SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BETZDEARBORN INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
SAME
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ Fee paid previously with preliminary materials.
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
1998
Notice of
Annual Meeting
and
Proxy Statement
[BETZDEARBORN LOGO]
<PAGE>
/X/ PLEASE VOTE
Whether or not you plan to attend the annual
meeting, your vote is important. To ensure
that your shares will be represented, please
complete, sign, date, and mail your proxy
card in the enclosed postage paid envelope.
ANNUAL REPORTS
The Company's most recent Annual Report on
Form 10-K, including the financial statements
and schedules filed with the SEC, is available
upon written request and without charge. To
receive a copy, direct your request to either
George L. James III, senior vice president and chief
financial officer, or Linda R. Hansen, vice
president, secretary and general counsel, at the
corporate world headquarters address.
<PAGE>
CONTENTS
PAGE
----
A MESSAGE FROM THE CHAIRMAN................................. 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS.................... 3
PROXY STATEMENT............................................. 4
/x/ Proposal No. 1: Election of Directors............... 5
Board Committees and Director Meetings.............. 8
Information Relating to Executive Officers.......... 9
Ownership of Company Shares......................... 10
Compensation Committee Report on Executive 12
Compensation........................................
Executive Compensation.............................. 15
/x/ Proposal No. 2: Approval of Increase in Number of
Authorized Shares of Common Stock................... 21
/x/ Proposal No. 3: Amendments to the Bylaws........... 22
/x/ Proposal No. 4: Ratification of Independent
Auditors........................................... 25
OTHER MATTERS...................................... 26
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EXHIBIT A: PROPOSED AMENDMENT TO ARTICLE 5 OF THE
RESTATED ARTICLES OF INCORPORATION.... A-1
EXHIBIT B1: PROPOSED SECTION 4.01(B) OF THE
BYLAWS................................. B1-1
EXHIBIT B2: PROPOSED ARTICLE VII OF THE BYLAWS..... B2-1
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/x/ To be voted on at the meeting.
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[BETZDEARBORN LOGO] WILLIAM R. COOK
Chairman of the Board
President
Chief Executive Officer
BETZDEARBORN INC.
4636 Somerton Road
PO Box 3002
Trevose, PA 19053-6783
215 355-3300
215 953-2484 Fax
March 9, 1998
DEAR SHAREHOLDER:
You are cordially invited to attend the Company's Annual Meeting to be held
Thursday, April 9, 1998, at our Corporate World Headquarters in Trevose,
Pennsylvania. The meeting will begin with introductions of the nominee for
Director and continuing Directors, followed by voting on the four proposals and
other matters properly brought before the Meeting. We will then conclude with a
report on Company operations.
In addition to electing a Director and ratifying the appointment of Ernst &
Young LLP as independent auditors for the Company, you are being asked to
consider and approve an amendment to the Company's Restated Articles of
Incorporation and amendments to the Company's Bylaws. The Board of Directors
believes these proposals are in the best interest of the Company and its
shareholders and recommends a vote FOR each of the proposals. They are more
fully described in the accompanying Proxy Statement, which you are encouraged to
read carefully.
Your Board of Directors and Management look forward to personally greeting you
on April 9th. If you will not be able to attend the Annual Meeting, we urge you
to exercise your right to vote by promptly completing and returning your signed
proxy card in the envelope provided.
Thank you for your cooperation and continued support.
Sincerely,
/s/ William R. Cook
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WILLIAM R. COOK
Chairman of the Board,
President and Chief Executive Officer
Shaping the Future of Water & Process Treatment
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<PAGE>
[BETZDEARBORN LOGO] LINDA R. HANSEN
Vice President, Secretary
and General Counsel
BETZDEARBORN INC.
4636 Somerton Road
P.O. Box 3002
Trevose, PA 19053-6783
215-953-5707
215-953-5536 Fax
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
March 9, 1998
DEAR SHAREHOLDER,
The 1998 Annual Meeting of Shareholders of BetzDearborn Inc. will be held in the
Corporate Training Facility at BetzDearborn World Headquarters, 4636 Somerton
Road, Trevose, Pennsylvania, on Thursday, April 9, 1998 at 11:00 a.m. Daylight
Savings Time, for the following purposes:
1. To elect one Director as a member of a class for a term of three years;
2. To approve an amendment to the Company's Restated Articles of
Incorporation to increase the number of shares of Common Stock
authorized for issuance from 90,000,000 to 250,000,000 shares;
3. To approve amendments of the Company's Bylaws regarding Director
liability and indemnification of Directors, officers and other
authorized representatives;
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for 1998; and
5. To consider and transact such other business as may properly come before
the Meeting or any adjournment thereof.
Shareholders of record at the close of business on February 20, 1998, will be
entitled to vote at the meeting and any adjournments. It is important that your
shares be represented and voted, and you are cordially invited to attend the
meeting. WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE VOTE, SIGN, DATE, AND
RETURN THE ENCLOSED, PROXY OR CONFIDENTIAL INSTRUCTION CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES.
Very truly yours,
/s/ Linda R. Hansen
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LINDA R. HANSEN
Secretary
Shaping the Future of Water & Process Treatment
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<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors ("Board") of BetzDearborn Inc. for use at the
1998 Annual Meeting of Shareholders and any adjournments thereof. Distribution
of this Proxy Statement and the enclosed proxy card is scheduled to begin on or
about March 9, 1998.
A Proxy may be revoked by a shareholder before it is exercised by notifying
the Secretary of the Company prior to the Meeting or by voting in person at the
Meeting. In the absence of voting instructions for one or more of the proposals
listed on the Proxy, the Proxy will be voted FOR those proposals. As to any
other matters that may properly come before the Meeting, the persons named in
the Proxy will consult with the entire Board (including the nominee) and use
their discretion in voting upon such matters.
Solicitations may be made by mail, personal interview, and telephone by
officers and regular employees of the Company, not exceeding twenty-five in
number, who will receive no additional compensation therefor. The Company may
request, and reimburse reasonable out-of-pocket expenses, of banks, brokers and
other nominees to forward proxy materials to the beneficial owners of shares
held of record. Additionally, the Company has retained D.F. King & Co., Inc. to
assist with the solicitation of proxies from brokerage firms and banks. The
Company will pay D.F. King & Co., Inc. a fee of $5,500 and reimburse them for
their actual expenses in rendering this service.
Only holders of record of the Company's common and preferred shares at the
close of business on February 20, 1998, will be entitled to receive notice of,
and vote at, the Meeting. Each such shareholder is entitled to one vote for each
share held of record on all business that comes before the Meeting. Cumulative
voting in the election of Directors is not permitted. On February 20, 1998,
there were 29,535,377 common shares and 474,400 preferred shares of the Company
issued and outstanding.
The Company's Annual Report for 1997, on which no action will be asked by
the Board, is enclosed with this Proxy Statement. It is not to be regarded as
proxy solicitation material.
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PROPOSAL NO. 1: ELECTION OF DIRECTORS
Under the Company's Bylaws, the Board consists of not less than five or
more than thirteen Directors divided into three classes approximately equal in
number. Normally, the Directors of one class stand for election to three-year
terms at each Annual Meeting, with the result that each class stands for
election once every three years. This year's Meeting will relate to the election
of one Director to a class for a three-year term expiring in 2001.
The class of Directors whose term of office will expire at the 1998 Annual
Meeting consists of Ms. Carolyn S. Burger, Geoffrey Stengel, Jr., and John G.
Drosdick. Ms. Burger and Mr. Stengel have elected not to stand for reelection.
Mr. Drosdick was appointed by the Board on December 11, 1997, to fill the
unexpired term of deceased Director George A. Butler. As a consequence, the
Company will reduce the size of the Board from eleven to nine Directors until
such time as successors may be elected. Unless otherwise instructed, the persons
named in the enclosed Proxy will vote shares subject to a valid Proxy in favor
of the election of Mr. Drosdick.
The Board knows of no reason why such nominee may be unable to serve as a
Director. If the nominee should become unable to serve, the persons named in the
Proxy, after consultation with the full Board, will exercise their discretion in
voting for such person or persons as the Board may recommend.
The following information is furnished with respect to the nominee for
election and each of the continuing Directors of the Company. The information
includes age, period served as Director, business experience during the past
five years, and other directorships.
Nominee for Term Expiring in 2001:
John G. Drosdick, age 54, was appointed a Director of the Company
[PHOTO] in December, 1997. He has been a Director and President and Chief
Operating Officer of Sun Company, Inc. since 1996. Previously, he
was President and Chief Operating Officer of Ultramar Corporation
from 1990 to 1996. Mr. Drosdick also serves as a Director of
Ultramar Corporation.
The Board of Directors recommends that the
shareholders vote FOR the nominee.
Directors Whose Terms Will Expire in 1999:
John W. Boyer, Jr., age 69, was elected a Director of the Company
[PHOTO] in 1981. He has been a Director of the Philadelphia Suburban
Corporation since 1981. Previously, he was Chairman of the
Philadelphia Suburban Corporation from 1992 to 1993 and Chairman
and President from 1981 to 1992. Mr. Boyer also serves as a
Director of Salient 3 Corporation and Rittenhouse Trust Company.
He is a Trustee of Eastern College and serves as Chairman of its
Finance Committee.
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<PAGE>
Patrick F. Brennan, age 66, was elected a Director of the Company
[PHOTO] in 1992. He has been a Director of Consolidated Papers, Inc.
since 1987, President and Chief Operating Officer from 1988 to
1996 and President, Chief Executive Officer and Chief Operating
Officer from 1993 to 1996. Mr. Brennan is also a Director of
Northland Cranberries, Inc. and Wisconsin Manufacturers and
Commerce.
William R. Cook, age 54, was elected Chairman of the Board of the
[PHOTO] Company in 1996. He has been Chief Executive Officer of the
Company since 1994, President since 1990 and a Director since
1989. Mr. Cook has been Chairman of the BetzDearborn Paper
Process Group Inc. since 1990 and served as Chairman of the
BetzDearborn Hydrocarbon Process Group Inc. from 1991 to 1994 and
Chairman of Betz Entec, Inc. from 1992 to 1994. Mr. Cook is also
a Director of Dynatech Corporation and the Chemical Manufacturers
Association.
Alan R. Hirsig, age 58, was elected Director of the Company in
[PHOTO] 1995. He has been President and Chief Executive Officer of ARCO
Chemical Company since 1991 and a Director since 1989. He is a
Director of Philadelphia Suburban Corporation and Greater
Philadelphia First. Mr. Hirsig is a Trustee of Bryn Mawr College
and the YMCA of Philadelphia and vicinity, and also serves as
Chairman of the Chemicals Manufacturers Association and Chairman
of the Advisory Board of PRIME, Inc.
John A.H. Shober, age 64, was elected a Director of the Company
[PHOTO] in 1987. He has been a Director of Penn Virginia Corp. since
1989, Vice Chairman of the Board of Directors from 1992 to 1996,
and President and Chief Executive Officer from 1989 to 1992. He
is a Director of MIBRAG mbH, Ensign-Bickford Industries, Inc.,
Airgas, Inc., Anker Coal Group, Inc., CD Technologies, Inc.,
First Reserve Corporation and the Eisenhower Exchange
Fellowships, Inc.
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<PAGE>
Directors Whose Terms Will Expire in 2000:
John F. McCaughan, age 62, was elected a Director of the Company
[PHOTO] in 1972. He was Chairman of the Board from 1982 to 1996, Chief
Executive Officer from 1982 to 1993 and President of the Company
from 1987 to 1989. Mr. McCaughan serves as a Director of
Philadelphia Suburban Corporation, Penn Mutual Life Insurance
Company and the YMCA of Philadelphia and vicinity. He also is a
Trustee of the Doylestown Hospital Foundation.
John Quarles, age 62, was elected a Director of the Company in
[PHOTO] 1992. Since 1977, he has been a partner in the law firm of
Morgan, Lewis and Bockius where he heads the firm's environmental
practice group. Mr. Quarles is a former Chairman of the Firm and
currently is a member of the firm's Executive Committee. Mr.
Quarles also is a Director of the Christian Broadcasting Network
and a former Director of the Environmental Law Institute.
Robert L. Yohe, age 61, was elected a Director of the Company in
[PHOTO] 1991. Since 1995, he has been an independent corporate director
and advisor. Mr. Yohe was Vice Chairman of Olin Corporation from
1993 to 1994 after serving as Executive Vice President from 1987
to 1993. He was a Director of Olin Corporation from 1990 to 1994.
Mr. Yohe serves as a Director of Airgas, Inc., Calgon Carbon
Corporation, LaRoche Industries Inc., Marsolex Inc. and The
Middleby Corporation. He also is a Trustee of Lafayette College.
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<PAGE>
BOARD COMMITTEES AND DIRECTOR MEETINGS
The Board held six regular meetings during 1997. All Directors attended at
least 75% of the aggregate of all meetings of the Board of Directors and
committees on which they served during 1997.
As of January 1, 1998, there are four standing committees of the Board of
Directors: Audit Committee, Corporate Governance Committee, Environmental,
Health and Safety Committee, and Executive Compensation and Retirement
Committee.
THE AUDIT COMMITTEE reviews the qualifications and independence of the
Company's independent auditors and recommends a firm to the Board for election
by the shareholders. The Audit Committee also considers and approves the range
of audit and nonaudit fees, the scope of nonaudit services performed by
independent auditors, and the annual compensation of the independent auditors.
With the assistance of the Company's independent auditors and internal auditors,
the Committee also reviews the Company's internal accounting policies and
procedures. The Audit Committee, which presently consists of Directors Brennan,
Boyer, Drosdick, and Shober, met two times during 1997.
THE CORPORATE GOVERNANCE COMMITTEE evaluates and recommends to the full
Board the slate of Directors to be submitted to the shareholders at the Annual
Meeting as well as candidates to be appointed by the Board to fill vacancies
that may occur from time to time. It also recommends to the Board the slate of
Directors for Committee assignments and the election of the Chairman of each
Committee. The Corporate Governance Committee evaluates director compensation
methods in order to attract and retain qualified Directors and ensure that the
Company remains competitive with similarly situated corporations. In considering
candidates for nomination as a Director, the Corporate Governance Committee will
consider individuals suggested by shareholders of the Company. Shareholders
wishing to suggest an individual for consideration as a Director should submit
the candidate's name and complete biographical resume to the Committee's
Chairman, BetzDearborn Inc., 4636 Somerton Road, Trevose, PA 19053. All
shareholder suggestions must be received by November 9 immediately preceding the
Annual Meeting, at which such nominee would be eligible for election to be
considered for recommendation by the Corporate Governance Committee. The
Corporate Governance Committee, which presently consists of Directors Boyer,
McCaughan, Quarles, and Shober, met two times during 1997.
THE ENVIRONMENTAL, HEALTH AND SAFETY COMMITTEE is a new standing committee
of the Board which was established effective January 1, 1998, to determine the
appropriateness and adequacy of the Company's global environmental, health and
safety policies and programs. This committee monitors the Company's conformance
with corporate policies and applicable laws and regulations. It assesses the
effectiveness of the Company's internal Environmental, Health and Safety audit
program; waste minimization efforts; remediation of waste sites, and the
Company's policies, procedures and practices relating to the protection of the
environment and the health and safety of employees, customers, contractors, and
the public. The Environmental, Health and Safety Committee also monitors
scientific, legislative, and judicial developments and their effect on the
Company's environmental, health and safety practices. The Environmental, Health
and Safety Committee presently consists of Directors Hirsig, Quarles, and Yohe.
THE EXECUTIVE COMPENSATION AND RETIREMENT COMMITTEE is the successor to the
former Executive Compensation and Employee Benefits Committee. Effective January
1, 1998, the Retirement and Stock Bonus Plan Committee was dissolved and its
duties delegated to the Executive Compensation and Employee Benefits Committee,
which was renamed the Executive Compensation and Retirement Committee. The
Committee fixes the individual compensation rates for corporate senior officers
and presidents of subsidiaries and divisions following consultation with the
chief executive officer; makes recommendations to the Board regarding any plan
that affects only senior management as well as significant changes to executive
benefit plans; reviews employee benefit plans with the Board and apprises the
Board of any significant changes and additions to existing benefits that should
be considered; oversees the funding of the Company's retirement and 401(k)/ESOP
Plans in the United States and monitors pension fund performance in other
countries; appoints and monitors the
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<PAGE>
performance of trustees and fund managers; retains investment consultants to
evaluate investment performance; and defines investment policies and performance
indices for each of the plans it oversees. The Executive Compensation and
Retirement Committee, which presently consists of Directors Brennan, Drosdick,
Hirsig, and Yohe, met three times in 1997. The Retirement and Stock Bonus Plan
Committee met two times in 1997 before it was dissolved and its duties delegated
to the Executive Compensation and Retirement Committee.
EXECUTIVE OFFICERS
The following information is furnished with respect to each of the
executive officers of the Company. The information includes age, position or
office with the Company and business experience during the past five years. Each
executive officer is elected annually to the positions and offices held with the
Company.
<TABLE>
<S> <C>
Linda R. Hansen Ms. Hansen, age 50, has been Vice President, Secretary and
General Counsel of the Company since 1997. Previously, Ms.
Hansen was Senior Vice President, General Counsel and
Assistant Secretary for Fisher Scientific Company from 1995
to 1997 and Vice President, General Counsel and Secretary
of Curtin Matheson Scientific, Inc. from 1987 to 1995.
Richard A. Heberle Mr. Heberle, age 58, has been Group Vice President of the
Company since 1998. Previously, he was Senior Vice
President of the Company from 1995 to 1998 and President of
Betz International, Inc. from 1980 to 1994.
John L. Holland Mr. Holland, age 55, has been Group Vice President of the
Company since 1998 and President of the BetzDearborn Water
Management Group since 1995. He was Senior Vice President
of the Company from 1995 to 1998, President of the
BetzDearborn Paper Process Group Inc. from 1994 to 1995 and
President of Betz Canada Inc. from 1991 to 1994.
George L. James III Mr. James, age 51, has been Senior Vice President and Chief
Financial Officer of the Company since 1997. He was Vice
President and Chief Financial Officer from 1995 to 1997 and
Treasurer of the Company from 1995 to 1996. Previously, Mr.
James was Vice President, Corporate Development and
Planning of Scott Paper Company from 1994 to 1995 and Vice
President, Corporate Finance, Planning and Analysis of
Scott Paper Company from 1992 to 1994.
Ronald A. Kutsche Mr. Kutsche, age 55, has been Group Vice President of the
Company since 1998 and President of the BetzDearborn Paper
Process Group Inc. since 1995. Since 1994, he has been
Chairman of the BetzDearborn Metals Process Group.
Previously, he was Senior Vice President of the Company
from 1995 to 1998, and served as Chairman of the
BetzDearborn Hydrocarbon Process Group Inc. from 1994 to
1995, President of the BetzDearborn Hydrocarbon Process
Group Inc. from 1990 to 1995, Chairman of Betz Energy
Chemicals, Inc. in 1994, and President of Betz Energy
Chemicals, Inc. from 1990 to 1994.
Larry V. Rankin Mr. Rankin, age 54, has been Senior Vice President of the
Company since 1988 and Chairman of BetzDearborn Canada Inc.
since 1990. Previously, he was Chairman of Betz
International, Inc. and Chairman of Betz Europe, Inc. from
1987 to 1996.
</TABLE>
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OWNERSHIP OF COMPANY SHARES
The following table includes information regarding beneficial ownership of
the Company's common stock by owners of more than 5% of such shares.
<TABLE>
<CAPTION>
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NAMES AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS OUTSTANDING
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<S> <C> <C> <C>
Common Stock Scudder, Stevens & Clark, Inc. 2,895,914 9.80%
345 Park Avenue
New York, NY 10154
Common Stock The Regents of 1,573,500 5.33%
the University of California
300 Lakeside Drive
Oakland, CA 94612
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</TABLE>
The Company is not aware of any other person or group which is the
beneficial owner of more than 5% of the Company's common shares or preferred
shares.
The table below includes information regarding beneficial ownership of the
Company's shares by each Director, nominee and named executive officer as
defined below, and for all Directors and executive officers of the Company as a
group as of February 20, 1998. Unless otherwise indicated in the footnotes, each
individual exercises sole voting and investment power over all common shares set
forth opposite his or her name.
<TABLE>
<CAPTION>
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COMMON PERCENT OF DEFERRED PLAN PERCENT OF
SHARES(1) CLASS OUTSTANDING SHARES(2) CLASS OUTSTANDING
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<S> <C> <C> <C> <C>
John W. Boyer, Jr................... 1,700 * 507 *
Patrick F. Brennan.................. 2,200 * 1,766 *
Carolyn S. Burger................... 600 * 507 *
William R. Cook..................... 45,040(3) * -- *
John G. Drosdick.................... 1,000 * 125 *
Richard A. Heberle.................. 17,755(3) * -- *
Alan R. Hirsig...................... 2,000 * 507 *
John L. Holland..................... 10,711(3) * -- *
George L. James III................. 7,955 * s -- *
Ronald A. Kutsche................... 10,098(3) * -- *
John F. McCaughan................... 44,249(4) * -- *
John Quarles........................ 1,700 * 2,000 *
Larry V. Rankin..................... 18,281(3) * -- *
John A.H. Shober.................... 3,500 * 507 *
Geoffrey Stengel, Jr................ 2,200 * 507 *
Robert L. Yohe...................... 2,000 * 1,766 *
All Directors and executive officers
as a group (17 persons)........... 168,622 * 8,192 *
</TABLE>
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* Indicates ownership of less than 1% of the class outstanding.
(1) The numbers shown include shares granted subject to forfeiture and
restrictions on transfer pursuant to the Company's Employee Stock Incentive
Plan over which the persons named have voting power as follows: Mr. Cook,
19,992 shares; Mr. Heberle, 4,355 shares; Mr. Holland, 4,119 shares; Mr.
Kutsche, 5,013 shares; Mr. Rankin, 4,758 shares; all Directors and executive
officers as a group
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(17 persons), 41,495 shares. Also included is each person's respective
interest in certain shares held by the Trustee of the Company's Employee
Stock Ownership and 401(k) Plan over which such persons have voting and
investment power: Mr. Cook, 726 shares; Mr. Heberle, 495 shares; Mr.
Holland, 148 shares; Mr. Kutsche, 181 shares; Mr. Rankin, 2,762 shares; all
Directors and executive officers as a group (17 persons), 15,170 shares. Not
included are shares which may be acquired upon the exercise of stock options
granted under the BetzDearborn Inc. Stock Option Plan of 1981 and the
BetzDearborn Inc. Stock Option Plan of 1987 over which the named individuals
have neither voting nor investment power until exercise of the options: Mr.
Cook, 138,874 shares; Mr. Heberle, 37,253 shares; Mr. Holland, 37,394
shares; Mr. Kutsche, 55,754 shares; Mr. Rankin, 56,943 shares; all Directors
and executive officers as a group (17 persons), 484,280 shares.
(2) Deferred Plan shares represent shares of common stock of the Company
hypothetically purchased by the persons named under the Company's Directors'
Deferred Compensation Plan. Such Plan provides that Directors who are not
employees of the Company may elect to defer all or any portion of their
compensation earned as a Director and invest such amount in shares of common
stock of the Company. Common stock so invested is adjusted to reflect stock
dividends and splits; however, upon retirement, payments of deferred
compensation are made in cash.
(3) Does not include interest in shares of preferred stock over which the
persons named have voting power only as follows: Mr. Cook, 261 shares; Mr.
Heberle, 238 shares; Mr. Holland, 202 shares; Mr. Kutsche, 235 shares; and
Mr. Rankin, 258 shares.
(4) Does not include 200 shares held by Mr. McCaughan's wife for herself or as a
trustee or 280 shares held by his mother for herself with respect to which
Mr. McCaughan disclaims beneficial ownership.
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REMUNERATION OF DIRECTORS
Each Director who is not an employee of the Company ("Outside Director")
receives an annual retainer in the form of 500 shares of the Company's common
stock granted without restrictions under the Employee Stock Incentive Plan as
compensation for Board Committee assignments and meetings. Outside Directors are
paid a fee of $1,500 for each Board Meeting attended. Committee Chairs are paid
an annual retainer of $3,000, and the Chairs and each Committee member are paid
a fee of $1,000 for each Committee Meeting attended. In addition, each Director
is granted annually an option to purchase 1,000 shares of the Company's common
stock according to the Company's Stock Option Plan of 1987. Directors who are
employees of the Company are not paid any fees.
Outside Directors are also eligible to participate in the Company's
Directors' Deferred Compensation Plan in which they may elect to defer some or
all of their compensation.
In order to reinforce the importance of aligning Director interest with
shareholder value, the Board requires each Outside Director to acquire and
maintain ownership of shares of Company common stock equal to not less than
$100,000 in value within a predetermined period of initial election to the
Board.
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Mr. Quarles is a partner in the law firm of Morgan, Lewis and Bockius which
provided legal services to the Company in 1997.
11
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation and Retirement Committee, which is comprised
entirely of nonemployee Directors, establishes base compensation rates for the
Company's executive officers, and approves awards under the Company's Employee
Stock Incentive Plan and Stock Option Plan of 1987, among other duties. This
report addresses the Company's compensation policies for 1997 as they affected
the Chief Executive Officer, the five executive officers who were the Company's
most highly paid executives in 1997 (collectively, with the Chief Executive
Officer, the "Named Executive Officers"), and the other executive officers of
the Company.
COMPENSATION PHILOSOPHY
The Committee's executive compensation policies are designed to provide
competitive compensation opportunities, to reward executives consistent with the
Company's performance, to recognize individual performance and responsibility,
to assist the Company in attracting and retaining qualified executives and, most
importantly, to underscore the importance of total shareholder return. The
principal elements of compensation are base salaries, annual cash bonuses, and
long-term stock-based incentives. By design, the variable or at-risk components
of compensation are proportionately greater for senior executives, in
recognition of their greater potential impact on the Company's results.
All compensation decisions are determined following a detailed review of
many factors that the Committee believes are relevant, including the Company's
achievements over the past year, external competitive data, each individual's
contributions to the Company's success, significant changes in roles or
responsibilities, and the internal equity of pay relationships.
While total compensation opportunities for the Named Executive Officers are
targeted to be consistent with median levels of competitive compensation for
executives with comparable responsibilities in similarly sized specialty
chemical and diversified industrial firms, the actual compensation earned in any
particular year may be more or less than the competitive median, depending upon
shareholder returns, the Company's performance, and individual contributions.
Total compensation opportunities for the Named Executive Officers are adjusted
over time as appropriate to satisfy these objectives.
The competitiveness of the Company's total compensation program --
incorporating base salaries, annual cash bonuses, and long-term stock-based
incentives -- is assessed regularly with the assistance of the Committee's
independent compensation consultant. Data for these comparisons is drawn from
national compensation surveys of both specialty chemical and diversified
industrial firms, as well as from a detailed competitive assessment of the proxy
statements of a peer group of specialty chemical manufacturers. The firms
represented in the compensation peer group (firms in the Value Line Specialty
Chemical Index) are the same as those employed in the performance graph. The
median annual revenue and market capitalization of the firms in the compensation
peer group are comparable to that of the Company.
BASE SALARY
Base salaries for all Named Executive Officers, including the Chief
Executive Officer, are reviewed annually by the Committee. In determining
appropriate base salaries, the Committee considers external competitiveness, the
roles and responsibilities of the individual, the internal equity of pay
relationships, and the contributions of the individual to the Company's success.
ANNUAL CASH BONUS INCENTIVES
The Committee believes that executives should be rewarded for their
contributions to the annual success of the Company and, as such, administers the
Performance Incentive Compensation Plan. Awards paid under the Plan reflect the
degree to which the Company meets or exceeds certain predetermined financial
objectives, as measured by results from operations. Threshold levels of
performance, below which no awards will be paid, have been established. Awards
may be adjusted to reflect individual contributions to the Company's success.
All Named Executive Officers, including the Chief Executive Officer, are
eligible to participate in this program.
12
<PAGE>
LONG-TERM STOCK-BASED INCENTIVES
The Company believes that it is essential to strongly link executive,
employee, and shareholder interests. To meet this objective, the Committee
administers the Stock Option, the Stock Incentive Plan, and the Employee Stock
Purchase Plan to help attract, retain, and motivate executives and other
employees by providing them with an opportunity to share in the Company's
success.
STOCK OWNERSHIP GUIDELINES: The Committee has determined that it is in the
interest of the Company and the shareholders to require approximately eighty of
the Company's most senior employees, including each Named Executive Officer and
the Chief Executive Officer, to acquire and maintain ownership of significant
amounts of Company stock. Ownership requirements are based on the employee's
roles and responsibilities, and they range from 50% of base salary up to 400% of
base salary for the Chief Executive Officer. In addition, each nonemployee
Director is required to acquire and maintain ownership of shares of Company
common stock of a value not less than $100,000. These ownership requirements are
to be achieved over predetermined time periods and are to be maintained
thereafter. Each of the Named Executive Officers, including the Chief Executive
Officer, and each nonemployee Director, has met or has made substantial progress
towards meeting the ownership requirements.
STOCK OPTION PLAN: In determining individual awards under the Stock Option
Plan of 1987, the Committee considers the extremely competitive market, the
contributions of the individual to the success of the Company, and the need to
retain the individual over time. A significant proportion of the Company's
employees, including all Named Executive Officers and the Chief Executive
Officer, are eligible to participate in this program. The Committee believes
that broad-based equity incentive opportunities are an important element of a
shareholder-focused compensation strategy. In any given year, the total number
of shares awarded under this Plan may vary based on a number of factors,
including business conditions, Company performance, and stock appreciation.
STOCK INCENTIVE PLAN: The Committee also administers the Stock Incentive
Plan, which provides for restricted stock awards. Named Executive Officers,
including the Chief Executive Officer and other officers, are annually eligible
for a restricted stock award that will vest either on the fifth anniversary of
its grant, or earlier upon the achievement of predetermined Company performance
objectives. The Committee strongly believes that this program provides a strong
link between executive compensation and total shareholder return, Company
performance, and individual contribution.
ACQUISITION INCENTIVE COMPENSATION PLAN: The Company's 1996 acquisition of
Dearborn provided shareholders with substantial opportunities. To help ensure
that these opportunities were realized in a timely fashion, the Committee
implemented a one-time Acquisition Incentive Compensation Plan. Under this Plan,
Named Executive Officers, including the Chief Executive Officer and other
officers, were provided with the opportunity to earn shares of Company common
stock upon the achievement of significant operating cost reductions and upon the
achievement of an accretive level of earnings per share over a predetermined
time period. Portions of the award opportunity may be earned for performance at
predetermined milestones. Opportunities provided to the Named Executive
Officers, including the Chief Executive and other officers, under this Plan
reflect the Committee's assessment of their ability to influence the Company's
performance with respect to predetermined acquisition and total shareholder
return goals. By linking the award opportunity to key performance objectives,
and by providing the award in the form of Company stock, the Committee believes
that it has established a strong link between executive compensation, total
shareholder return, and Company performance.
EMPLOYEE STOCK PURCHASE PLAN: The Committee and the Board of Directors
strongly believe that total shareholder returns can be enhanced when all
employees have an opportunity to share in the Company's success. During 1997,
the Committee recommended, and the Board and shareholders approved the
implementation of an Employee Stock Purchase Plan. Under this Plan,
substantially all employees, including the Named Executive Officers, have the
opportunity to invest in the common stock of the Company at a discount of 15% of
fair market value up to a maximum of $25,000 worth of
13
<PAGE>
common stock annually. The Committee believes that this is a valuable employee
benefit that will increase employee interest in stock price and total
shareholder return.
The Committee has reviewed the Internal Revenue Code provisions which place
a limit on deductions for compensation for any Named Executive Officers in
excess of $1,000,000. Although the Committee intends to comply with these
provisions, it has determined that it should retain the flexibility to balance
this intention with the need to meet the Company's executive compensation
objectives as outlined above. Over time, the Committee will continue to consider
the implications of this statute.
1997 COMPENSATION
Nineteen ninety-seven was a year of significant challenge and outstanding
accomplishment. The integration of Dearborn acquisition was completed ahead of
schedule attaining cost reductions in excess of the Company's goals. The
Dearborn acquisition became accretive to earnings one year ahead of schedule.
However, the Company experienced systems-related problems which caused supply
chain and invoicing disruptions which affected the field sales force during the
first half of the year. Despite these difficulties, the Company achieved record
sales and earnings for the year.
Base salaries paid in 1997 reflect the Committee's review of external
competitiveness, the roles and responsibilities of the individuals, the internal
equity of pay relationships, and the contributions of the individual to the
Company's success. The Chief Executive Officer's base salary was increased in
1997 to a level which the Committee believes is approximately equal to the
competitive median for chief executive officers in similarly sized specialty
chemical and diversified industrial firms.
Incentive bonuses paid to all Named Executive Officers, including the Chief
Executive Officer, for 1997 were determined in conjunction with the Company's
Performance Incentive Compensation Plan, which reflects the Company's success
assessed against predetermined financial results from operations and individual
contributions to that success.
Stock options and restricted stock grants awarded in 1997 to all Named
Executive Officers, including the Chief Executive Officer, were based on an
assessment of competitive practice and individual contributions, and were
intended to help retain the executives over time and to provide rewards
consistent with shareholder returns. Options granted in 1997 vest ratably over
time, and all options were granted with an exercise price equal to the fair
market value on the date of the grant. With respect to option grants, no
compensation will be earned unless the share price increases, thereby creating
shareholder returns. Restricted stock grants awarded to all Named Executive
Officers, including the Chief Executive Officer, under the Stock Incentive Plan
vest at the end of five years, or earlier upon the achievement of predetermined
performance objectives.
During 1997, the Committee determined that the Company's performance met
certain operating cost objectives outlined under the Acquisition Incentive
Compensation Plan. In recognition of these achievements, the Committee awarded
shares of stock to all Named Executive Officers, including the Chief Executive
Officer and other officers. These awards are reflected in the Summary
Compensation Table.
In addition, in early 1998, the Committee determined that the Company's
1997 performance met certain earnings per share objectives outlined under the
Plan. In recognition of these achievements, the Committee will award shares of
stock to all Named Executive Officers, including the Chief Executive Officer and
other officers. These awards are reflected in the Long-Term Incentive Plans --
Awards in Last Fiscal Year Table.
This report is submitted by the following nonemployee Directors who
presently constitute the Executive Compensation and Employee Benefits Committee.
Robert L. Yohe, Chairman
Patrick F. Brennan
John G. Drosdick
Alan R. Hirsig
14
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information regarding compensation paid,
accrued, or set aside by the Company during each of the Company's last three
fiscal years to the Company's Chief Executive Officer and each of the Company's
four other most highly compensated executive officers, as determined by salary
and bonus earned during 1997.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------------- ------------------------ --------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER ALL
ANNUAL RESTRICTED NUMBER OTHER
NAME AND PRINCIPAL BONUS COMPENSA- STOCK OF LTIP COMPEN-
POSITION YEAR SALARY ($) ($)(1) SATION ($)(2) AWARD(S) ($)(3) OPTIONS PAYOUTS SATION ($)(4)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WILLIAM R. COOK 1997 $574,997 $245,000 -- $169,739 30,000 $627,500 $5,131
Chairman, President and 1996 535,002 230,000 -- 578,080 17,373 -- 5,351
Chief Executive Officer 1995 460,017 85,000 -- 0 29,624 -- 4,303
RICHARD A. HEBERLE 1997 $257,135 $ 87,500 -- $ 42,168 8,000 $329,438 $5,131
Group Vice President 1996 232,500 80,000 -- 146,315 4,196 -- 4,955
1995 195,800 30,100 -- 0 10,701 -- 4,303
JOHN L. HOLLAND 1997 $308,902 $ 50,000 -- $ 50,639 8,000 $329,438 $5,131
Group Vice President 1996 276,248 96,000 -- 70,800 4,911 -- 5,028
1995 219,221 62,500 -- 102,109 17,408 -- 4,303
RONALD A. KUTSCHE 1997 $251,946 $112,100 -- $ 41,290 7,000 $156,875 $5,131
Group Vice President 1996 245,000 18,600 -- 3,644 4,520 -- 4,881
1995 211,365 57,500 -- 15,717 21,540 -- 4,108
LARRY V. RANKIN 1997 $246,693 $ 81,300 -- $ 35,077 8,000 $235,313 $5,131
Senior Vice President 1996 232,800 87,800 -- 154,792 4,440 -- 4,976
1995 220,700 32,600 -- 0 9,278 -- 4,303
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects bonus earned in year indicated, but paid the following year.
(2) The aggregate of other annual compensation of each of the named executive
officers does not exceed the lesser of $50,000 or 10% of his total annual
salary and bonus, and therefore is not reportable in column (e).
(3) The value of restricted stock awards made in 1997 pursuant to the Company's
Employee Stock Incentive Plan is determined by the closing price of the
Company's common stock on the date of grant as reported by the New York
Stock Exchange (NYSE) multiplied by the number of shares. The value of the
aggregate number of shares of restricted stock held by each named executive
officer is determined by the closing price of the Company's common stock on
December 31, 1997 ($61.0625) as reported by the NYSE multiplied by the
aggregate number of shares. The aggregate number of shares and value of
restricted stock held as of December 31, 1997, by each named executive
officer is: William R. Cook, 19,992 shares, $1,220,762; Richard A. Heberle,
4,355 shares, $265,927; John L. Holland, 4,119 shares, $251,516; $215,429;
Ronald A. Kutsche, 5,013 shares, $306,106 and Larry V. Rankin, 4,758 shares,
$290,535. Shares granted in 1997 vest either on the fifth anniversary of the
date of the grant or earlier depending on the achievement of predetermined
Company performance objectives. Dividends are paid on restricted stock from
date of grant.
(4) Represents the value of $2,756 in participant allocations and the balance in
Company matching contributions, each in the form of preferred shares,
pursuant to the Company's Employee Stock Ownership and 401(k) Plan.
- --------------------------------------------------------------------------------
15
<PAGE>
STOCK OPTION GRANTS DURING 1997
The following table reports the number, exercise price, expiration date of
stock options and their potential realizable values based on assumed annual
compounded rates of stock price appreciation of awards granted during 1997
pursuant to the Company's Stock Option Plan of 1987.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- -------------------------------------------------------------------------- -----------------------
(A) (B) (C) (D) (E) (F) (G)
% OF
TOTAL
NUMBER OPTIONS/
OF SECU- SARS
RITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
NAME AND PRINCIPAL OPTIONS/SARS IN FISCAL OR BASE EXPIRATION
POSITION GRANTED (1) YEAR (2) PRICE DATE 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WILLIAM R. COOK 30,000 4.36 $62.75 2/13/07 $1,183,000 $3,000,000
Chairman, President and
Chief Executive Officer
RICHARD A. HEBERLE 8,000 1.16 62.75 2/13/07 315,680 800,000
Group Vice President
JOHN L. HOLLAND 8,000 1.16 62.75 2/13/07 315,680 800,000
Group Vice President
RONALD A. KUTSCHE 7,000 1.02 62.75 2/13/07 276,220 700,000
Group Vice President
LARRY V. RANKIN 8,000 1.16 62.75 2/13/07 315,680 800,000
Senior Vice President
</TABLE>
- --------------------------------------------------------------------------------
(1) Options were granted on February 13, 1997, and have a maximum term of ten
years subject to earlier termination in the event of optionee's cessation of
service with the Company. Options become exercisable for one-third of the
option shares on the date of the option grant; one-third of the option
shares upon completion of one year of service from the date of the option
grant; and one-third of the option shares upon completion of two years of
service from the date of the option grant.
(2) No stock appreciation rights are granted pursuant to the Company's Stock
Option Plan of 1987.
- --------------------------------------------------------------------------------
16
<PAGE>
STOCK OPTION EXERCISES DURING 1997 AND YEAR-END OPTION VALUES
The following table contains information related to aggregated stock
options exercised by the named executive officers of the Company during 1997 and
the number and value of stock options held at year end. The Company does not
have any outstanding stock appreciation rights.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST CALENDAR YEAR AND YEAR-END OPTION VALUES
- ---------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN THE
UNEXERCISED MONEY
OPTIONS AT OPTIONS AT
FY-END FY-END ($)(2)
-------------- ------------------
NUMBER OF
NAME AND PRINCIPAL SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
POSITION ON EXERCISE ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WILLIAM R. COOK -- -- 113,083/25,791 $1,189,610/103,152
Chairman, President and
Chief Executive Officer
RICHARD A. HEBERLE 1,408 $60,368 30,521/6,732 427,390/24,901
Group Vice President 3,000 68,250
3,740 98,876
JOHN L. HOLLAND 1,816 70,370 30,423/6,971 382,491/29,159
Group Vice President 2,030 86,402
RONALD A. KUTSCHE -- -- 49,581/6,173 806,355/26,825
Group Vice President
LARRY V. RANKIN -- -- 50,129/6,814 756,118/26,362
Senior Vice President
</TABLE>
- --------------------------------------------------------------------------------
(1) Value realized is the difference between the option exercise price and the
closing market price of the common stock on the date of exercise multiplied
by the number of shares to which the exercise relates.
(2) The closing price for the Company's common stock as reported by the New York
Stock Exchange on December 31, 1997, was $61.0625. Value is the difference
between the option exercise price and $61.0625 multiplied by the number of
shares of common stock underlying the option.
- --------------------------------------------------------------------------------
17
<PAGE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED PLANS
----------------------------------------------
(A) (B) (C) (D) (E) (F)
PERFORMANCE
NUMBER OF OR OTHER
SHARES, UNITS PERIOD UNTIL
OR OTHER MATURATION OR
NAME RIGHTS (#)(1) PAYOUT(2) THRESHOLD (#) TARGET (#) MAXIMUM (#)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WILLIAM R. COOK n/a 12/31/98 or 0 8,000 10,000
earlier
RICHARD A. HEBERLE n/a 12/31/98 or 0 1,800 2,250
earlier
JOHN L. HOLLAND n/a 12/31/98 or 0 1,800 2,250
earlier
RONALD A. KUTSCHE n/a 12/31/98 or 0 2,000 2,500
earlier
LARRY V. RANKIN n/a 12/31/98 or 0 3,000 3,750
earlier
- --------------------------------------------------------------------------------
</TABLE>
(1) In 1997, the Executive Compensation and Employee Benefits Committee approved
the adoption of the Acquisition Incentive Compensation Plan for a select
group including the Named Executive Officers. Under the Plan, awards in the
form of vested restricted stock will be granted upon the achievement of
predetermined earnings per share goals. Assessment of the Company's earnings
per share achievements will be made by the Committee and will reflect
primarily earnings per share as reported in the Company's Forms 10-Q.
Achievement of the earnings per share goal shall be certified upon two
consecutive quarters of exceeding the predetermined earnings per share
expectations. In early 1998, the Committee determined that the Company's
1997 performance met certain earnings per share objectives outlined under
the Plan. In recognition of these achievements, the Committee will award
shares of stock to all Named Executive Officers, including the Chief
Executive Officer, and other officers at the maximum payout level.
(2) The plan shall be in effect until otherwise determined by the Compensation
Committee, or December 31, 1998, whichever is earlier.
- --------------------------------------------------------------------------------
18
<PAGE>
PERFORMANCE GRAPH
The following graph compares the annual changes in the cumulative total
shareholder return on the Company's common stock during the five years ending
December 31, 1997, with the cumulative total return on the S&P 500 Index and the
Value Line Specialty Chemicals Group. The comparison assumes that $100.00 was
invested on December 31, 1992, in the Company's common stock, the S&P 500 Index,
and the Value Line Specialty Chemicals Group and assumes the reinvestment of
dividends.
In the printed version there appears a line graph depicted by the
following plot points:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Value Line S&P 500 BTL
1992 100 100 100
1993 112 110 73
1994 110 112 76
1995 136 153 73
1996 156 188 104
1997 202 251 110
19
<PAGE>
PENSION PLAN TABLE
The Company's Employee Retirement Plan was established in 1953. The Plan,
which is noncontributory, presently covers all U.S. employees of the Company and
its domestic subsidiaries who meet the Plan's eligibility requirements. Upon
retirement, eligible employees are entitled to receive retirement payments in
accordance with one of several optional forms of payment.
The Plan, as amended, provides an annual retirement benefit in an amount
determined by multiplying the participant's final average earnings (defined as
the highest three consecutive years of service) by 1.2% for each of the
participant's first thirty-five years of service and adding to that an amount
determined by multiplying the participant's final average earnings in excess of
covered compensation (defined as an accumulated average of Social Security wage
bases) by 0.6% for each of the participant's first thirty-five years of service.
The amount of the estimated retirement income will be reduced for early
retirees and for vested terminated employees not working to normal retirement
age of 65 to conform to the maximum benefit limitations imposed by the Employee
Retirement Income Security Act of 1974 (ERISA). The BetzDearborn Inc. Benefit
Restoration Plan restores any benefits reduced by the maximum benefit
limitations of ERISA. Benefits under the Retirement Plan are computed on the
basis of a single life annuity.
The following table shows the estimated annual benefits payable under the
Plan and Benefit Restoration Plan to eligible employees retiring in 1998 at
normal retirement age in the stated salary classifications.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS OF PARTICIPATION IN PLAN
FINAL AVERAGE ----------------------------------------------------
EARNINGS 15 20 25 30 35
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$250,000 $ 64,698 $ 86,265 $107,831 $129,397 $150,963
300,000 78,198 104,265 130,331 156,397 182,463
400,000 105,198 140,265 175,331 210,397 245,463
500,000 132,198 176,265 220,331 264,397 308,463
600,000 159,198 212,265 265,331 318,397 371,463
700,000 186,198 248,265 310,331 372,397 434,463
800,000 213,198 284,265 355,331 426,397 497,463
900,000 240,148 320,265 400,331 480,397 560,463
- --------------------------------------------------------------------------------
</TABLE>
Retirement benefits paid to the Company's executive officers identified in
the Summary Compensation Table are determined by their respective annual
compensation listed in columns (c) and (d) and any qualifying compensation in
column (e). The retirement benefits are paid out of the Company's Employee
Retirement Plan to the extent permitted by the Internal Revenue Code. The
balance of benefits, if any, is paid by the Company's Benefit Restoration Plan.
As of February 20, 1998, the following individuals have the respective years of
credited service for Retirement Plan purposes set forth after their names: Mr.
Cook, 26; Mr. Heberle, 32; Mr. Holland, 27; Mr. Kutsche 26; and Mr. Rankin, 28.
EMPLOYMENT AGREEMENTS
The Company has executed or will execute in 1998 new Employment Agreements
with each of the Named Executive Officers of the Company. Such agreements
provide for the employment of each Named Executive Officer for a period of five
years, unless sooner terminated by death, disability, voluntary resignation or
termination for cause. Employment may also be terminated by the Board without
"cause" (as defined in the agreement) or by the Named Executive Officer for
"good reason"
20
<PAGE>
(as defined in the agreement). In such cases, the Company agrees to pay the
employee two years' base salary in 24 equal, monthly installments and bonuses
for the next two fiscal years of the Company, based on the bonus amounts
actually paid to similarly situated executives (without regard to any
discretionary component) during those years. Additionally, any restricted stock
awards made to the Named Executive Officer under the Company's Employee Stock
Incentive Plan and stock options granted under the Company's Stock Option Plan
of 1987 shall continue to vest during the two year period following termination.
Finally, the Named Executive Officer will be entitled to welfare benefit
continuation, to the extent permitted under the terms of the plans, and to a
payment equal to the pension benefits that would have been earned had the
employee continued in his or her present capacity for two years.
In the event that the employee's employment is terminated without cause or
for good reason within the two year period following a "change of control" (as
defined in the agreement), the Named Executive Officer is entitled to a payment
in a single lump sum equal to three times the sum of (1) his base salary and (2)
the greater of his target bonus payment for such fiscal year or the average of
the bonuses paid to the employee during the three preceding fiscal years. The
employee shall, upon such termination, vest in all his or her outstanding shares
of restricted stock and stock options and shall be entitled to welfare benefit
continuation for three years to the extent permitted by the underlying plans (or
payment in lieu thereof to the extent not permitted) and a payment for lost
pension benefits which would have been earning during the three year period
following termination. Further, in the event that any such payments are subject
to the excise tax imposed under Section 4999 of the Internal Revenue Code, the
Company agrees to reimburse the employee for such excise tax payments (or pay
such amount to the appropriate taxing authorities) and for any income tax on
such reimbursements, as well as for any taxes resulting for the loss of any
deductions because of the inclusion in the employee's income of such payment.
The agreements also contain covenants whereby the employee agrees, both
during and after employment, to protect and not divulge the Company's
proprietary and confidential information. Employee must also agree not to work
for or substantially invest in a competitor during employment and for two years
following termination of active employment. If the employee's employment is
terminated as a result of a change of control of the Company, the prohibition
against working for a competitor is lifted.
PROPOSAL NO. 2: APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
On February 12, 1998, the Board of Directors adopted, subject to
shareholder approval, an amendment to the Company's Restated Articles of
Incorporation to increase the number of the Company's authorized shares of
common stock from 90,000,000 to 250,000,000. Article 5 of the Restated Articles
of Incorporation, as proposed to be amended, is attached to this proxy statement
as Exhibit A ("Common Stock Amendment").
REASONS FOR AMENDMENT. The Company believes it is desirable to have the
additional authorized shares of common stock available for future financing and
acquisition transactions, stock dividends and stock splits, employee benefit
plans, and other general corporate purposes. All authorized but unissued shares
of common stock, including the additional shares authorized by the Common Stock
Amendment, will be available for issuance without further action by the
shareholders, unless such action is required by applicable law or the rules of
the New York Stock Exchange, where the Company's common stock is currently
listed.
21
<PAGE>
PRINCIPAL EFFECTS. The additional shares of common stock to be authorized
by the Common Stock Amendment would have rights identical to the currently
authorized common stock of the Company. Any future issuance of additional shares
of common stock may, among other things, have a dilutive effect on earnings per
share of common stock and on the equity and voting rights of those holding
common stock at the time such shares are issued. From time to time the Company
evaluates the desirability of stock splits at various ratios and various prices.
However, the Company presently has no plans, arrangements or understandings for
the issuance of additional shares of common stock, except in connection with
employee benefit plans.
The Company has a Shareholder Rights Plan to protect shareholder interests
in the event that the Company is confronted by hostile acquirers. Under the
terms of such Plan, each holder of shares of common stock owns purchase rights
equal to the number of shares held. Each purchase right entitles the holder to
purchase one additional share of the Company's common stock if there are
attempts to gain control of the Company without offering fair value to the
Company's shareholders. Under such circumstances, additional authorized shares
of common stock would need to be available to shareholders wishing to exercise
their purchase rights pursuant to the Plan. However, the Board has no knowledge
of any effort to accumulate the Company's securities or to obtain control of the
Company. The proposed amendment is not part of a plan by management to adopt a
series of antitakeover provisions. The Board has no present intention to issue
rights to acquire additional shares.
- --------------------------------------------------------------------------------
The Board of Directors recommends that the shareholders
vote FOR the amendment to the Restated Articles of Incorporation
to increase the number of authorized shares of common stock.
PROPOSAL NO. 3: APPROVAL OF AMENDMENTS TO THE BYLAWS
On December 11, 1997, the Board approved a resolution to submit proposed
amendments to Section 4.01(b) and Article VII of the Bylaws of the Company to
the shareholders for approval. Section 4.01(b) of the Bylaws relates to the
personal liability of the Directors. Article VII of the Bylaws pertains to the
indemnification of Directors, officers and other authorized representatives.
The amendments, as proposed, are designed to update the current Bylaws of
the Company by giving full effect to provisions of the Pennsylvania Business
Corporation Law ("BCL") applicable to Director liability and indemnification of
Directors, officers and other authorized representatives. The current Bylaws of
the Company were adopted by the Board in 1988, prior to the enactment of the
BCL. The proposed amendments, if approved by the shareholders, will conform the
Company's Bylaws more closely with the applicable provisions of the BCL.
LIABILITY OF DIRECTORS
REASONS FOR AMENDMENT
In 1987, Pennsylvania enacted the Directors' Liability Act. Among other
things, the Act provided that whenever the bylaws of a corporation, by vote of
the shareholders, so provided, a director would not be personally liable for
monetary damages except if the director breached or failed to perform the duties
of his office as prescribed by the Act and the breach or failure to perform
constituted self-dealing, willful misconduct, or recklessness. An exception was
provided for violation of criminal statutes and liability for payment of taxes.
22
<PAGE>
The current Bylaws of the Company incorporate the standards of conduct in
the Act. The BCL, enacted after the adoption of the Company's current Bylaws,
included most of the material features of the Act, but also set forth some
additional provisions relating to the standard of conduct and duties of
directors. Because the BCL has a somewhat broader standard, the Board believes
it is appropriate to replace the old language in the Company's Bylaws with a
reference to the current standard in the BCL.
Proposed Section 4.01(b) is set forth as Exhibit B1. This amendment does
not eliminate a Director's duty of care. It provides that a Director shall not
be personally liable for money damages except if he or she breaches or fails to
perform the duties of his or her office as prescribed by the referenced
subchapter of the BCL and the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness. Section 4.01(b), as proposed,
retains the exception for violation of criminal statutes and liability for
payment of taxes. The Board believes that by adopting the BCL's standard of
conduct, it will remove uncertainties under which Directors who act in good
faith may nevertheless be held personally liable for damages as a result of
suits against them. As a result, Directors will not be reluctant to perform
certain aspects of their jobs which may subject them to personal liability, the
performance of which is necessary to properly conduct the Company's business.
PRINCIPAL EFFECTS
The proposal to amend Section 4.01(b) of the Company's Bylaws would
incorporate the standard of conduct for Directors set forth in the BCL. Section
4.01(b), as proposed, is designed to protect Directors from liability for
monetary damages to either the Company or its shareholders for mistakes or
errors of judgment made in good faith and after reasonable inquiry which, at
some future date, might be considered to constitute a breach of their duty of
care. Directors who breach or fail to perform the duties of their office as
prescribed in the Bylaws and such breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness are not relieved from personal
liability to the Company or the shareholders by this amendment. Additionally,
those maintaining lawsuits against the Company's Directors would be able to
obtain equitable remedies, such as injunctive relief, in appropriate situations.
INDEMNIFICATION OF DIRECTORS, OFFICERS, AND OTHER AUTHORIZED REPRESENTATIVES
REASONS FOR AMENDMENTS
The Act also broadened the power of a corporation to indemnify its
directors, officers, and other authorized representatives by expressly providing
that a corporation would have the power to indemnify such persons in all
instances except where an act or a failure to act constitutes willful misconduct
or recklessness. Like the provisions of the Act with respect to director
liability, the indemnification provisions are considered essential in order to
induce qualified persons to act as Directors of the Company.
The provisions in the Act relating to indemnification were carried over
into the BCL. The Company's present Bylaws, however, do not take full advantage
of the power afforded a corporation in the BCL. Under the proposed amendment,
the Company would be permitted to indemnify its Directors, officers, and other
authorized representatives to the fullest extent permitted under Pennsylvania
law.
PRINCIPAL EFFECTS
The proposal to amend Article VII of the Company's Bylaws would provide for
the mandatory indemnification of Directors, officers and authorized
representatives to the full extent permitted by the BCL except where such
indemnification is prohibited by law or is finally determined to constitute
willful misconduct or recklessness. The current Bylaws provide for mandatory
indemnification although not to the extent permitted by the BCL. The proposed
amendment also provides for the mandatory advancement of expenses including
attorneys' fees and disbursements to Directors, officers, and authorized
representatives which, under the current Bylaws, is permissive.
23
<PAGE>
Proposed Article VII is set forth in Exhibit B2. Its significant features
are the following:
1. The obligation to indemnify Directors and officers is mandatory in
all cases except where the indemnification is prohibited by law or
is finally determined to constitute willful misconduct or
recklessness.
2. The Board would have the power to designate persons other than
Directors and officers to be "indemnified representatives," but
such persons would not automatically be entitled to indemnification
under the Bylaws.
3. Advancement of expenses (including attorneys' fees and
disbursements) would be mandatory in the proposed Bylaws. The only
condition is the receipt of an undertaking by the indemnified
representative to repay the amount if it is ultimately determined
that the person is not entitled to indemnification.
4. The Bylaws have the status of a contract between the Company and
the indemnified person. Any amendment of the Bylaws would have only
prospective effect on the rights of an indemnified person.
5. Any dispute relating to the right to indemnification, contribution,
or advancement of expenses would be decided by arbitration in
accordance with the rules of the American Arbitration Association,
and any award entered by the arbitrators would be final, binding
and nonappealable.
The Board is not aware of any pending or threatened litigation or any act
or omission on the part of any Director which would relieve any Director of
liability, or by which any Director, officer, or authorized representative would
be entitled to any greater indemnification under the proposed amendment than
that available under the present Bylaws dealing with indemnification.
The Board believes that adoption of this amendment will enhance the
Company's ability to attract and retain qualified Directors. It provides
additional protection for Directors who act on behalf of the Company in good
faith and upon reasonable inquiry, thereby encouraging them to make decisions on
their own merit rather than on a desire to avoid personal liability. The Board
also believes that liability insurance carriers offering Directors and Officers'
liability insurance will regard the amendments favorably, which may assist the
Company in obtaining adequate coverage for Directors and officers in the future.
If approved, the proposed amendments to Section 4.01(b) and Article VII of
the Company's Bylaws will become effective immediately. The texts of the
proposed amendments are attached hereto as Exhibits B1 and B2, and this
discussion of the proposed amendments is qualified in its entirety by reference
to such exhibits.
- --------------------------------------------------------------------------------
The Board of Directors recommends that the shareholders
vote FOR the amendments to Section 4.01(b) and Article VII
of the Company's Bylaws.
24
<PAGE>
PROPOSAL NO. 4: RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board, on the recommendation of the Company's Audit Committee, has
nominated Ernst & Young LLP as independent auditors for the year ending December
31, 1998. Ernst & Young LLP has been the Company's independent auditors since
the Company's first public offering of its securities in 1965. Although not
required, the Board has determined that it is desirable to have the appointment
of the Company's independent auditors ratified by the shareholders of the
Company. In the event Ernst & Young LLP is not ratified, the Board would
reconsider its choice. Representatives of Ernst & Young LLP are expected to be
present at the Meeting. They will be accorded an opportunity to make a statement
should they so desire and are expected to be able to respond to appropriate
questions from shareholders.
- --------------------------------------------------------------------------------
The Board of Directors recommends that the shareholders
vote FOR the appointment of Ernst & Young LLP as
independent auditors for the Company for 1998.
VOTE REQUIRED FOR APPROVAL
Matters submitted to shareholders of record are decided by the vote of the
holders of a majority of the outstanding shares entitled to vote, present in
person or represented by proxy, at a meeting at which a quorum is present,
though such majority may be less than a majority of all the shares entitled to
vote. Under applicable Pennsylvania law, if a quorum is present with respect to
a specific matter, such matter will be authorized upon receiving approval by a
majority of the votes cast. For such purposes an abstention, broker non-vote or
the specific direction not to cast any vote on any specific matter will not
constitute the casting of a vote on such matter.
VOTING OF STOCK IN PLAN ACCOUNTS
The Company's Employee Stock Ownership and 401(k) Plan permits plan
participants to direct the plan Trustee how to vote the shares of common stock
and preferred stock allocated to their accounts. The Trustee will vote all
shares of common stock and preferred stock for which no participant directions
are received in the same proportion as all the shares of common stock and
preferred stock for which directions are received.
25
<PAGE>
OTHER MATTERS
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, to file reports of
ownership on Forms 3, 4, and 5 with the Securities and Exchange Commission.
Directors, officers and shareholders owning greater than 10% of the Company's
securities are required by Commission regulations to furnish the Company with
copies of all Forms 3, 4, and 5 they file.
Based solely upon the Company's review of copies of such forms it has
received, the Company believes that all of its Directors, officers, and
shareholders owning greater than 10% of the Company's securities complied with
all filing requirements applicable to them under Section 16(a) of the Exchange
Act during fiscal year 1997.
SHAREHOLDER PROPOSALS
Under the Securities and Exchange Commission rules, certain shareholder
proposals may be included in the Company's proxy statement. Any such proposal
for the 1999 Annual Meeting must be received by the Company no later than
November 9, 1998. All proposals should be submitted to Linda R. Hansen,
Secretary, BetzDearborn Inc., 4636 Somerton Road, Trevose, Pennsylvania 19053.
The Board knows of no other matters which will be brought before the
Meeting by any person other than those matters set forth in the attached Notice
of Annual Meeting of Shareholders. If, however, any other matter shall properly
come before the Meeting or any adjournment thereof, the persons named in the
Proxy will vote thereon in accordance with their best judgment.
Linda R. Hansen
Secretary
Dated: March 9, 1998
26
<PAGE>
EXHIBIT A
PROPOSED AMENDMENT TO ARTICLE 5 OF THE
RESTATED ARTICLES OF INCORPORATION
OF BETZDEARBORN INC.
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-1
<PAGE>
EXHIBIT B1
PROPOSED SECTION 4.01(B) OF
THE BYLAWS OF BETZDEARBORN INC.
(b) LIABILITY OF DIRECTORS.
(1) No director, including a director who is also an officer, of the
Corporation shall be personally liable for monetary damages as such for any
action taken, or any failure to take any action, in his or her capacity as a
director, including such director's duties as a member of any committee of the
Board of Directors on which he or she may serve, unless:
(A) the director has breached or failed to perform the duties of his
or her office under Subchapter 17B of the Business Corporation Law or any
successor provision; and
(B) such breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
(2) The provisions of paragraph (1) shall not apply to the responsibility
or liability of a director pursuant to any criminal statute, or the liability of
a director for the payment of taxes pursuant to local, state or Federal law.
B1-1
<PAGE>
EXHIBIT B2
PROPOSED ARTICLE VII OF
THE BYLAWS OF BETZDEARBORN INC.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND
OTHER AUTHORIZED REPRESENTATIVES
Section 7.01. SCOPE OF INDEMNIFICATION.
(a) GENERAL RULE. The Corporation shall indemnify an indemnified
representative against any liability incurred in connection with any proceeding
in which the indemnified representative may be involved as a party or otherwise
by reason of the fact that such person is or was serving in an indemnified
capacity, including, without limitation, liabilities resulting from any actual
or alleged breach or neglect of duty, error, misstatement or misleading
statement, negligence, gross negligence or act giving rise to strict or products
liability, except:
(1) where such indemnification is expressly prohibited, or been
finally determined to be unlawful, under applicable law; or
(2) where the conduct of the indemnified representative has been
finally determined to constitute willful misconduct or recklessness within
the meaning of 15 Pa.C.S. Section1746(b) or any superseding provision of
law sufficient in the circumstances to bar indemnification against
liabilities arising from the conduct.
(b) PARTIAL PAYMENT. If an indemnified representative is entitled to
indemnification in respect of a portion, but not all, of any liabilities to
which such person may be subject, the Corporation shall indemnify such
indemnified representative for such portion of the liabilities.
(c) NO PRESUMPTION. The termination of a proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the indemnified representative is
not entitled to indemnification.
(d) DEFINITIONS. For purposes of this Article:
(1) "indemnified capacity" means any and all past, present and future
service by an indemnified representative in one or more capacities as a
director, officer, employee or agent of the Corporation, or, at the request
of the Corporation, as a director, officer, employee, agent, fiduciary or
trustee of another Corporation, partnership, joint venture, trust, employee
benefit plan or other entity or enterprise;
(2) "indemnified representative" means any and all directors and
officers of the Corporation and any other person designated as an
indemnified representative by the Board of Directors of the Corporation
(which may, but need not, include any person serving at the request of the
Corporation, as a director, officer, employee, agent, fiduciary or trustee
of another Corporation, partnership, joint venture, trust, employee benefit
plan or other entity or enterprise);
(3) "liability" means any damages, judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax assessed with
respect to an employee benefit plan or reasonable expense of any nature
(including, without limitation, attorneys' fees and disbursements); and
(4) "proceeding" means any threatened, pending or completed action,
suit, appeal or other proceeding of any nature, whether civil, criminal,
administrative, or investigative, whether formal or informal, and whether
brought by or in the right of the Corporation, a class of its security
holders or otherwise.
B2-1
<PAGE>
Section 7.02. PROCEEDINGS INITIATED BY INDEMNIFIED REPRESENTATIVES.
Notwithstanding any other provision of this Article, the Corporation shall not
indemnify under this Article an indemnified representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include
counterclaims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of or
participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors in office.
This section does not apply to reimbursement of expenses incurred in
successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article.
Section 7.03. ADVANCING EXPENSES. The Corporation shall pay the reasonable
expenses (including attorneys' fees and disbursements) incurred by an
indemnified representative in advance of the final disposition of a proceeding
described in Section 7.01 or the initiation of or participation in which is
authorized pursuant to Section 7.02 upon receipt of an undertaking by or on
behalf of the indemnified representative to repay the amount if it is ultimately
determined pursuant to Section 7.06 that such person is not entitled to be
indemnified by the Corporation pursuant to this Article. The financial ability
of an indemnified representative to repay an advance shall not be a prerequisite
to the making of such advance.
Section 7.04. SECURING OF INDEMNIFICATION OBLIGATIONS. To further effect,
satisfy or secure the indemnification obligations provided herein or otherwise,
the Corporation may maintain insurance, obtain a letter of credit, act as
self-insurer, create a reserve, trust, escrow, cash collateral or other fund or
account, enter into indemnification agreements, pledge or grant a security
interest in any assets or properties of the Corporation, or use any other
mechanism or arrangement whatsoever in such amounts, at such costs, and upon
such other terms and conditions as the Board of Directors shall deem
appropriate. Absent fraud, the determination of the Board of Directors with
respect to such amounts, costs, terms and conditions shall be conclusive against
all security holders, officers and directors and shall not be subject to
voidability.
Section 7.05. PAYMENT OF INDEMNIFICATION. An indemnified representative
shall be entitled to indemnification within 30 days after a written request for
indemnification has been delivered to the secretary of the Corporation.
Section 7.06. ARBITRATION.
(a) GENERAL RULE. Any dispute related to the right to
indemnification, contribution or advancement of expenses as provided under
this Article, except with respect to indemnification for liabilities
arising under the Securities Act of 1933 that the Corporation has
undertaken to submit to a court for adjudication, shall be decided only by
arbitration in the metropolitan area in which the principal executive
offices of the Corporation are located at the time, in accordance with the
commercial arbitration rules then in effect of the American Arbitration
Association, before a panel of three arbitrators, one of whom shall be
selected by the Corporation, the second of whom shall be selected by the
indemnified representative and the third of whom shall be selected by the
other two arbitrators. In the absence of the American Arbitration
Association, or if for any reason arbitration under the arbitration rules
of the American Arbitration Association cannot be initiated, and if one of
the parties fails or refuses to select an arbitrator or the arbitrators
selected by the Corporation and the indemnified representative cannot agree
on the selection of the third arbitrator within 30 days after such time as
the Corporation and the indemnified representative have each been notified
of the selection of the other's arbitrator, the necessary arbitrator or
arbitrators shall be selected by the presiding judge of the court of
general jurisdiction in such metropolitan area.
B2-2
<PAGE>
(b) QUALIFICATIONS OF ARBITRATORS. Each arbitrator selected as
provided herein is required to be or have been a director or executive
officer of a Corporation whose shares of common stock were listed during at
least one year of such service on the New York Stock Exchange or the
American Stock Exchange or quoted on the National Association of Securities
Dealers Automated Quotations System.
(c) BURDEN OF PROOF. The party or parties challenging the right of an
indemnified representative to the benefits of this Article shall have the
burden of proof.
(d) EXPENSES. The Corporation shall reimburse an indemnified
representative for the expenses (including attorneys' fees and
disbursements) incurred in successfully prosecuting or defending such
arbitration.
(e) EFFECT. Any award entered by the arbitrators shall be final,
binding and nonappealable and judgment may be entered thereon by any party
in accordance with applicable law in any court of competent jurisdiction,
except that the Corporation shall be entitled to interpose as a defense in
any such judicial enforcement proceeding any prior final judicial
determination adverse to the indemnified representative under Section
7.01(a)(2) in a proceeding not directly involving indemnification under
this Article. This arbitration provision shall be specifically enforceable.
Section 7.07. CONTRIBUTION. If the indemnification provided for in this
Article or otherwise is unavailable for any reason in respect of any liability
or portion thereof, the Corporation shall contribute to the liabilities to which
the indemnified representative may be subject in such proportion as is
appropriate to reflect the intent of this Article or otherwise.
Section 7.08. MANDATORY INDEMNIFICATION OF DIRECTORS, OFFICERS. ETC. To the
extent that an authorized representative of the Corporation has been successful
on the merits or otherwise in defense of any action, suit or proceeding referred
to in Sections 1741 or 1742 of the Business Corporation Law or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees and disbursements) actually and reasonably
incurred by such person in connection therewith.
Section 7.09. CONTRACT RIGHTS; AMENDMENT OR REPEAL. All rights under this
Article shall be deemed a contract between the Corporation and the indemnified
representative pursuant to which the Corporation intends to be legally bound.
Any repeal, amendment or modification of this Article by the Corporation that
impairs the rights of any indemnified representative or limits the obligations
of the Corporation shall be prospective only and shall not impair or affect any
rights or obligations arising from service as an indemnified representative
prior to the effective date of such repeal, amendment or modification.
Section 7.10. SCOPE OF ARTICLE. The rights granted by this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an indemnified capacity and as to action in any
other capacity. The indemnification, contribution and advancement of expenses
provided by or granted pursuant to this Article shall continue as to a person
who has ceased to be an indemnified representative in respect of matters arising
prior to such time, and shall inure to the benefit of the heirs and personal
representatives of such a person.
Section 7.11. RELIANCE ON PROVISIONS. Each person who shall act as an
indemnified representative of the Corporation shall be deemed to be doing so in
reliance upon the rights of indemnification, contribution and advancement of
expenses provided by this Article.
Section 7.12. INTERPRETATION. The provisions of this Article are intended
to constitute bylaws authorized by 15 Pa.C.S. ss.1746.
B2-3
<PAGE>
[BETZDEARBORN LOGO]
Shaping the Future of Water & Process Treatment
Printed on recycled paper.(C) 1998, BetzDearborn Inc. All rights reserved.
<PAGE>
BETZDEARBORN INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS APRIL 9, 1998
The undersigned hereby appoints John W. Boyer, Jr., John A. H. Shober and
Patrick F. Brennan, or any of them, attorneys and proxies with full power of
substitution in each of them, in the name, place and stead of the undersigned to
vote as proxy all the stock of the undersigned in BetzDearborn Inc. (the
"Company").
(Continued and to be signed on other side)
<PAGE>
A /X/ Please mark your
votes as in this
example.
The shares represented by this Proxy card will be voted FOR Proposals 1 through
5, if no instruction to the contrary is indicated or if no instruction is given.
FOR WITHHELD
1. To elect the / / / / Nominee:
following John G. Drosdick
nominee, as
set forth in the proxy statement.
2. To approve an amendment to the Company's Restated Articles of Incorporation.
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve amendments to the Company's Bylaws.
/ / / / / /
4. To ratify the appointment of Ernst & Young LLP as the Company's independent
auditors for 1998.
/ / / / / /
5. To transact such other business as may properly come before the annual
meeting or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD IN THE ENCLOSED ENVELOPE.
SIGNATURE(S) -------------------------------------------------------------------
- ---------------------------- DATE ----------------------------
NOTE: Please sign exactly as name appears hereon. Executors, Administrators,
Trustees, etc. should so indicate when signing, giving full title as such. If
signer is a corporation, execute in full corporate name by authorized officer.
If shares held in the name of two or more persons, all should sign.
<PAGE>
BETZDEARBORN INC.
INSTRUCTION CARD FOR THE ANNUAL MEETING ON APRIL 9, 1998
The undersigned hereby instructs American Stock Transfer & Trust Company
to vote as designated on the reverse all the preferred and common shares of
BetzDearborn Inc. (the "Company") entitled to be voted by the undersigned under
the Company's Employee Stock Ownership and 401(k) Plan.
(To be signed on Reverse Side)
<PAGE>
A /X/ Please mark your
votes as in this
example.
The shares represented by this Proxy card will be voted FOR Proposals 1 through
5, if no instruction to the contrary is indicated or if no instruction is given.
FOR WITHHELD
1. To elect the / / / / Nominee:
following John G. Drosdick
nominee, as
set forth in the proxy statement.
2. To approve an amendment to the Company's Restated Articles of Incorporation.
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve amendments to the Company's Bylaws.
/ / / / / /
4. To ratify the appointment of Ernst & Young LLP as the Company's independent
auditors for 1998.
/ / / / / /
5. To transact such other business as may properly come before the annual
meeting or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD IN THE ENCLOSED ENVELOPE.
SIGNATURE(S) -------------------------------------------------------------------
- ---------------------------- DATE ----------------------------
NOTE: Please sign exactly as name appears hereon. Executors, Administrators,
Trustees, etc. should so indicate when signing, giving full title as such.
