no material changes to that item.
B. Product Liability
See the discussion under Item 3 - "Pending Legal Proceedings," Section B
- - Product Liability, of the Registrant's Form 10-K for the fiscal year ended
December 31, 1997. There have been no material changes to that item.
Item 6 - Exhibits and Reports on Form 8-K
(a) Listing of Exhibits:
Exhibit
Number Exhibit Description
------- -------------------
2.1 Agreement and Plan of Merger dated as of July 30, 1998,
among Hercules Incorporated, Water Acquisition Co. and
the Company(1)
3 Conformed Restated Articles of Incorporation
10 Form of Amendment to executive Employment Agreement(2)
27 Financial Data Schedule
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed by the Company during the quarter ended
June 30, 1998
- ----------
(1) Included as an exhibit to the Company's Current Report on Form 8-K dated
July 30, 1998, filed with the Commission on July 30, 1998, and incorporated
herein by reference.
(2) Management contract or compensation plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
BETZDEARBORN INC.
(Registrant)
Date: August 14, 1998 By: /s/ George L. James
-------------------------------
George L. James
Senior Vice President - Finance
Date: August 14, 1998 By: /s/ Linda R. Hansen
-------------------------------
Linda R. Hansen
Vice President,
Secretary and General Counsel
14
CONFORMED RESTATED ARTICLES OF INCORPORATION
Explanatory Note: The following exhibit is a conformed version of the Restated
Articles of Incorporation of BetzDearborn, which reflects all amendments to such
Articles of Incorporation since they were last restated.
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
BETZDEARBORN INC.
1st. The name of the Corporation shall be BETZDEARBORN INC.
2nd. The location and post office address of its registered office in this
Commonwealth is 4636 Somerton Road, Trevose, Pennsylvania.
3rd. The purposes for which the Corporation is incorporated are: to buy,
sell, manufacture, compound, process, develop, handle and otherwise conduct
research, deal and trade in chemicals, chemical compounds and chemical products,
and equipment, materials and articles of all kinds and descriptions, including,
without limiting the generality of the foregoing, chemicals, chemical compounds
and chemical products, and equipment, materials and articles for use in the
treatment, improvement or control of water, waste, biological and
microbiological organisms or of other liquids, gases and solids; and the
Corporation shall have unlimited power to engage in and do any lawful act
concerning any or all lawful business for which corporations may be incorporated
under the Business Corporation Law of Pennsylvania.
The Corporation is organized under the Business Corporation Law of
Pennsylvania.
4th. The term for which the Corporation is to exist is perpetual.
5th. The aggregate number of shares which the Corporation has authority to
issue is 251,000,000 shares, divided into 1,000,000 Preferred Shares of the par
value of $.10 per share, and 250,000,000 Common Shares of the par value of $.10
per share.
A description of the shares in each class and a statement of the
preferences, qualifications, limitations, restrictions, and the special or
relative rights granted to or imposed upon the shares of each class, except such
thereof as the Board of Directors is authorized to fix, as hereinafter provided,
are as follows:
I. Preferred Shares
1. The Preferred Shares may be divided into and issued in series, each
series to be so designated as to distinguish the shares thereof from the shares
of all other series and classes. The Board of Directors of the Corporation shall
have authority, by resolution, to establish from time to time new series of
Preferred Shares by the allocation thereto of Preferred Shares which are at the
time undesignated as to series. In establishing any such new series, the Board
of Directors shall, by resolution, fix and determine:
(a) A distinguishing designation for such series;
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(b) The rate of dividends to be payable on the shares of such series, and
the date from which such dividends shall be cumulative upon shares
issued prior to the record date for the initial dividend thereon;
(c) Any redemption provisions with respect to the shares of such series,
including the terms and conditions upon which such shares may be
redeemed, and the price at which such shares may be redeemed (the
directors shall specify whether or not, and the extent to which, the
redemption price may be payable in property, which may include shares
or other securities owned by the Corporation, and, if payable in
property, the method of valuation to be used);
(d) The amounts payable upon the shares of such series in the event of
voluntary or involuntary liquidation;
(e) The terms and conditions of conversion, including specific rates of
conversion, if the Board of Directors determines that the shares of
such series shall be convertible into Common Shares or into any other
class of shares; and
(f) Sinking fund provisions, if any, in connection with a redemption or
repurchase of the shares of such series.
In the resolution establishing a new series of Preferred Shares, the Board
of Directors may provide for such additional rights, and with respect to rights
of redemption and convertibility, such relative preferences between shares of
different series, as are consistent with the rights of any outstanding shares of
a previously established series, and with all other provisions of this Article
5th. Except as to the various rights and preferences fixed by the Board of
Directors in the resolution establishing a new series, all Preferred Shares
shall be identical. In case the stated dividends or the amounts payable on
liquidation, or both, are not paid in full, all Preferred Shares of all series
shall participate ratably in the payment of dividends, including accumulations,
if any, in accordance with the sums which would be payable thereon if all
dividends thereon were declared and paid in full, and, in any distribution of
assets other than by way of dividends, in accordance with the sums which would
be payable on such distribution if all sums payable thereon to holders of
Preferred Shares were discharged in full.
2. Dividends. The holders of the Preferred Shares shall be entitled to
receive, when and as declared by the Board of Directors, out of any funds of the
Corporation lawfully available for dividends under the laws of the Commonwealth
of Pennsylvania, cash dividends at such rate per share per annum for each
particular series as shall have been fixed by the Board of Directors, in the
resolution establishing such series, and no more, payable quarterly on such
dates as may have been fixed in the resolution establishing such series, or, if
no payment dates have been so specified by the Board of Directors, then on such
dates as may be determined by the Board of Directors from time to time.
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Such dividends on the Preferred Shares shall be cumulative from the dates
as follows:
(a) In the case of shares issued prior to the record date for the initial
dividend on shares of the series of which such shares shall constitute
a part, then from the date fixed as aforesaid for such purpose by the
Board of Directors;
(b) If issued during the period commencing immediately after the record
date for a dividend on shares of such series and terminating at the
close of the payment date, then from such dividend payment date; and
(c) Otherwise, from the dividend payment date next preceding the date of
issue of such shares.
Further restrictions with respect to dividends and distributions on, and
acquisitions for value of, Preferred Shares and Common Shares are set forth in
Section 6 of this Part I.
3. Redemption of Preferred Shares. Except as otherwise provided in Section
6 of this Part I and except to the extent that the resolution of the Board of
Directors establishing a particular series shall provide that shares of such
series shall not be redeemable, and subject to the terms and conditions of each
outstanding series of Preferred Shares fixed as aforesaid, the Corporation may,
at the election of the Board of Directors, redeem all or any of the outstanding
Preferred Shares, or all or any shares of any series thereof, at any time or
from time to time, upon payment in respect of the shares so redeemed of the
redemption price fixed as aforesaid by the Board of Directors in respect of the
series of which such shares shall constitute a part, together in each case with
an amount equal to all accumulated and unpaid dividends thereon to the date of
redemption, whether or not such dividends shall have been earned or declared
(such price, including such amount equal to such accumulated and unpaid
dividends, and whether payable in cash or property or partly in cash and partly
in property, as herein provided, being hereinafter called the "redemption
price").
Any redemption shall be in such amount, at such place and in such manner as
the Board of Directors shall determine. In the case of a redemption of less than
all the outstanding Preferred Shares of any series, the particular shares to be
redeemed shall be selected by lot in such manner as the Board of Directors shall
determine. Notice of every redemption shall be mailed at least 30 days prior to
the date fixed for such redemption to the holders of record of the shares so to
be redeemed at their respective addresses as the same shall appear on the books
of the Corporation.
From and after the date fixed in any such notice as the date of redemption,
unless default shall be made by the Corporation in providing the redemption
price at the time and place specified for the payment thereof pursuant to said
notice, all dividends on the Preferred Shares thereby called for redemption
shall cease to accrue, and all rights as shareholders in the Corporation of the
holders thereof, except the right to receive the redemption price upon
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surrender of their share certificates, shall cease and terminate, and such
shares shall not be deemed outstanding for any purpose.
The Corporation may, however, give or irrevocably authorize the Depositary
hereinafter mentioned forthwith to give written notice (in the same manner as
the notice of redemption is required to be given as aforesaid) to the holders of
all the Preferred Shares selected for redemption that the redemption price has
been or will on a date specified be deposited with a designated bank, bank and
trust company, or private bank, which shall have an office in Philadelphia,
Pennsylvania, and shall have a capital and surplus of not less than $25,000,000
(hereinafter called the "Depositary"), in trust for the account of the holders
of such Preferred Shares, and that such holders may receive the redemption price
of such Preferred Shares from such Depositary on or after the date of such
deposit upon the surrender of their share certificates without awaiting the date
fixed for redemption. In such event, if the redemption price shall have been so
deposited by the Corporation with such Depositary, all rights as shareholders in
the Corporation of the holders of the shares so called, except the right to
receive the redemption price from such Depositary, upon such surrender, shall
cease and terminate upon the date of such deposit or the date of the giving of
such notice or authority, whichever be later, and such Preferred Shares shall
thereafter not be deemed to be outstanding for any purpose; provided, that if
any shares so called for redemption shall at that time be convertible, the
conversion privilege may be exercised in accordance with its terms, but not
later than the close of business on the day prior to the date fixed for
redemption. Any portion of the redemption price so deposited which represents
the redemption price of convertible shares which are actually converted shall
promptly be repaid by the Depositary to the Corporation. Any remaining portion
of the redemption price so deposited which shall remain unclaimed by the holders
of such Preferred Shares at the end of two years after the date so fixed for
redemption shall be paid by such Depositary to the Corporation, after which the
holders of such Preferred Shares shall look only to the Corporation for payment
of the redemption price thereof.
The provisions of this Section 3 with respect to the rights of holders of
Preferred Shares to receive payment of the redemption price are subject in all
respects to the provisions of Section 2 of Part III hereof.
Preferred Shares of any series redeemed, purchased or retired shall be
canceled and thereupon restored to the status of authorized but unissued
Preferred Shares undesignated as to series.
4. Liquidation or Dissolution. On any voluntary or involuntary liquidation
or dissolution of the Corporation, before any payment or distribution shall be
made to the holders of any Common Shares, the holders of the Preferred Shares
shall be entitled to be paid the amounts respectively fixed therefor as
aforesaid by the Board of Directors in respect of each outstanding series of
Preferred Shares, together in each case with an amount equal to all accumulated
and unpaid dividends thereon to the date of such payment, whether or not such
dividends shall have been earned or declared.
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After such payment shall have been made in full to the holders of Preferred
Shares, they shall be entitled to no further payment or distribution, and the
holders of Common Shares shall be entitled to share ratably in all remaining
assets of the Corporation.
A consolidation with or merger with or into any other corporation or
corporations shall not be deemed a liquidation or dissolution of the Corporation
within the meaning of this Section 4.
5. Voting Rights. At each meeting of shareholders of the Corporation, each
holder of Preferred Shares shall be entitled to one vote for each such share on
each matter to come before the meeting, except as otherwise provided herein or
by law.
If, however, dividends upon any of the Preferred Shares shall be in arrears
in an amount equal to six or more quarterly dividends thereon, the holders of
the Preferred Shares, voting separately as a class, shall be entitled to elect
the number of directors determined as set forth below in this Section 5. The
rights granted herein to the holders of Preferred Shares to elect directors in
the event of dividend arrearages are referred to herein as "Special Voting
Rights" and shall continue until all accumulated and unpaid dividends on the
Preferred Shares shall have been paid, whereupon the Special Voting Rights shall
cease and the voting rights otherwise provided shall resume, subject to the
Special Voting Rights being again revived from time to time upon the
reoccurrence of the conditions above described as giving rise thereto. The
directors to be elected by the exercise of Special Voting Rights of holders of
Preferred Shares are referred to herein as "Preferred Share Directors." The
other directors of the Corporation shall be elected by the holders of the Common
Shares, voting separately as a class, and are referred to herein as "Common
Share Directors."
At any time after the accrual of Special Voting Rights, a special meeting
of shareholders of the Corporation, for the purpose of the initial exercise of
such Special Voting Rights, shall be held, upon 30 days' notice, upon call by
the Secretary of the Corporation at the written request of any holder of
Preferred Shares at the time outstanding, or, if the Secretary shall fail or
neglect to call such meeting within 30 days after receipt of such request, then
upon call by any such holder, provided, however, that no such special meeting
shall be called if the annual meeting of shareholders is to be held within 90
days after the receipt of the foregoing written request from any holder of the
Preferred Shares. Upon the mailing of the notice of any meeting of the
shareholders of the Corporation at which the Special Voting Rights are to be
exercised, the number of directors of the Corporation shall ipso facto be
increased to the sum of (i) the number of directors provided for in the Bylaws,
plus (ii) that additional number of directors necessary to provide sufficient
vacancies to enable the holders of Preferred Shares to elect the Preferred Share
Directors. At such meeting of shareholders the number of Common Share Directors
shall be that number of directors provided for in the Bylaws (the number of
directors which the Corporation would have were it not for the Special Voting
Rights). The number of Preferred Share Directors shall be the greater of (i) two
or (ii) the number determined by multiplying the number of Common Share
Directors by the number of Preferred Shares outstanding on the applicable record
date, and dividing the product so obtained by the total number of Common and
Preferred Shares outstanding on such record date, provided that if the number of
Preferred Share Directors includes a fraction,
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(a) such fraction shall be disregarded if less than one-half, or
(b) the number of Preferred Share Directors shall be increased to the next
whole number if such fraction is one-half or more.
The number of directors of the Corporation indicated by the Bylaws may be
increased or decreased in such manner as may be permitted by the Bylaws, and
without the separate vote of the holders of Preferred Shares, provided that no
such action shall impair the right of the holders of Preferred Shares to elect
and be represented by the number of directors they are entitled to elect under
the Special Voting Rights so long as such Rights are in effect.
So long as Special Voting Rights are in effect, any vacancy in the Board of
Directors caused by the death or resignation of any Preferred Share Director
shall, until the next meeting of shareholders for the election of directors, in
each case be filled by vote of the remaining Preferred Share Director or
Directors, provided that if there shall be no such remaining Director, such
vacancy shall be filled for such period by vote of the Common Share Directors.
Upon termination of the Special Voting Rights, the term of all Preferred Share
Directors then in office shall expire, at which time the number of directors of
the Corporation shall revert to that number provided by the Bylaws. For the
purpose of this paragraph, a director elected in the manner above provided to
fill a vacancy in the number of Preferred Share Directors shall also be deemed
to be a Preferred Share Director.
Further provisions concerning voting rights of the holders of the Preferred
Shares are contained in Sections 7 and 8 of this Part I and in Sections 1 and 3
of Part III, below.
6. Restrictions on Dividends and Purchase of Shares. So long as any
Preferred Shares shall be outstanding, no dividend (other than dividends payable
in Common Shares) shall be paid or distribution shall be made on the Common
Shares, nor shall any Common Shares be purchased, retired or otherwise acquired
by the Corporation (except out of the proceeds of the sale of Common Shares
received by the Corporation after January 1, 1970), nor shall any Preferred
Shares be redeemed, purchased or otherwise acquired (for sinking fund purposes
or otherwise) by the Corporation, except in accordance with a stock purchase
offer (which may vary as to terms offered with respect to shares of different
series but not with respect to shares of the same series) made to all holders of
record of Preferred Shares, unless in each such case,
(a) all dividends on all outstanding Preferred Shares for all past
quarterly dividend periods shall have been paid and full dividends
thereon for the then current quarterly dividend period declared and a
sum sufficient for the payment thereof set apart; and
(b) the Corporation shall not be in arrears in respect of any sinking fund
obligation or obligation of a similar nature in respect of any series
of Preferred Shares.
7. Certain matters requiring consent of holders of two-thirds of Preferred
Shares. So long as any Preferred Shares shall be outstanding, the Corporation
shall not, without
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the consent of the holders of at least two-thirds of the Preferred Shares at the
time outstanding, given in person or by proxy, either in writing or at a meeting
called for the purpose:
(a) adopt or effect any amendment to the Corporation's Articles of
Incorporation or Bylaws, other than an amendment of the nature
described under Section 8, below, which would adversely affect the
rights or preferences of the Preferred Shares; provided, however, that
if any such amendment shall adversely affect the rights or preferences
of one or more, but not all, of the several series of Preferred Shares
at the time outstanding, or shall unequally affect the rights or
preferences of two or more of such series, the consent of the holders
of at least two-thirds of the shares of each series adversely
affected, similarly given, shall be required in lieu of the consent of
the holders of two-thirds of the Preferred Shares; or
(b) authorize any new class of shares which are senior to the Preferred
Shares with respect to the payment of dividends or distributions on
liquidation or dissolution.
8. Certain matters requiring consent of holders of majority of all
outstanding shares. The Corporation may increase the authorized number of
Preferred Shares, or authorize any new class of shares which are on a parity
with the Preferred Shares with respect to the payment of dividends or
distributions on liquidation or dissolution, by obtaining the affirmative vote,
given in person or by proxy, of the holders of at least a majority of the then
outstanding Common Shares and Preferred Shares, voting together and not by
class.
II. Common Shares
1. Junior to Preferred Shares. The Common Shares shall rank junior to the
Preferred Shares with respect to payment of dividends and distributions on
liquidation or dissolution.
2. Voting Rights. At each meeting of shareholders of the Corporation, each
holder of Common Shares shall be entitled to one vote for each such share, on
each matter to come before the meeting, except as otherwise provided herein or
by law.
Further provisions concerning voting rights of the holders of Common Shares
are contained in Sections 5 and 8 of Part I, above, and in Sections 1 and 3 of
Part III below.
3. Dividends. After all dividends upon all Preferred Shares for all
previous quarterly dividend periods shall have been paid and full dividends
thereon for the then current quarterly dividend period declared and a sum
sufficient for the payment thereof set apart therefor, and after or concurrently
with the setting aside of any and all amounts then or theretofore required to be
set aside for any sinking fund obligation or obligation of a similar nature in
respect of any series of Preferred Shares, then and not otherwise, and subject
to any other applicable
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provisions of Part I hereof, dividends may be declared upon and paid to the
holders of the Common Shares, to the exclusion of the holders of the Preferred
Shares.
4. Rights upon Liquidation. In the event of voluntary or involuntary
liquidation or dissolution of the Corporation, after payment in full of amounts
required to be paid to the holders of the Preferred Shares, the holders of the
Common Shares shall be entitled, to the exclusion of the holders of the
Preferred Shares, to share ratably in all remaining assets of the Corporation.
III. General
1. Except to the extent that a greater affirmative vote may be required by
law, the vote of the shareholders for approval of any plan of merger or
consolidation (excepting any plan of merger or consolidation for which no
shareholder approval is required under the provisions of Pennsylvania law in
effect at the time such action is taken); for authorization of any sale of all
or substantially all of the Corporation's assets; or for adoption of any
amendment of this Section 1 of Part III, must meet the following requirements:
(a) There must be the affirmative vote (given in person or by proxy) of
the holders of at least a majority of the then outstanding Common
Shares and Preferred Shares, voting together and not by class; and
(b) Of the shares (regardless of class) actually represented in person or
by proxy at the particular meeting, there must be the affirmative vote
of at least two-thirds, voting together and not by class.
2. If a registered holder of shares of either class does not perfect his
right to receive
(a) any dividends payable upon his shares, or
(b) any redemption price due him for Preferred Shares called for
redemption by the Corporation,
within three years after the date for determination of those entitled to receive
such dividend or redemption price, then such holder shall have no further rights
with respect to such dividend or redemption price which shall thereupon become
the absolute property of the Corporation, its successors and assigns; provided,
however, that the above provisions of this Section may be disregarded by the
Board of Directors if and to the extent that counsel designated by the Board,
who may be counsel regularly retained by the Corporation, shall advise the Board
that such provisions may not be legally enforceable.
3. Shareholders of the Corporation shall not be entitled to cumulative
voting in the election of directors.
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IV. Provisions Regarding Certain Business Combinations
1. General. In addition to any other requirements of these Restated
Articles of Incorporation and applicable law, every Business Combination
involving an Interested Shareholder must either be approved by a majority of the
Disinterested Directors or be fair (within the meaning of Section 2 of this Part
IV) to the holders of the Protected Shares of the Corporation.
2. Fairness Provisions. For purposes of Section 1 of Part IV, to be fair to
the holders of Protected Shares of the Corporation, a Business Combination must
meet all of the following conditions:
(a) Minimum Value. The aggregate amount of the cash and the Fair Market
Value as of the Consummation Date of consideration other than cash to
be received per share by holders of shares of each class or series of
outstanding Protected Shares regardless of whether the Interested
Shareholder has previously acquired any shares of a particular class
or series of Protected Shares shall be at least equal to the highest
of the following:
(i) if applicable, the Highest Per Share Price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Shareholder or any of its
Affiliates or Associates for any shares of such class or series
of Protected Shares acquired by the Interested Shareholder or
any of its Affiliates or Associates (A) within the two year
period immediately prior to the Announcement Date or (B) on the
Determination Date, whichever is higher;
(ii) if applicable, the highest preferential amount per share to
which the holders of shares of such class or series of Protected
Shares are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; or
(iii) the Fair Market Value per share of such class or series of
Protected Shares on the Announcement Date or the Determination
Date, whichever is higher.
(b) Form of Consideration. The consideration to be received by holders of
a particular class or series of outstanding Protected Shares shall be
in cash or in the same form as the Interested Shareholder or any of
its Affiliates or Associates has paid for shares of such class or
series of Protected Shares prior to the Consummation Date. If the
Interested Shareholder or any of its Affiliates or Associates has paid
for shares of any class or series of Protected Shares
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with varying forms of consideration, the form of consideration to be
received for such class or series of Protected Shares shall be either
cash or the form used to acquire the largest number of shares of such
class or series of Protected Shares previously acquired by it.
(c) Procedural Requirements.
(i) Maintain Dividends. After such Interested Shareholder has become
an Interested Shareholder and prior to the consummation of such
Business Combination, except as approved by a majority of the
Disinterested Directors, there shall have been (A) no failure to
declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) on any outstanding
Preferred Shares of the Corporation, (B) no reduction in the
annual rate of dividends paid on the Common Shares except as
necessary to reflect any subdivision of the Common Shares, and
(C) such increase in the annual rate of dividends paid on the
Common Shares as was necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction which had the effect
of reducing the number of outstanding Common Shares.
(ii) Acquisition of Additional Shares. After such Interested
Shareholder has become an Interested Shareholder and prior to
the Consummation Date, neither such Interested Shareholder nor
any of its Affiliates or Associates shall have become the
beneficial owner of any additional Voting Shares at a price less
than that provided for by paragraph (a) of Section 2 of this
Part IV except as part of the transaction which results in such
Interested Shareholder becoming an Interested Shareholder.
(iii) No Disproportionate Benefits. After such Interested Shareholder
has become an Interested Shareholder, neither such Interested
Shareholder nor any of its Affiliates shall have received the
benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation
of or in connection with such Business Combination or otherwise.
(iv) Furnish Information. A proxy or information statement describing
the proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to all
shareholders of the Corporation at least 30 days prior to the
Consummation Date (whether or not such proxy or information
statement is required pursuant to such Act or any such
subsequent provisions).
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3. Powers of Board of Directors. A majority of the Disinterested Directors
of the Corporation shall have the power and duty to determine for the purposes
of this Part IV on the basis of the information known to them after reasonable
inquiry, (a) the number of Voting Shares beneficially owned by any person, (b)
whether a person is an Interested Shareholder or is an Affiliate or Associate of
another person, (c) whether a person has an agreement, arrangement or
understanding with another as to the matters referred to in paragraph (c) of
Section 6 of this Part IV, (d) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any Business
Combination have, an aggregate Fair Market Value of $1,000,000 or more, and (e)
whether the requirements of paragraph (a) of Section 2 of this Part IV have been
met with respect to any Business Combination.
4. No Effect on Fiduciary Obligations of Interested Shareholders. Nothing
contained in this Part IV shall be construed to relieve any Interested
Shareholder from any fiduciary obligation imposed by law.
5. Amendment, Repeal, Etc. Notwithstanding any other provisions of these
Articles of Incorporation or the Bylaws of the Corporation, the affirmative vote
of the holders of not less than 80% of the outstanding Voting Shares, voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, this Part IV.
6. Definitions. For the purposes of this Part IV:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in
effect on March 7, 1985.
(b) "Announcement Date" means, with respect to any Business
Combination, the date of the first public announcement of such
Business Combination.
(c) A person shall be a "beneficial owner" of any Voting Shares:
(i) which such person or any of its Affiliates or Associates
owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates
has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (B) the right to vote
or direct the vote pursuant to any agreement, arrangement
or understanding; or
(iii) which are owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing
of such Voting Shares.
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(d) "Board" means the Board of Directors of the Corporation.
(e) A "Business Combination" shall mean any one or more of the
following:
(i) any merger or consolidation of the Corporation or any
Subsidiary with or into (A) any Interested Shareholder or
(B) any other corporation (whether or not itself an
Interested Shareholder) which is, or after such merger or
consolidation would be, an Affiliate of an Interested
Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with any Interested Shareholder or any
Affiliate of any Interested Shareholder of any assets of
the Corporation or any Subsidiary having an aggregate Fair
Market Value of $1,000,000 or more; or
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions)
of any securities of the Corporation or any Subsidiary to
any Interested Shareholder or any Affiliate of any
Interested Shareholder in exchange for cash, securities or
other property (or a combination thereof) having an
aggregate Fair Market Value of $1,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of
an Interested Shareholder or an Affiliate of any Interested
Shareholder; or
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or
any merger or consolidation of the Corporation with any of
its Subsidiaries or any similar transaction (whether or not
with or into or otherwise involving an Interested
Shareholder) which has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding
shares of any class equity securities, or securities
convertible into equity securities, of the Corporation or
any Subsidiary, including, without limitation, any class or
series of Protected Shares, which is directly or indirectly
owned by any Interested Shareholder or any Affiliate of any
Interested Shareholder.
(f) "Consummation Date" means, with respect to any Business
Combination, the date on which such Business Combination is
effected.
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(g) "Determination Date" means, with respect to any Interested
Shareholder, the date on which such Interested Shareholder first
became an Interested Shareholder.
(h) "Disinterested Director" means any member of the Board who is not
an Affiliate or Associate or nominee of the Interested
Shareholder and was a member of the Board prior to the time that
the Interested Shareholder became an Interested Shareholder, and
any successor of a Disinterested Director who is a member of the
Board and who is not an Affiliate or Associate or a nominee of
the Interested Shareholder and was recommended to succeed a
Disinterested Director by a majority of Disinterested Directors
on the Board at the time of such recommendation.
(i) "Fair Market Value" means (A) in the case of stock, the highest
closing sale price during the thirty day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange, Inc. Listed Stocks,
or, if such stock is not quoted on such Composite Tape, on the
New York Stock Exchange, Inc., or, if such stock is not listed on
the New York Stock Exchange, Inc., on the principal United States
securities exchange registered under the Securities Exchange Act
of 1934 on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing sale (or bid, as
the case may be) quotation with respect to a share of such stock
during the thirty day period preceding the date in question as
reported by 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 on the date
in question of a share of such stock as determined by a majority
of the Disinterested Directors in good faith; and (B) in the case
of property other than cash or stock the Fair Market Value of
such property on the date in question as determined by a majority
of the Disinterested Directors in good faith.
(j) References to "Highest Per Share Price" shall in each case with
respect to any class of shares reflect an appropriate adjustment
for any dividend or distribution in such shares or any share
split, pro rata share distribution or reclassification of
outstanding shares of such class into a greater number of shares
of such class or any combination or reclassification of
outstanding shares of such class into a smaller number of shares
of such class.
(k) "Interested Shareholder" shall mean, in respect of any Business
Combination, any person (other than the Corporation) who or
which, as of its Announcement Date, or on the day immediately
prior to the Consummation Date:
(i) is the beneficial owner, directly or indirectly, of ten
percent (10%) or more of the voting power of the
outstanding Voting Shares; or
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(ii) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly
or indirectly, of ten percent (10%) or more of the voting
power of the then outstanding Voting Shares; or
(iii) is an assignee of or has otherwise succeeded to any shares
of Voting Shares of the Corporation which were at any time
within the two year period immediately prior to the date in
question beneficially owned by any Interested Shareholder
if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not
involving a public offering within the meaning of the
Securities Act of 1933.
(l) For the purposes of determining whether a person is an Interested
Shareholder the number of Voting Shares deemed to be outstanding
shall include shares deemed beneficially owned by the Interested
Shareholder through application of paragraph (c) of Section 6 of
this Part IV, but shall not include any other Voting Shares which
may be issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise.
(m) A "person" shall mean any individual, firm, partnership, joint
venture, corporation or other entity.
(n) "Protected Share" means Common Shares and all other classes of
capital stock of the Corporation having, or which may have upon
the happening of some contingency, the right to vote for the
election of some or all of the directors of the Corporation,
regardless of whether at the time in question such shares then
have a present right to so vote.
(o) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation.
(p) "Voting Shares" means, at any time, all shares of capital stock
of the Corporation entitled to vote generally in the election of
directors.
(q) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration to be received" as used in
paragraph (b) of Section 2 of this Part IV shall include the
Common Shares and/or the shares of any other class of outstanding
Protected Shares retained by the holders of such shares.
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STATEMENT AFFECTING CLASS OR SERIES
OF SHARES OF
BETZ LABORATORIES, INC.
In compliance with the requirements of Section 602 of the Pennsylvania
Business Corporation Law approved the 5th day of May, 1933, P.L. 364, as
amended, the undersigned corporation hereby certifies under its corporate seal
that:
1. The name of the Corporation is Betz Laboratories, Inc.
2. The resolution establishing and designating the new series Preferred
Shares and fixing and determining the relative rights and preferences of such
series, set forth in full is as follows:
There is hereby established a series of Preferred Shares authorized by
Article 5th of the Articles of Incorporation of the Corporation (such class of
Preferred Shares being hereinafter called "Preferred Stock"). The voting rights,
designation, preferences, qualifications, privileges, limitations, options,
conversion rights and other special rights, if any, of such series not set forth
in the Articles of Incorporation of the Corporation are as follows:
Section 1. Designation and Amount; Special Purpose Restricted Transfer
Issue.
(A) The shares of such series shall be designated as "Series A ESOP
Convertible Preferred Stock" ("Series A Preferred Stock") and the number of
shares constituting such series shall be 500,030.
(B) Shares of Series A Preferred Stock shall be issued originally to Mellon
Bank, N.A., as trustee (the "Trustee") of the Employee Stock Ownership Plan of
the Corporation (the "Plan"). The Series A Preferred Stock shall be transferable
without consequence to any successor trustee under the Plan or to any other
person if the Corporation would be allowed a deduction for federal income tax
purposes, pursuant to Section 404(k) of the Internal Revenue Code of 1986 or any
successor provision, in the full amount of the dividends paid on the Series A
Preferred Stock to such other person. Such transferee is hereinafter referred to
as a permitted transferee under the Plan. All references to the holder of shares
of Series A Preferred Stock shall mean the Trustee or any permitted transferee
under the Plan. In the event of any transfer of record ownership of shares of
Series A Preferred Stock to any person other than a permitted transferee under
the Plan, the shares of Series A Preferred Stock so transferred, upon such
transfer and without any further action by the Corporation or the holder
thereof, shall be automatically converted into Common Shares of the Corporation
(hereinafter referred to as shares of Common Stock) on the terms otherwise
provided for the conversion of shares of Series A Preferred Stock into shares of
Common Stock pursuant to Section 5 hereof and no such transferee shall have any
of the voting rights, preferences, qualifications, privileges, limitations,
options, conversion rights and other special rights, if any, ascribed to shares
of Series A Preferred Stock hereunder but, rather, only the powers and rights
pertaining to the Common Stock into which such shares of Series A Preferred
Stock shall be so converted. In the event of such a conversion, the transferee
of the shares of Series A Preferred Stock shall be treated for all
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purposes as the record holder of the shares of Common Stock into which such
shares of Series A Preferred Stock have been automatically converted as of the
date of such transfer and shall be deemed, for purposes of Section 5 hereof, to
have surrendered the certificates for the Series A Preferred Stock so converted.
Certificates representing shares of Series A Preferred Stock shall bear a legend
to reflect the foregoing provisions. Notwithstanding the foregoing provisions of
this paragraph (B) of Section 1, shares of Series A Preferred Stock (i) may be
converted into shares of Common Stock as provided by Section 5 hereof and the
shares of Common Stock issued upon such conversion may be transferred by the
holder thereof as permitted by law (and the certificates therefor shall be so
legended) and (ii) shall be redeemable by the Corporation upon the terms and
conditions provided by Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends ("Preferred Dividends") in an amount per
share equal to $16.00 per share per annum, and no more, payable quarterly in
arrears, one-quarter on the 14th day of September, one-quarter on the 14th day
of December, one-quarter on the 14th day of March and one-quarter on the 14th
day of June of each year (each a "Dividend Payment Date") commencing on
September 14, 1989, to holders of record at the start of business on such
Dividend Payment Date. In the event that any Dividend Payment Date shall fall on
any day other than a "Business Day" (as hereinafter defined), the dividend
payment otherwise due such Dividend Payment Date shall be paid on the Business
Day immediately preceding such Dividend Payment Date to holders of record at the
start of business on such Business Day. Preferred Dividends shall be cumulative
on outstanding shares of Series A Preferred Stock from the date of issuance of
such shares of Series A Preferred Stock. Preferred Dividends shall accrue on a
daily basis whether or not the Corporation shall have the legal ability to
declare dividends, but Preferred Dividends accrued after issuance on the shares
of Series A Preferred Stock for any period less than a full quarterly period
between Dividend Payment Dates shall be computed on the basis of a 360-day year
of 30-day months. Accrued but unpaid Preferred Dividends shall cumulate as of
the Dividend Payment Date on which they first become payable, but no interest
shall accrue on accumulated but unpaid Preferred Dividends.
(B) So long as any shares of Series A Preferred Stock shall be outstanding,
no dividend shall be declared or paid or set apart for payment on any other
class or series of stock ranking on a parity with the Series A Preferred Stock
as to dividends unless there shall also be or have been declared and paid on the
Series A Preferred Stock dividends for all dividend payment periods of the
Series A Preferred Stock ending on or before the dividend payment date of such
parity stock, ratably in proportion to the respective amounts of dividends
accumulated and unpaid through such dividend period on the Series A Preferred
Stock and accumulated and unpaid on such parity stock through the dividend
payment period on such parity stock next preceding such dividend payment date.
In the event that full cumulative dividends on the Series A Preferred Stock have
not been declared and paid or set apart for payment when due, the Corporation
shall not declare or pay or set apart for payment any dividends or make any
other distributions on, or make any payment on account of the purchase,
redemption or other retirement of, any other class of stock or series thereof of
the Corporation ranking, as to dividends or as to distributions in the
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<PAGE>
event of a liquidation or dissolution of the Corporation, junior to the Series A
Preferred Stock until full cumulative dividends on the Series A Preferred Stock
shall have been paid or declared and set apart for payment; provided, however,
that the foregoing shall not apply to (i) any dividend payable solely in any
shares of any stock ranking, as to dividends and as to distributions in the
event of a liquidation or dissolution of the Corporation, junior to the Series A
Preferred Stock or (ii) the acquisition of shares of any stock ranking, as to
dividends or as to distributions in the event of a liquidation or dissolution of
the Corporation, junior to the Series A Preferred Stock in exchange solely for
shares of any other stock ranking, as to dividends and as to distributions in
the event of liquidation or dissolution of the Corporation, junior to the Series
A Preferred Stock.
Section 3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the voting rights provided for in Article 5th - Part I, Section 5 of
the Corporation's Articles of Incorporation.
Section 4. Liquidation or Dissolution.
(A) Upon any voluntary or involuntary liquidation or dissolution of the
Corporation, the holders of Series A Preferred Stock shall be entitled to
receive out of assets of the Corporation which remain after satisfaction in full
of all valid claims of creditors of the Corporation and which are available for
payment to stockholders, and subject to the rights of the holders of any stock
of the Corporation ranking senior to or on a parity with the Series A Preferred
Stock in respect of distributions upon liquidation or dissolution of the
Corporation, before any amount shall be paid or distributed among the holders of
Common Stock or and other shares ranking junior to the Series A Preferred Stock
in respect of distributions upon liquidation or dissolution of the Corporation,
liquidating distributions in the amount of $200 per share, plus an amount equal
to all accumulated and unpaid dividends thereon to the date fixed for
distribution, and no more. If upon any liquidation or dissolution of the
Corporation, the amounts payable with respect to the Series A Preferred Stock
and any other stock ranking as to any such distribution on a parity with the
Series A Preferred Stock are not paid in full, the holders of the Series A
Preferred Stock and such other stock shall share ratably in any distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled.
(B) Neither the consolidation of the Corporation with or the merger of the
Corporation with or into any other corporation or corporations, nor the
consolidation of any other corporation with or the merger of any other
corporation with or into the Corporation, nor the sale, lease, exchange or other
transfer of all or any portion of the assets of the Corporation, shall be deemed
to be a liquidation or dissolution of the Corporation for purposes of this
Section 4, but the holders of Series A Preferred Stock shall nevertheless be
entitled in the event of any such merger or consolidation to the rights, if any,
provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary liquidation or
dissolution of the Corporation, stating the payment date or dates when, and the
place or places where, the amounts distributable to holders of Series A
Preferred Stock in such circumstances shall be payable, shall be given by
first-class mail, postage prepaid, mailed not less than twenty (20) days
3
<PAGE>
prior to any payment date stated therein, to the holders of Series A Preferred
Stock, at the address shown on the books of the Corporation or any transfer
agent for the Series A Preferred Stock.
Section 5. Conversion into Common Stock.
(A) A holder of a share or shares of Series A Preferred Stock shall be
entitled, at any time prior to the close of business on the date fixed for
redemption of such shares pursuant to Sections 6, 7 and 8 hereof, to cause any
or all of such shares to be converted into shares of Common Stock, initially at
a conversion rate equal to 2.76 shares of Common Stock for each share of Series
A Preferred Stock so converted, which conversion rate is subject to adjustment
as the Conversion Price is adjusted as hereinafter provided. For purposes hereof
the term "Conversion Price" shall initially mean the amount obtained by dividing
$200 by 2.76 and thereafter shall be adjusted as hereinafter provided.
(B) Any holder of a share or shares of Series A Preferred Stock desiring to
convert such share or shares into shares of Common Stock shall surrender the
certificate or certificates representing the shares of Series A Preferred Stock
being converted, duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto), at the principal
executive office of the Corporation or the offices of the transfer agent for the
Series A Preferred Stock or such office or offices in the continental United
States of an agent for conversion as may from time to time be designated by
notice to the holders of the Series A Preferred Stock by the Corporation or the
transfer agent for the Series A Preferred Stock, accompanied by written notice
of conversion. Such notice of conversion shall specify (i) the number of shares
of Series A Preferred Stock to be converted and the name or names in which such
holder wishes the certificate or certificates for Common Stock and for any
shares of Series A Preferred Stock not to be so converted to be issued and (ii)
the address to which such holder wishes delivery to be made of such new
certificates to be issued upon such conversion.
(C) Upon surrender of a certificate representing a share or shares of
Series A Preferred Stock for conversion, the Corporation shall issue and send by
hand delivery (with receipt to be acknowledged) or by first class mail, postage
prepaid, to the holder thereof or to such holder's designee, at the address
designated by such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled upon conversion.
In the event that there shall be have been surrendered a certificate or
certificates representing shares of Series A Preferred Stock only part of which
are to be converted, the Corporation shall issue and deliver to such holder or
such holder's designee a new certificate or certificates representing the number
of shares of Series A Preferred Stock which shall not have been converted.
(D) The issuance by the Corporation of shares of Common Stock upon a
conversion of shares of Series A Preferred Stock into shares of Common Stock
made at the option of the holder thereof shall be effective as of the earlier of
(i) the delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion thereof or (ii)
the commencement of business on the second business day after the surrender of
the certificate or certificates for the shares of Series A Preferred Stock to be
converted, duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly
4
<PAGE>
executed stock powers relating thereto) as provided herein. On and after the
effective date of conversion, the person or persons entitled to receive the
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock, but no allowance or
adjustment shall be made in respect of dividends payable to holders of Common
Stock if the record date for such dividends is prior to such effective date. The
Corporation shall not be obligated to pay to such persons any dividends which
shall have been declared and shall be payable to holders of shares of Series A
Preferred Stock on a Dividend Payment Date if such Dividend Payment Date for
such dividend is subsequent to the effective date of conversion of such shares.
(E) The Corporation shall not be obligated to deliver to holders of Series
A Preferred Stock any fractional share of shares of Common Stock issuable upon
any conversion of such shares of Series A Preferred Stock, but in lieu thereof
may make a cash payment in respect thereof in any manner permitted by law.
(F) Whenever the Company shall issue shares of Common Stock upon conversion
of shares of Series A Preferred Stock as contemplated by this Section 5, the
Company shall issue together with each such share of Common Stock one right to
purchase Common Stock of the Company (or other securities in lieu thereof)
pursuant to the Rights Agreement dated as of September 8, 1988 between the
Company and Mellon Bank (East) N.A., as Rights Agent, as such agreement may be
from time to time amended (the "Rights Agreement"), or any rights issued to
holders of Common Stock of the Company in addition thereto or in replacement
therefor, whether or not such rights shall be exercisable at such time, but only
if such rights are issued and outstanding and held by other holders of Common
Stock of the Company at such time and have not expired.
(G) The Corporation shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for issuance upon the
conversion of shares of Series A Preferred Stock as herein provided, free from
any preemptive rights, such number of shares of Common Stock as shall from time
to time be issuable upon the conversion of all the shares of Series A Preferred
Stock then outstanding. Nothing contained herein shall preclude the Corporation
from issuing shares of Common Stock held in its treasury upon the conversion of
shares of Series A Preferred Stock into Common Stock pursuant to the terms
hereof. The Corporation shall use its best efforts to obtain and keep in force
such governmental or regulatory permits or other authorizations as may be
required by law, and shall comply with all requirements as to registration or
qualification of the Common Stock, in order to enable the Corporation lawfully
to issue and deliver to each holder of record of Series A Preferred Stock such
number of shares of its Common Stock as shall from time to time be sufficient to
effect the conversion of all shares of Series A Preferred Stock then outstanding
and convertible into shares of Common Stock.
Section 6. Redemption at the Option of the Corporation.
(A) The Series A Preferred Stock shall be redeemable to the extent provided
in this Section 6 and in Sections 7 and 8 below and not otherwise.
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<PAGE>
(B) The Series A Preferred Stock shall be redeemable, in whole or in part,
at the option of the Corporation at any time on or after June 19, 1992, for the
amount payable in respect of such shares upon liquidation of the Corporation
pursuant to Section 4 hereof. Payment of the redemption price shall be made by
the Corporation in cash or shares of Common Stock, or a combination thereof, as
permitted by paragraph (E) of this Section 6. From and after the date fixed for
redemption, dividends on shares of Series A Preferred Stock called for
redemption shall cease to accrue, such shares shall no longer be deemed to be
outstanding and all rights in respect of such shares shall cease, except the
right to receive the redemption price. If less than all of the outstanding
shares of Series A Preferred Stock are to be redeemed, the Corporation shall
either redeem a portion of the shares of each holder determined pro rata based
on the number of shares held by each holder or shall select the shares to be
redeemed by lot, as may be determined by the Corporation.
(C) The Corporation may, at its option, elect to redeem any or all of the
shares of Series A Preferred Stock notwithstanding that such redemption takes
place prior to June 19, 1992 for the amount payable in respect of such shares
upon liquidation of the Corporation pursuant to Section 4 hereof, which amount
shall be payable by the Corporation in cash or shares of Common Stock, or a
combination thereof, as permitted by paragraph (E) of this Section 6, upon the
occurrence of any of the following events: (i) In the event of a change in the
federal tax law of the United States of America which has the effect of
precluding the Corporation from claiming all or any portion of the tax
deductions for dividends paid on the Series A Preferred Stock when such
dividends are used as provided under Section 404(k) (2) of the Internal Revenue
Code of 1986, as amended and in effect on the date shares of Series A Preferred
Stock are initially issued; (ii) In the event the last reported sales price,
regular way, of a share of Common Stock, as reported on the principal national
securities exchange on which such stock is listed or admitted to trading that is
also the principal market for the Common Stock or, if the principal market for
the Common Stock is not a national securities exchange, on the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or, if the Common Stock is not quoted on such
National Market System, the average of the closing bid and asked prices in the
over-the-counter market as reported by NASDAQ, for at least twenty (20) trading
days within a period of thirty (30) consecutive trading days ending within five
(5) days of the notice of redemption, equals or exceeds one hundred fifty
percent (150%) of the Conversion Price in effect during such period (giving
effect in making such calculation to any adjustments required by Section 9
hereof); or (iii) In the event that the Plan is terminated in accordance with
its terms;
(D) Unless otherwise required by law, the Corporation shall cause notice of
any redemption under this Section 6 to be sent to the holders of Series A
Preferred Stock at the address shown on the books of the Corporation or any
transfer agent for the Series A Preferred Stock by first class mail, postage
prepaid, mailed not less than thirty (30) days nor more than sixty (60) days
prior to the redemption date. Each such notice shall state: (i) the redemption
date; (ii) the total number of shares of the Series A Preferred Stock to be
redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; (v) that dividends on
the shares to be redeemed will cease to accrue on such redemption date; and
(vi) the conversion
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<PAGE>
rights of the shares to be redeemed, the period within which conversion rights
may be exercised, which period shall not end prior to the redemption date, and
the Conversion Price and number of shares of Common Stock issuable upon
conversion of a share of Series A Preferred Stock at the time. Upon surrender of
the certificate for any shares so called for redemption and not previously
converted (properly endorsed or assigned for transfer, if the Corporation shall
so require and the notice shall so state), such shares shall be redeemed by the
Corporation at the date fixed for redemption and at the redemption price set
forth in this Section 6.
(E) The Corporation, at its option, may make payment of the redemption
price payable upon any redemption of shares of Series A Preferred Stock in cash
or in shares of Common Stock, or in a combination of such shares and cash, any
such shares of Common Stock to be valued for such purposes at their Fair Market
Value (as defined in paragraph (H) of Section 9 hereof). Whenever the Company
shall issue shares of Common Stock in payment of all or a portion of the
redemption price pursuant to this paragraph, the Company shall issue together
with each such share of Common Stock one right to purchase Common Stock of the
Company (or other securities in lieu thereof) pursuant to the Rights Agreement,
or any rights issued to holders of Common Stock of the Company in addition
thereto or in replacement therefor, whether or not such rights shall be
exercisable at such time, but only if such rights are issued and outstanding and
held by other holders of Common Stock of the Company at such time and have not
expired.
Section 7. Redemption at the Option of the Holder.
Shares of Series A Preferred Stock shall be redeemed by the Corporation at
the option of the holder at any time and from time to time when and to the
extent necessary: (i) for such holder to provide for distributions required to
be made to participants under, or to satisfy an investment election provided to
participants in accordance with, the Plan, or any successor plan; (ii) for such
holder to make any payments of principal, interest or premium due and payable
(whether scheduled or upon acceleration) under the Note Purchase Agreement among
the Trustee, Prudential Insurance Company of America or one of its affiliates or
any successor lender (collectively, the "Lender") and the Corporation or any
other indebtedness incurred by the holder for the benefit of the Plan; or (iii)
for such holder to meet the diversification requirements set forth in Section
401(a) (28) of the Internal Revenue Code, as amended. Such shares shall be
redeemed by the Corporation for cash or, except for a redemption pursuant to
clause (iii) above, if the Corporation so elects, in shares of Common Stock or a
combination of such shares and cash, any such shares of Common Stock to be
valued (as defined in paragraph (H) of Section 9 hereof), at a redemption price
equal to the Fair Market Value (as defined in paragraph (H) of Section 9 hereof)
of the shares of Series A Preferred Stock to re redeemed, upon written notice by
the holder to the Corporation, given not less than five (5) business days prior
to the date fixed by the holder in such notice for such redemption, setting
forth (i) the redemption date; (ii) the number of shares of Series A Preferred
Stock to be redeemed; (iii) the reason for the redemption; and (iv) the holder's
certification that the reason for the redemption and the extent of the
redemption are proper under this Section 7. If the Company makes payment of all
or a portion of the redemption price in shares of Common Stock, the holder shall
be entitled to receive, together with each share of Common Stock, one right to
purchase Common Stock (or other securities in lieu thereof) as provided in
Section 6(E) hereof.
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Section 8. Consolidation, Merger, etc.
(A) In the event that the Corporation shall consummate any consolidation or
merger or similar business combination pursuant to which the outstanding shares
of the Corporation's Common Stock are by operation of law exchanged solely for
or changed, reclassified or converted solely in to stock of the Corporation or
any successor or resulting corporation or other enterprise that constitutes
"employer securities" with respect to a holder of Series A Preferred Stock
within the meaning of Section 409(e) of the Internal Revenue Code of 1986, as
amended, and "qualifying employer securities" within the meaning of Section
407(e)(5) of the Employee Retirement Income Security Act of 1974, as amended, or
any successor provisions of law ("employer securities" and "qualified employer
securities" being hereinafter collectively referred to as "qualified employer
securities"), and, if applicable, for cash payment in lieu of fractional shares,
if any, the shares Series A Preferred Stock of such holder shall, in connection
with such consolidation, merger or similar business combination, be assumed by
and shall become preferred stock of the Corporation or such successor or
resulting corporation or other enterprise, having in respect of such corporation
or other enterprise, insofar as possible, the same voting rights, designations,
preferences, qualifications, privileges, limitations, options, conversion rights
and other special rights, if any (including the redemption rights provided by
Sections 6, 7 and 8 hereof), that the Series A Preferred Stock had immediately
prior to such transaction, except that after such transaction each share of the
Series A Preferred Stock shall be convertible, otherwise on the terms and
conditions provided by Section 5 hereof, into the number and kind of qualifying
employer securities so receivable by a holder of the number of shares of Common
Stock into which such shares of Series A Preferred Stock could have been
converted immediately prior to such transaction; provided, however, that if by
virtue of the structure of such transaction, a holder of Common Stock is
required to make an election with respect to the nature and kind of
consideration to be received in such transaction, which election cannot
practicably be made by the holders of the Series A Preferred Stock, then the
shares of Series A Preferred Stock shall, by virtue of such transaction and on
the same terms as apply to the holders of Common Stock, be converted into or
exchanged for the aggregate amount of stock, securities, cash or other property
(payable in kind) receivable by a holder of the number of shares of Common Stock
into which such shares of Series A Preferred Stock could have been converted
immediately prior to such transaction if such holder of Common Stock failed to
exercise any rights or election to receive any kind or amount of stock,
securities, cash or other property (other than such qualifying employer
securities and a cash payment, if applicable, in lieu of fractional shares)
receivable upon such transaction (provided that, if the kind or amount of
qualifying employer securities receivable upon such transaction is not the same
for each non-electing share, then the kind and amount so receivable upon such
transaction for each non-electing share shall be the kind and amount so
receivable per share by the plurality of the non-electing shares). The rights of
the Series A Preferred Stock as preferred stock of any such successor or
resulting corporation shall successively be subject to adjustments pursuant to
Section 9 hereof after any such transaction as nearly equivalent as practicable
to the adjustment provided for by such section prior to such transaction. The
Corporation shall not consummate any such merger, consolidation or similar
transaction unless all then outstanding shares of Series A Preferred Stock shall
be assumed and authorized by the successor or resulting corporation as
aforesaid.
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<PAGE>
(B) In the event that the Corporation shall consummate any consolidation or
merger or similar business combination pursuant to which the outstanding shares
of Common Stock are by operation of law exchanged for or changed, reclassified
or converted into other stock or securities or cash or any other property, or
any combination thereof, other than any such consideration which is constituted
solely of qualifying employer securities (as referred to in paragraph (A) of
this Section 8) and cash payments, if applicable, in lieu of fractional shares,
outstanding shares of Series A Preferred Stock shall, without any action on the
part of the Corporation or any holder thereof (but subject to paragraph (C) of
this Section 8), be automatically converted by virtue of such merger,
consolidation or similar transaction immediately prior to such consummation into
the number of shares of Common Stock into which such shares of Series A
Preferred Stock could have been converted at such time so that each share of
Series A Preferred Stock shall, by virtue of such transaction and on the same
terms as apply to the holders of Common Stock, be converted into or exchanged
for the aggregate amount of stock, securities, cash or other property (payable
in like kind) receivable by a holder of the number of shares of Common Stock
into which such shares of Series A Preferred Stock could have been converted
immediately prior to such transaction; provided, however, that if by virtue of
the structure of such transaction, a holder of Common Stock is required to make
an election with respect to the nature and kind of consideration to be received
in such transaction, which election cannot practicably be made by the holders of
the Series A Preferred Stock, then the shares of Series A Preferred Stock shall,
by virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in kind) receivable by a holder of
the number of shares of Common Stock into which such shares of Series A
Preferred Stock could have been converted immediately prior to such transaction
if such holder of Common Stock failed to exercise any rights of election as to
the kind or amount of stock, securities, cash or other property receivable upon
such transaction (provided that, if the kind or amount of stock, securities,
cash or other property receivable upon such transaction is not the same for each
non-electing share, then the kind and amount of stock, securities, cash or other
property receivable upon such transaction for each non-electing share shall be
the kind and amount so receivable per share by a plurality of the non-electing
shares).
(C) In the event the Corporation shall enter into any agreement providing
for any consolidation or merger or similar business combination described in
paragraph (B) of this Section 8, then the Corporation shall as soon as
practicable thereafter (and in any event at least ten (10) business days before
consummation of such transaction) give notice of such agreement and the material
terms thereof to each holder of Series A Preferred Stock and each such holder
shall have the right to elect, by written notice to the Corporation, to receive,
upon consummation of such transaction (if and when such transaction is
consummated), from the Corporation or the successor of the Corporation in
redemption and retirement of such Series A Preferred Stock, a cash payment equal
to the amount payable in respect of shares of Series A Preferred Stock upon
liquidation of the Corporation pursuant to Section 4 hereof. No such notice of
the redemption shall be effective unless given to the Corporation prior to the
close of business on the fifth business day prior to consummation of such
transaction, unless the Corporation or the successor of the Corporation shall
waive such prior notice, but any notice of redemption so given prior to
9
<PAGE>
such time may be withdrawn by notice of withdrawal given to the Corporation
prior to the close of business on the fifth business day prior to consummation
of such transaction.
Section 9. Anti-Dilution Adjustments.
(A) In the event the Corporation shall at any time or from time to time
while any of the shares of the Series A Preferred Stock are outstanding (i) pay
a dividend or make any other distribution in respect of the Common Stock in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock
into a greater number of shares or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, in each case whether by
reclassification of shares, recapitalization of the Corporation (including a
recapitalization effected by a merger or consolidation to which Section 8 hereof
does not apply) or otherwise, the Conversion Price in effect immediately prior
to such action shall be adjusted by multiplying such Conversion Price by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately before such event, and the denominator of which is the
number of shares of Common Stock outstanding immediately after such event. An
adjustment made pursuant to this paragraph 9(A) shall be given effect, upon
payment of such a dividend or other distribution, as of the record date for the
determination of stockholders entitled to receive such dividend or distribution
(on a retroactive basis) and in the case of a subdivision or combination shall
become effective immediately as of the effective date thereof.
(B) In the event that the Corporation shall at any time or from time to
time while any of the shares of Series A Preferred Stock are outstanding issue
to holders of shares of Common Stock as a dividend or other distribution,
including by way of a reclassification of shares or a recapitalization of the
Corporation, any right or warrant to purchase shares of Common Stock (but not
including as such right or warrant any security convertible into or exchangeable
for shares of Common Stock) at a purchase price per share less than the Fair
Market Value (as hereinafter defined) of a share of Common Stock on the date of
issuance of such right or warrant, then, subject to the provisions of paragraphs
(F) and (G) of this Section 9, the Conversion Price shall be adjusted by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately before such
issuance of rights or warrants plus the number of shares of Common Stock which
could be purchased at the Fair Market Value of a share of Common Stock at the
time of such issuance for the maximum aggregate consideration payable upon
exercise in full of all such rights or warrants, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the maximum number of shares of Common
Stock that could be acquired upon exercise in full of all such rights and
warrants whether or not such rights and warrants are fully exercisable at the
time of initial issuance.
(C) In the event the Corporation shall at any time or from time to time
while any of the shares of Series A Preferred Stock are outstanding issue, sell
or exchange shares of Common Stock (other than pursuant to any right or warrant
to purchase or acquire shares of Common Stock (including as such right or
warrant any security convertible into or exchangeable for shares of Common
Stock) and other than pursuant to any employee or director incentive or benefit
plan or arrangement or any stock option or stock incentive plan, including any
10
<PAGE>
employment, severance or consulting agreement, of the Corporation or any
subsidiary of the Corporation heretofore or hereafter adopted or entered into)
for a consideration having a Fair Market Value, on the date of such issuance,
sale or exchange, less than the Fair Market Value of such shares on the date of
issuance, sale or exchange, then, subject to the provisions of paragraphs (F)
and (G) of this Section 9, the Conversion Price shall be adjusted by multiplying
such Conversion Price by a fraction the numerator of which shall be the sum of
(i) the Fair Market Value of all the shares of Common Stock outstanding on the
day immediately preceding the first public announcement of such issuance, sale
or exchange plus (ii) the Fair Market Value of the consideration received by the
Corporation in respect of such issuance, sale or exchange of shares of Common
Stock, and the denominator of which shall be the product of (I) the Fair Market
Value of a share of Common Stock on the day immediately preceding the first
public announcement of such issuance, sale or exchange multiplied by (II) the
sum of the number of shares of Common Stock outstanding on such day plus the
number of shares of Common Stock so issued, sold or exchanged by the
Corporation.
(D) In the event the Corporation shall, at any time or from time to time
while any shares of Series A Preferred Stock are outstanding, issue, sell or
exchange any right or warrant to purchase or acquire shares of Common Stock
(including as such right or warrant any security convertible into or
exchangeable for shares of Common Stock), other than any such issuance to
holders of shares of Common Stock as a dividend or other distribution (including
by way of a reclassification of shares or a recapitalization of the Corporation)
and other than pursuant to any employee or director incentive or benefit plan or
arrangement or any stock option or stock incentive plan (including any
employment, severance or consulting agreement) of the Corporation or any
subsidiary of the Corporation heretofore or hereafter adopted or entered into,
for a consideration having a Fair Market Value, on the date of such issuance,
sale or exchange, less than the Non-Dilutive Amount (as hereinafter defined),
then, subject to the provisions of paragraphs (F) and (G) of this Section 9, the
Conversion Price shall be adjusted by multiplying such Conversion Price by a
fraction the numerator of which shall be the sum of (i) the Fair Market Value of
all the shares of Common Stock outstanding on the day immediately preceding the
first public announcement of such issuance, sale or exchange plus (ii) the Fair
Market Value of the consideration received by the Corporation in respect of such
issuance, sale or exchange of such right or warrant plus (iii) the Fair Market
Value at the time of such issuance of the consideration which the Corporation
would receive upon exercise in full of all such rights or warrants, and the
denominator of which shall be the product of (I) the Fair Market Value of a
share of Common Stock on the date immediately preceding the first public
announcement of such issuance, sale or exchange multiplied by (II) the sum of
the number of shares of Common Stock outstanding on such day plus the maximum
number of shares of Common Stock which could be acquired upon exercise in full
of all such rights and warrants whether or not such rights and warrants are
fully exercisable at the time of initial issuance.
(E) In the event the Corporation shall, at any time or from time to time
while any of the shares of Series A Preferred Stock are outstanding, make an
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend, distribution, reclassification of shares or
recapitalization of the Corporation (including a recapitalization or
reclassification effected by a merger or consolidation to which Section 8 hereof
does not apply) or effect a Pro Rata Repurchase (as hereinafter defined) of
Common Stock, the Conversion Price
11
<PAGE>
in effect immediately prior to such Extraordinary Distribution or Pro Rata
Repurchase shall, subject to paragraphs (F) and (G) of this Section 9, be
adjusted by multiplying such Conversion Price by the fraction the numerator of
which is (i) the product of (x) the number of shares of Common Stock outstanding
immediately before such Extraordinary Distribution or Pro Rata Repurchase
multiplied by (y) the Fair Market Value of a share of Common Stock on the day
before the ex-dividend date with respect to an Extraordinary Distribution which
is paid in cash and on the distribution date with respect to an Extraordinary
Distribution which is paid other than in cash, or on the applicable expiration
date (including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase, or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, minus (ii) the Fair Market
Value of the Extraordinary Distribution or the aggregate purchase price of the
Pro Rata Repurchase, as the case may be, and the denominator of which shall be
the product of (a) the number of shares of Common Stock outstanding immediately
before such Extraordinary Dividend or Pro Rata Repurchase minus, in the case of
a Pro Rata Repurchase, the number of shares of Common Stock repurchased by the
Corporation multiplied by (b) the Fair Market Value of a share of Common Stock
on the day before the ex-dividend date with respect to an Extraordinary
Distribution which is paid in cash and on the distribution date with respect to
an Extraordinary Distribution which is paid other than in cash, or on the
application expiration date (including all extensions thereof) of any tender
offer which is a Pro Rata Repurchase or on the date of purchase with respect to
any Pro Rata Repurchase which is not a tender offer, as the case may be. The
Corporation shall send each holder of Series A Preferred Stock (i) notice of its
intent to make any dividend or distribution and (ii) notice of any offer by the
Corporation to make a Pro Rata Repurchase, in each case at the same time as, or
as soon as practicable after, such offer is first communicated (including by
announcement of a record date in accordance with the rules of any stock exchange
on which the Common Stock is listed or admitted to trading) to holders of Common
Stock. Such notice shall indicate the intended record date and the amount and
nature of such dividend or distribution, or the number of shares subject to such
offer for a Pro Rata Repurchase and the purchase price payable by the
Corporation pursuant to such offer, as well as the Conversion Price and the
number of shares of Common Stock into which a share of Series A Preferred Stock
may be converted at such time.
(F) Notwithstanding any other provisions of this Section 9, the Corporation
shall not be required to make any adjustment to the Conversion Price unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the Conversion Price. Any lesser adjustment shall be carried forward and shall
be made no later than the time of, and together with, the next subsequent
adjustment which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least one percent (1%) in
the Conversion Price.
(G) If the Corporation shall make any dividend or other distribution on the
Common Stock or issue any Common Stock, other capital stock or other security of
the Corporation or any rights or warrants to purchase or acquire any such
security, which transaction does not result in an adjustment to the Conversion
Price pursuant to the foregoing provisions of this Section 9, the Board of
Directors of the Corporation shall consider whether such action is of such a
nature that an adjustment to the Conversion Price should equitably be made in
respect of such transaction. If in such case the Board of Directors of the
Corporation determines that an
12
<PAGE>
adjustment to the Conversion Price should be made, such adjustment shall be made
effective as of such date as is determined by the Board of Directors of the
Corporation. The determination of the Board of Directors of the Corporation as
to whether an adjustment to the Conversion Price should be made pursuant to the
foregoing provisions of this paragraph 9(G), and, if so, as to what adjustment
should be made and when, shall be final and binding on the Corporation and all
stockholders of the Corporation. The Corporation shall be entitled to make such
additional adjustments in the Conversion Price, in addition to those provided
for in the foregoing provisions of this Section 9, as shall be necessary in
order that any dividend or distribution in shares of capital stock of the
Corporation, subdivision, reclassification or combination of shares of stock of
the Corporation or any recapitalization of the Corporation shall not be taxable
to the holders of the Common Stock.
(H) For purposes of the provisions governing the Series A Preferred Stock,
the following definitions shall apply:
"Adjustment Period" shall mean the period of five (5) consecutive trading
days preceding, and including, the date as of which the Current Market Price or
Fair Market Value of a security is to be determined.
"Board of Directors" of the Corporation shall include a duly authorized and
appointed committee thereof.
"Business Day" shall mean each day that is not a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
"Current Market Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Corporation or any other
issuer for any day shall mean the last reported sale price, regular way, or, in
the event that no sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in either case as reported on the
principal national securities exchange on which such security is listed or
admitted to trading that is also the principal market for the Common Stock or,
if the principal market for such security is not a national securities exchange,
on the NASDAQ National Market System or, if such security is not quoted on such
National Market System, the average of the closing bid and asked prices on each
such day in the over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on any such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly making a market
in such security selected for such purpose by the Board of Directors of the
Corporation, in each case, on such trading day during the Adjustment Period.
"Extraordinary Distribution" shall mean any dividend or other distribution
to holders of Common Stock (effected while any of the shares of Series A
Preferred Stock are outstanding) (i) of cash, where the aggregate amount of such
cash dividends or other cash distributions together with the amount of all cash
dividends and other cash distributions made during the preceding period of 12
months, when combined with the aggregate amount of all Pro
13
<PAGE>
Rata Repurchases (for this purpose, including only that portion of the aggregate
purchase price of such Pro Rata Repurchase which is in excess of the Fair Market
Value of the Common Stock repurchased as determined on the applicable expiration
date (including all extensions thereof) of any tender offer or exchange offer
which is a Pro Rata Repurchase, or the date or purchase with respect to any
other Pro Rata Repurchase which is not a tender offer or exchange offer made
during such period), exceeds twelve and one-half percent (12 1/2%) of the
aggregate Fair Market Value of all shares of Common Stock outstanding on the day
before the ex-dividend date with respect to such Extraordinary Distribution
which is paid in cash and on the distribution date with respect to an
Extraordinary Distribution which is paid other than in cash, and/or (ii) of any
shares of capital stock of the Corporation (other than shares of Common Stock),
other securities of the Corporation (other than securities of the type referred
to in paragraphs (B) or (C) of this Section 9), evidence of indebtedness of the
Corporation or any other person or any other property (including shares of any
subsidiary of the Corporation) or any combination thereof. The Fair Market Value
of an Extraordinary Distribution for purposes of paragraph (D) of this Section 9
shall be equal to the sum of the Fair Market Value of such Extraordinary
Distribution plus the amount of any cash dividends which are not Extraordinary
Distributions made during such 12-month period and not previously included in
the calculation of an adjustment pursuant to paragraph (D) of this Section 9.
"Fair Market Value" shall mean, as to shares of Common Stock or any other
class of capital stock or securities of the Corporation or any other issuer
which are publicly traded, the average of the Current Market Prices of such
shares or securities for each day of the Adjustment Period.
The "Fair Market Value" of any security or of any other property which is
not publicly traded shall mean the fair value thereof as determined by an
independent investment banking or appraisal firm experienced in the valuation of
such securities or property selected in good faith by the Board of Directors of
the Corporation or, if no such investment banking or appraisal firm is in the
good faith judgment of the Board of Directors available to make such
determination, as determined in good faith by the Board of Directors of the
Corporation.
"Non-Dilutive Amount" in respect of an issuance, sale or exchange by the
Corporation of any right or warrant to purchase or acquire shares of Common
Stock (including any security convertible into or exchangeable for shares of
Common Stock) shall mean the remainder of (i) the product of the Fair Market
Value of a share of Common Stock on the day preceding the first public
announcement of such issuance, sale or exchange multiplied by the maximum number
of shares of Common Stock which could be acquired on such date upon the exercise
in full of such rights and warrants (including upon the conversion or exchange
of all such convertible or exchangeable securities), whether or not exercisable
(or convertible or exchangeable) at such date, minus (ii) the aggregate amount
payable pursuant to such right or warrant to purchase or acquire such maximum
number of shares of Common Stock; provided, however, that in no event shall the
Non-Dilutive Amount be less than zero. For purposes of the foregoing sentence,
in the case of a security convertible into or exchangeable for shares of Common
Stock, the amount payable pursuant to a right or warrant to purchase or acquire
shares of Common Stock shall be the Fair Market Value of such security on the
date of the issuance, sale or exchange of such security by the Corporation.
14
<PAGE>
"Pro Rata Repurchase" shall mean any purchase of shares of Common Stock by
the Corporation or any subsidiary thereof, whether for cash, shares of capital
stock of the Corporation, other securities of the Corporation, evidences of
indebtedness of the Corporation or any other person or any other property
(including shares of a subsidiary of the Corporation), or any combination
thereof, effected while any of the shares of Series A Preferred Stock are
outstanding, pursuant to any tender offer or exchange offer subject to Section
13(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or any successor provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that no purchase
of shares by the Corporation or any subsidiary thereof made in open market
transactions shall be deemed a Pro Rata Repurchase. For purposes of this
paragraph 9(G), shares shall be deemed to have been purchased by the Corporation
or any subsidiary thereof "in open market transactions" if they have been
purchased substantially in accordance with the requirements of Rule 10b-18 as in
effect under the Exchange Act on the date shares of Series A Preferred Stock are
initially issued by the Corporation or in such other terms and conditions as the
Board of Directors of the Corporation shall have determined are reasonably
designed to prevent such purchases from having a material effect on the trading
market for the Common Stock.
(I) Whenever an adjustment to the Conversion Price of the Series A
Preferred Stock is required pursuant to the terms hereof, the Corporation shall
forthwith place on file with the transfer agent for the Common Stock and the
Series A Preferred Stock, and with the Secretary of the Corporation, a statement
signed by two officers of the Corporation stating the adjusted Conversion Price
determined as provided herein and the resulting conversion rate of the Series A
Preferred Stock. Such statement shall set forth in reasonable detail such facts
as shall be necessary to show the reason and the manner of computing such
adjustment, including any determination of Fair Market Value involved in such
computation. Promptly after each adjustment to the Conversion Price of the
Series A Preferred Stock, the Corporation shall mail a notice thereof and of the
then prevailing conversion rate to each holder of shares of the Series A
Preferred Stock.
Section 10. Miscellaneous.
(A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt thereof
or three (3) business days after the mailing thereof if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms hereof) with postage prepaid, addressed: (i) if to the Corporation, to
its principal executive office (Attention: Secretary) or to the transfer agent
for the Series A Preferred Stock, or other agent of the Corporation designated
as permitted by this Resolution or (ii) if to any holder of the Series A
Preferred Stock or Common Stock, as the case may be, to such holder at the
address of such holder as listed in the stock record books of the Corporation
(which may include the records of any transfer agent for the Series A Preferred
Stock or Common Stock, as the case may be) or (iii) to such other address as the
Corporation or any such holder, as the case may be, shall have designated by
notice similarly given.
(B) The term "Common Stock" as used in this Resolution means the
Corporation's Common Stock, par value $0.10 per share, as the same exists at the
date of
15
<PAGE>
original issuance of the Series A Preferred Stock or any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that, at any time as a result of an
adjustment made pursuant to Section 9 hereof the holder of any share of the
Series A Preferred Stock upon thereafter surrendering such share for conversion,
shall become entitled to receive any shares or other securities of the
Corporation other than shares of Common Stock, the Conversion Price in respect
of such other shares or securities so receivable upon conversion of shares of
Series A Preferred Stock shall thereafter be adjusted, and shall be subject to
further adjustment from time to time, in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock
contained in Section 9 hereof, and the provisions of Sections 1 through 8 and 10
hereof with respect to the Common Stock shall apply on like or similar terms to
any such other shares or securities.
(C) The Corporation shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of shares
of Series A Preferred Stock or shares of Common Stock or other securities issued
on account of Series A Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Corporation shall not, however, be
required to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Series A Preferred Stock or
Common Stock or other securities in a name other than that in which the shares
of Series A Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
(D) In the event that a holder of shares of Series A Preferred Stock shall
not by written notice designate the name in which shares of Common Stock to be
issued upon conversion of such shares should be registered or to whom payment
upon redemption of shares of Series A Preferred Stock should be made or the
address to which the certificate or certificates representing such shares, or
such payment, should be sent, the Corporation shall be entitled to register such
shares, and make such payment, in the name of the holder of such Series A
Preferred Stock as shown on the records of the Corporation and to send the
certificate or certificates representing such shares, or such payment, to the
address of such holder shown on the records of the Corporation.
(E) The Corporation may appoint, and from time to time discharge and
change, a transfer agent for the Series A Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send notice
thereof by first-class mail, postage prepaid, to each holder of record of Series
A Preferred Stock.
3. The aggregate number of shares of such series established and designated
by (a) such resolution, (b) all prior statements, if any, filed under the
Pennsylvania Business Corporation Law with respect thereto, and (c) any other
provision of the Articles of Incorporation is 500,030.
16
<PAGE>
4. The foregoing resolution was adopted, and the filing of this Statement
Affecting Class or Series of Shares was authorized, by the Board of Directors of
the Corporation at a duly called meeting held on the 19th day of June, 1989.
17
<PAGE>
IN WITNESS WHEREOF, this Corporation has caused this Statement Affecting
Class or Series of Shares to be executed by a duly authorized officer and its
corporate seal, duly attested by another such officer, to be hereunto affixed
this 19th day of June, 1989.
BETZ LABORATORIES, INC.
(Corporate Seal)
By: /s/ William C. Brafford
-------------------------------
William C. Brafford
Vice President
ATTEST:
/s/ Peter D. Heinz
- -------------------
Peter D. Heinz,
Assistant Secretary
18
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT to the Employment Agreement dated March 6, 1998 (the
"Employment Agreement") is made and entered into to be effective as of March 6,
1998 by and between BETZDEARBORN INC., a Pennsylvania corporation (hereinafter
called the "Company") and _______________, an individual (hereinafter called the
"Employee").
WITNESSETH:
WHEREAS, the Company and the Employee desire to amend the Employment
Agreement as set forth below;
NOW, THEREFORE, the Company and the Employee hereby mutually agree as
follows:
1. The first sentence of Section 5 of the Employment Agreement is hereby
amended to read in its entirety as follows:
The Company shall further provide the Employee with all health
and life insurance coverages, sick leave and disability programs,
tax-qualified and non-tax-qualified retirement and savings plans,
stock option plans, paid holidays and vacations, expense
reimbursement policies, moving and relocation policies,
perquisites, and such other fringe benefits of employment as the
Company may generally provide from time to time to actively
employed senior executives of the Company who are similarly
situated.
2. Clause (D) of Section 6(a)(2) of the Employment Agreement is hereby
amended to read in its entirety as follows:
Misappropriation by the Employee of any material funds, property
or rights of the Company
3. Clause (A) of Section 7(c)(3)(ii) of the Employment Agreement is hereby
amended to read in its entirety as follows:
the incentive bonus that would have been payable for the fiscal
year which includes the Date of Termination under the incentive
bonus program in effect as of the date of the Change of Control,
assuming that the Employee had been entitled to receive an amount
in respect of such bonus based solely upon the target percentage
applicable to employees in the same employment grade as the
Employee and the Employee's Base Salary as of the Date of
Termination (or if greater, the Employee's Base Salary as of the
date on which occurred an event giving rise to a termination for
Good Reason), and without regard to actual performance, and
<PAGE>
4. The second sentence of Section 8(e) of the Employment Agreement is
hereby amended by deleting the word "either."
5. The last sentence of Section 13 of the Employment Agreement is hereby
deleted in its entirety.
6. Except as specifically set forth in this Amendment, the Employment
Agreement is ratified and confirmed without amendment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BETZDEARBORN INC.
By:
-------------------------------
Title:
----------------------------
ATTEST:
- -------------------------------
Title:
------------------------
[CORPORATE SEAL]
EMPLOYEE
-----------------------------------
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 280
<ALLOWANCES> 7
<INVENTORY> 96
<CURRENT-ASSETS> 441
<PP&E> 862
<DEPRECIATION> 453
<TOTAL-ASSETS> 1,393
<CURRENT-LIABILITIES> 174
<BONDS> 680
6
0
<COMMON> 3
<OTHER-SE> 452
<TOTAL-LIABILITY-AND-EQUITY> 1,393
<SALES> 619
<TOTAL-REVENUES> 619
<CGS> 254
<TOTAL-COSTS> 254
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 53
<INCOME-TAX> 19
<INCOME-CONTINUING> 34
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.01
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