================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO _________
COMMISSION FILE NUMBER 1-2227
CROWN CORK & SEAL COMPANY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1526444
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Crown Way, Philadelphia, PA. 19154-4599
(Address of principal executive offices) (Zip Code)
215-698-5100
(Registrant's telephone number, including area code)
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
There were 122,356,114 shares of Common Stock outstanding as of July 31, 1999.
================================================================================
<PAGE>
Crown Cork & Seal Company, Inc.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Three months ended June 30, 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 1,997.4 $ 2,245.0
----------- -----------
Cost, expenses & other income
Cost of products sold, excluding depreciation and amortization 1,529.0 1,727.2
Depreciation and amortization 131.0 136.1
Selling and administrative expense 91.0 93.2
Gain on sale of assets (1.3)
Interest expense 91.2 104.1
Interest income (7.3) (12.4)
Translation and exchange adjustments 1.0 5.8
----------- -----------
1,834.6 2,054.0
----------- -----------
Income before income taxes 162.8 191.0
Provision for income taxes 55.0 64.4
Minority interests, net of equity earnings (8.2) (.9)
----------- -----------
Net income 99.6 125.7
Preferred stock dividends 3.9 4.1
----------- -----------
Net income available to common shareholders $ 95.7 $ 121.6
----------- -----------
Earnings per average common share:
Basic $ .78 $ .98
=========== ===========
Diluted $ .77 $ .95
=========== ===========
Dividends per common share $ .25 $ .25
=========== ===========
Weighted average common shares outstanding:
Basic 122,350,114 124,442,024
Diluted 130,040,318 132,826,655
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
Crown Cork & Seal Company, Inc.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Six months ended June 30, 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 3,791.0 $ 4,137.4
----------- -----------
Cost, expenses & other income
Cost of products sold, excluding depreciation and amortization 2,947.0 3,229.4
Depreciation and amortization 264.0 272.7
Selling and administrative expense 182.0 190.8
Gain on sale of assets (3.7)
Interest expense 184.3 197.9
Interest income (14.8) (19.8)
Translation and exchange adjustments 9.9 7.5
----------- -----------
3,568.7 3,878.5
----------- -----------
Income before income taxes 222.3 258.9
Provision for income taxes 83.4 92.3
Minority interests, net of equity earnings (9.8) .8
----------- -----------
Net income 129.1 167.4
Preferred stock dividends 7.8 9.2
----------- -----------
Net income available to common shareholders $ 121.3 $ 158.2
=========== ===========
Earnings per average common share:
Basic $ .99 $ 1.26
=========== ===========
Diluted $ .99 $ 1.24
=========== ===========
Dividends per common share $ .50 $ .50
=========== ===========
Weighted average common shares outstanding:
Basic 122,338,291 125,763,763
Diluted 129,984,457 135,295,628
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CONSOLIDATED BALANCE SHEETS (Condensed)
(In millions except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
June 30, December 31,
1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 203.1 $ 283.9
Receivables 1,464.0 1,359.2
Inventories 1,533.9 1,421.0
Prepaid expenses and other current assets 98.8 103.6
----------- -----------
Total current assets 3,299.8 3,167.7
----------- -----------
Long-term notes and receivables 29.2 44.2
Investments 145.6 90.6
Goodwill, net of amortization 4,294.4 4,565.4
Property, plant and equipment 3,469.5 3,742.5
Other non-current assets 885.7 858.1
----------- -----------
Total $ 12,124.2 $ 12,468.5
=========== ===========
Liabilities and shareholders' equity
Current liabilities
Short-term debt $ 2,793.6 $ 2,331.0
Current portion of long-term debt 53.9 135.0
Accounts payable and accrued liabilities 1,816.0 2,180.7
United States and foreign income taxes 59.7 62.8
---------- ----------
Total current liabilities 4,723.2 4,709.5
---------- ----------
Long-term debt, excluding current maturities 3,071.8 3,188.5
Postretirement and pension liabilities 684.1 707.0
Other non-current liabilities 546.2 609.0
Minority interests 275.3 279.7
Commitments and contingent liabilities
Shareholders' equity 2,823.6 2,974.8
----------- -----------
Total $ 12,124.2 $ 12,468.5
=========== ===========
Book value per common share $ 21.72 $ 22.89
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed)
(In millions)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Six months ended June 30, 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 129.1 $ 167.4
Depreciation and amortization 264.0 272.7
Gain on sale of assets (2.7)
Change in assets and liabilities, other than debt, net of businesses acquired (523.8) (573.9)
-------- --------
Net cash used in operating activities (133.4) (133.8)
-------- --------
Cash flows from investing activities
Capital expenditures (177.6) (237.3)
Acquisition of businesses, net of cash acquired (49.8) (34.2)
Proceeds from sale of property, plant and equipment 20.7 27.6
Other, net (4.2) (5.1)
-------- --------
Net cash used in investing activities (210.9) (249.0)
-------- --------
Cash flows from financing activities
Proceeds from long-term debt 6.0 3.9
Payments of long-term debt (176.3) (108.1)
Net change in short-term debt 536.4 938.8
Stock repurchased (1.0) (369.0)
Dividends paid (69.0) (73.2)
Common stock issued - benefit plans .2 5.2
Minority contributions, net of dividends paid (5.0) (3.4)
-------- --------
Net cash provided by financing activities 291.3 394.2
-------- --------
Effect of exchange rate changes on cash and cash equivalents (27.8) (2.2)
-------- --------
Net change in cash and cash equivalents (80.8) 9.2
Cash and cash equivalents at beginning of period 283.9 205.6
-------- --------
Cash and cash equivalents at end of period $ 203.1 $ 214.8
======== ========
- ---------------------------------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------
Schedule of non-cash investing activities:
Acquisition of businesses:
Fair value of assets acquired $ 68.1 $ 51.2
Liabilities assumed (18.3) (17.0)
-------- --------
Cash Paid $ 49.8 $ 34.2
======== ========
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Crown Cork& Seal Company, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In millions)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Comprehensive Income Preferred Common Paid-In Retained Treasury Comprehensive
Quarter Year-To-Date Stock Stock Capital Earnings Stock Income Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 | $350.9 $779.0 $1,340.3 $1,250.4 ($167.3) ($578.5) $2,974.8
Net income $ 99.6 $129.1 | 129.1 129.1
Translation adjustments (71.1) (210.5) | (210.5) (210.5)
------ ------ |
Comprehensive income (loss) $ 28.5 ($81.4) |
====== ====== |
Dividends declared: |
Common | (61.2) (61.2)
Preferred | (7.8) (7.8)
Stock repurchased | (.9) (.1) (1.0)
Stock issued - benefit plans | .2 .2
- -------------------------------------------------------|----------------------------------------------------------------------------
Balance at June 30, 1999 | $350.9 $779.0 $1,339.4 $1,310.5 ($167.2) ($789.0) $2,823.6
=======================================================|============================================================================
| Accumulated
| Other
Comprehensive Income | Preferred Common Paid-In Retained Treasury Comprehensive
Quarter Year-To-Date | Stock Stock Capital Earnings Stock Income Total
- -------------------------------------------------------|----------------------------------------------------------------------------
Balance at December 31, 1997 | $520.8 $779.0 $1,560.7 $1,327.2 ($137.0) ($521.5) $3,529.2
|
Net income $125.7 $167.4 | 167.4 167.4
Translation adjustments 22.7 (31.8) | (31.8) (31.8)
------ ------ |
Comprehensive income $148.4 $135.6 |
====== ====== |
|
Dividends declared: |
Common | (63.2) (63.2)
Preferred | (9.2) (9.2)
Stock repurchased | (153.3) (195.2) (20.5) (369.0)
Stock issued - benefit plans | 4.4 .8 5.2
|
- -------------------------------------------------------|----------------------------------------------------------------------------
Balance at June 30, 1998 | $367.5 $779.0 $1,369.9 $1,422.2 ($156.7) ($553.3) $3,228.6
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Crown Cork & Seal Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
(Unaudited)
A. Statement of Information Furnished
----------------------------------
The accompanying unaudited interim consolidated and condensed financial
statements have been prepared by the Company in accordance with Form
10-Q instructions. In the opinion of management, these consolidated
financial statements contain all adjustments necessary to present
fairly the financial position of Crown Cork & Seal Company, Inc. as of
June 30, 1999, and the results of its operations and cash flows for the
periods ended June 30, 1999 and 1998, respectively. These results have
been determined on the basis of generally accepted accounting
principles and practices consistently applied.
Certain information and footnote disclosures, normally included in
financial statements presented in accordance with generally accepted
accounting principles, have been condensed or omitted. The accompanying
Consolidated Financial Statements should be read in conjunction with
the financial statements and notes thereto incorporated by reference in
the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
B. Earnings Per Share
------------------
The following table summarizes the basic and diluted earnings per
common share computations for the periods ended June 30, 1999 and 1998,
respectively:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
Average Average
Quarter Income Shares EPS Income Shares EPS
------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $99.6 $125.7
Less:
Preferred stock dividends (3.9) (4.1)
----- ------
Basic EPS 95.7 122.3 $.78 121.6 124.4 $.98
Potentially dilutive securities:
Stock options .1 .4
Assumed preferred
stock conversion 3.9 7.6 4.1 8.0
----- ----- ------ -----
Diluted EPS $99.6 130.0 $.77 $125.7 132.8 $.95
===== ===== ====== =====
1999 1998
------------------------- -------------------------
Average Average
Year-to-date Income Shares EPS Income Shares EPS
------------ ------------------------- -------------------------
Net income $129.1 $167.4
Less:
Preferred stock dividends (7.8) (9.2)
------ ------
Basic EPS 121.3 122.3 $.99 158.2 125.8 $1.26
Potentially dilutive securities:
Stock options .1 .4
Assumed preferred
stock conversion 7.8 7.6 9.2 9.1
------ ----- ------ -----
Diluted EPS $129.1 130.0 $.99 $167.4 135.3 $1.24
====== ===== ====== =====
</TABLE>
7
<PAGE>
Crown Cork & Seal Company, Inc.
C. Inventories
-----------
--------------------------------------------------------
June 30, December 31,
1999 1998
--------------------------------------------------------
Finished goods $ 654.8 $ 576.8
Work in process 211.4 204.2
Raw materials and supplies 667.7 640.0
-------- --------
$1,533.9 $1,421.0
======== ========
D. Restructuring
-------------
During 1998, the Company provided $179 ($127 after-tax or $.95 per
share) for the costs associated with closing thirteen plants and
reorganizing three additional plants. These actions reflect the
Company's continued commitment to realign its manufacturing facilities
with the objective of enhancing operating efficiencies. Included in the
restructuring charge were costs to provide severance and related
benefits, write-down of assets and other exit costs. The Company
anticipates that this restructuring program will generate after-tax
savings of approximately $64 ($.48 per share) on an annualized basis
when fully implemented.
The cost of providing severance and related benefits is estimated at
$99 and covers a reduction of approximately 2,900 employees, 1,900 of
whom are involved in direct manufacturing operations. Employee
reductions are expected to be completed by the end of the third quarter
of 1999.
Included in this restructuring provision is a charge of $60, reflecting
the impairment of property, plant and equipment principally located in
the Americas Division. This charge has been reflected as a reduction in
the carrying values of the related assets. Write-downs of property,
plant and equipment were made where the carrying values exceed the
Company's estimate of proceeds from abandonment or disposal. These
estimates were based principally on past experience of comparable asset
disposals. Disposition of assets identified for disposal in the 1998
action is expected to be substantially completed by the end of 1999.
Other non-recurring exit costs are estimated at $20 and are primarily a
cash expense, comprising the costs to effectively close and dispose of
the facilities identified in the 1998 plan. Exit costs include, but are
not limited to, fees related to lease termination and other contract
cancellations, dismantlement costs and brokers' fees for assets to be
sold. These costs are expected to be substantially incurred by the end
of 1999.
The balance of the restructuring reserves (excluding the write-down of
assets which is reflected as a reduction of the related asset account)
is included within accounts payable and accrued liabilities. The
components of the restructuring reserve and movements within these
components during the first six months of 1999 were as follows:
<TABLE>
<CAPTION>
Employee Other Exit
(in millions) Severance Costs Total
--------- ---------- -----
<S> <C> <C> <C>
Opening balance............................ $ 96.9 $ 30.8 $127.7
Payments made.............................. (27.8) (7.1) (34.9)
Other movements............................ 3.3 * 3.3
------ ------ ------
Closing balance............................ $ 69.1 $ 27.0 $ 96.1
====== ====== ======
<FN>
* includes provisions under purchase accounting for two 1999
acquisitions in Europe as well as translation adjustments.
</FN>
</TABLE>
8
<PAGE>
Crown Cork & Seal Company, Inc.
During the first six months of 1999, payments of $27.8 were made
related to the termination of approximately 1,250 employees,
approximately 840 of whom were involved in direct manufacturing
operations. Payments of $7.1 were made for other exit costs, including
dismantlement costs, equipment removal and various contractual
obligations.
The foregoing restructuring charges and related cost savings represent
the Company's best estimates, but necessarily make numerous assumptions
with respect to industry performance, general business and economic
conditions, raw materials and product pricing levels, the timing of
implementation of the restructuring and related employee reductions and
facility closings and other matters many of which are outside the
Company's control. The Company's estimates of cost savings, which are
unaudited, are not necessarily indicative of future performance, which
may be significantly more or less favorable than as set forth above and
are subject to the considerations described under "Forward-Looking
Statements" within "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Shareholders are cautioned not to
place undue reliance on the estimates or the underlying assumptions and
should appreciate that such information may not necessarily be updated
to reflect circumstances existing after the date hereof or to reflect
the occurrence of unanticipated events.
E. Supplemental Cash Flow Information
----------------------------------
Cash payments for interest, net of amounts capitalized ($.9 for 1999
and $2.7 for 1998), were $204.4 and $189.3 during the six months ended
June 30, 1999 and 1998, respectively. Cash payments for income taxes
amounted to $40.2 and $22.5 during the six months ended June 30, 1999
and 1998, respectively.
F. Segment Information
-------------------
The Company maintains three operating segments, defined
geographically: Americas, Europe and Asia-Pacific. Each reportable
segment is an operating division within the Company and has a
President reporting directly to the Chief Executive Officer and the
Chief Operating Officer. "Other" represents "Corporate" which includes
research, development and engineering and administrative costs for the
U. S. corporate headquarters. Divisional headquarter costs are
maintained within the operating segments. The interim segment
information is as follows:
<TABLE>
<CAPTION>
Quarter ended June 30,
----------------------
1999 Americas Europe Asia-Pacific Other Total
---- -------- ------ ------------ ----- -----
<S> <C> <C> <C> <C> <C>
External sales $ 981.4 $ 929.6 $ 86.4 $1,997.4
Segment income 103.6 153.7 10.7 ($21.6) 246.4
1998
----
External sales 1,099.1 1,054.1 91.7 .1 2,245.0
Segment income 107.7 201.0 .6 (20.8) 288.5
Six months ended June 30,
-------------------------
1999 Americas Europe Asia-Pacific Other Total
---- -------- ------ ------------ ----- -----
External sales $1,852.0 $1,764.8 $174.2 $3,791.0
Segment income 179.0 240.0 19.3 ($40.3) 398.0
1998
----
External sales 2,025.9 1,944.5 166.8 .2 4,137.4
Segment income 177.6 309.7 1.7 (44.5) 444.5
</TABLE>
9
<PAGE>
Crown Cork & Seal Company, Inc
The following table reconciles the Company's segment income to
consolidated pre-tax income:
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total segment income $246.4 $288.5 $398.0 $444.5
Interest expense 91.2 104.1 184.3 197.9
Interest income (7.3) (12.4) (14.8) (19.8)
Gain on sale of assets (1.3) (3.7)
Translation and exchange adjustments 1.0 5.8 9.9 7.5
------ ------ ------ ------
Consolidated pre-tax income $162.8 $191.0 $222.3 $258.9
====== ====== ====== ======
</TABLE>
G. Commitments and Contingent Liabilities
--------------------------------------
The Company has various commitments to purchase materials and supplies
as part of the ordinary conduct of business. Such commitments are at
prices not in excess of current market.
The Company's basic raw materials for its products are tinplate,
aluminum and resins, all of which are purchased from multiple sources.
The Company is subject to material fluctuations in the cost of these
raw materials and has previously adjusted its selling prices to reflect
these movements. There can be no assurance, however, that the Company
will be able to recover fully any increases or fluctuations in raw
material costs from its customers.
The Company is subject to various lawsuits and claims with respect to
matters such as those pertaining to environmental, product liability,
asbestos and safety and health matters. The ultimate liability cannot
presently be determined as considerable uncertainties exist. It is
possible that results of operations in a particular period could be
materially affected by certain contingencies. Management believes that
based on current available information and after consultation with
counsel that the ultimate disposition of matters that are pending or
asserted will not have a material adverse effect on the consolidated
results, liquidity or financial position of the Company.
10
<PAGE>
Crown Cork & Seal Company, Inc.
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (in millions, except share, per share, employee,
shareholder and statistical data)
Introduction
------------
The following discussion presents management's analysis of the results
of operations for the three and six months ended June 30, 1999,
compared to the corresponding periods in 1998 and the changes in
financial condition and liquidity from December 31, 1998. This
discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998, along with
the consolidated financial statements and related notes included in and
referred to within this report.
All per share information is computed using average common shares
outstanding, assuming dilution.
Results of Operations
---------------------
Net Income and Earnings Per Share
---------------------------------
Net income available to common shareholders for the quarter ended June
30, 1999 was $95.7, a decrease of $25.9 or 21.3% when compared to the
prior year amount of $121.6. Earnings per common share decreased $.18
or 18.9% to $.77 from $.95 a year earlier and also reflects a 2.1%
decline in average common shares outstanding, resulting primarily from
the March 1998 repurchase of shares from Compagnie Generale d'Industrie
et de Participations (CGIP).
Net Sales
---------
Net sales in the quarter decreased $247.6 or 11.0% to $1,997.4 from
$2,245.0 in 1998 due primarily to the pass-through of lower raw
material costs, business divestitures, foreign currency translation,
and lower overall volumes for metal packaging. Excluding the effects of
lower raw material costs, business divestitures and foreign currency
translation, net sales would have been 6.0% lower than in the second
quarter of 1998. Sales from U.S. operations decreased by 10.9% and
those in non-U.S. markets decreased 11.1%. U.S. sales accounted for
approximately 41% of consolidated net sales in the second quarter of
both 1999 and 1998. Sales of beverage cans and ends as a percentage of
consolidated net sales represented 32.4% in the second quarter of 1999
compared to 32.7% in the second quarter of 1998 while sales of food
cans and ends increased in the second quarter to 29.5% from 28.4% in
the second quarter of 1998. Sales of plastic closures and plastic
containers represented 15.7% of consolidated net sales in the second
quarter of 1999 versus 16.0% for the same period of 1998.
An analysis of comparative net sales by operating division follows:
<TABLE>
<CAPTION>
Net Sales Percentage Change
--------------------------------------------- ------------------
Second Quarter Six Months Ended Second Six
1999 1998 1999 1998 Quarter Months
---- ---- ---- ---- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Divisions:
Americas $ 981.4 $1,099.1 $1,852.0 $2,025.9 (10.7%) (8.6%)
Europe 929.6 1,054.1 1,764.8 1,944.5 (11.8%) (9.2%)
Asia-Pacific 86.4 91.7 174.2 166.8 (5.8%) 4.4%
Other .1 .2
-------- -------- -------- --------
$1,997.4 $2,245.0 $3,791.0 $4,137.4 (11.0%) (8.4%)
======== ======== ======== ========
</TABLE>
11
<PAGE>
Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Net sales in the Americas Division decreased by $117.7 and $173.9 for
the three and six months ended June 30, 1999 as compared to the same
periods in 1998. The decrease in the second quarter was primarily due
to (i) the pass-through of certain lower raw material costs which
amounted to $38, (ii) unfavorable foreign currency translation and
(iii) sales unit volume decreases in beverage cans, food cans and
aerosol cans partially offset by sales unit volume increases in
plastic beverage closures and plastic beverage containers. Beverage
can volumes were down 8.4% throughout the division as a result of the
Company's decision to selectively prune its account base following
restructuring activities and weak economic conditions in South America
following Brazil's January currency devaluation.
Net sales in the European Division decreased $124.5 and $179.7 for the
three and six months ended June 30, 1998. The decrease in the second
quarter was due to (i) the general weakening of most European
currencies against the U.S. dollar with the impact of translation
reducing net sales by $23 in the quarter, (ii) the divestiture of the
non-personal care HDPE plastic container business which accounted for
$19 of second quarter 1998 net sales, (iii) the sale of the majority of
our South African operations which accounted for $15 of second quarter
1998 net sales, (iv) the pass-through of certain lower raw material
costs amounting to $20 and (v) decreased sales unit volumes in aerosol
cans and plastic closures. Food can volumes were down approximately 1%
in the quarter as volume weakness in the UK and Eastern Europe offset
volume growth in Western Europe. Strong beverage can demand in Spain
and Greece coupled with increased sales unit volumes of beer cans in
the UK offset beverage can market disruptions in Northwest Europe.
Net sales in the Asia-Pacific Division decreased $5.3 in the second
quarter but are still $7.4 ahead in the six months ended June 30, 1999
compared to the prior year. The decrease in second quarter sales is
primarily a result of selling price reductions throughout the region
which eroded the benefits of increased volumes in many product lines.
Food can volumes were up over 30% in the quarter as sales of seafood,
fruit and vegetable cans were very strong in Thailand. Thailand has
remained very price competitive in the region despite the strengthening
of the Thai Baht. Beverage can volumes were down in the quarter due to
lower customer requirements in Singapore and Malaysia offset by volume
gains in China and Vietnam.
Cost of Products Sold
---------------------
Cost of products sold, excluding depreciation and amortization, was
$1,529.0 for the quarter ended June 30, 1999, a decrease of $198.2 or
11.5% compared to $1,727.2 for the same period in 1998. The decrease
reflects (i)lower raw material costs, (ii) the effect of foreign
currency translation, (iii) cost savings from restructuring programs
and (iv) lower sales unit volumes across several product lines.
As a percentage of net sales, cost of products sold was 76.5% compared
to 76.9% for the second quarter of 1998. The improvement in gross
margin as a percentage to net sales is due primarily to the benefits
derived from the Company's continuing cost containment and
restructuring programs, offset to some extent by competitive influences
on selling prices across many product lines.
Selling and Administrative
--------------------------
Selling and administrative expenses for the quarter ended June 30, 1999
were $91.0, a decrease of $2.2 or 2.4% from the second quarter of 1998.
As a percentage of net sales, selling and administrative expenses,
excluding depreciation, were 4.6% in the second quarter as compared to
4.2% for the same period of 1998. The decrease in 1999 costs is
directly related to the continuing rationalization of these costs
throughout the Company. The increase in these costs as a percentage to
net sales in 1999 reflects lower sales compared to 1998 as discussed
above.
12
<PAGE>
Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Operating Income
----------------
For the quarter ended June 30, 1999, consolidated operating income
decreased $42.1 to $246.4 from $288.5 at June 30, 1998. Operating
income as a percentage to net sales was 12.3% for the second quarter of
1999 as compared to 12.9% in 1998. An analysis of operating income by
operating division follows:
<TABLE>
<CAPTION>
Operating Income Percentage Change
------------------------------------ ------------------
Second Quarter Six Months Ended Second Six
1999 1998 1999 1998 Quarter Months
---- ---- ---- ---- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Divisions:
Americas $103.6 $107.7 $179.0 $177.6 (3.8%) .8%
Europe 153.7 201.0 240.0 309.7 (23.5%) (22.5%)
Asia-Pacific 10.7 .6 19.3 1.7
Other (21.6) (20.8) (40.3) (44.5) (3.8%) 9.4%
------ ------ ------ ------
$246.4 $288.5 $398.0 $444.5 (14.6%) (10.5%)
====== ====== ====== ======
</TABLE>
As a percentage to net sales, Americas Division operating income was
10.6% in the second quarter of 1999 as compared to 9.8% for the same
period in 1998. The increase in second quarter 1999 operating margin as
a percentage to sales was primarily due to (i) cost savings from the
1998 restructuring program and (ii) unit volume gains in plastic
bottles and plastic closures; which offset sales unit volume declines
of beverage, food and aerosol cans. The decrease in second quarter
1999 operating margin compared to 1998 is directly a result of sales
unit volume declines of beverage, food and aerosol cans as well as
lower sales unit volumes of several health and beauty products.
European Division operating income as a percentage to net sales was
16.5% in the second quarter of 1999 as compared to 19.1% for the
comparable period of 1998. The decrease in second quarter operating
margins was primarily due to (i) sales unit volume decreases of food
cans, aerosol cans and plastic beverage containers, (ii) continued
weakness in Eastern Europe and (iii) the effect of competitive pricing
across many product lines, most notably food cans, which offset the
benefits of restructuring activities and sales unit volume increases of
beverage cans and plastic closures.
In the second quarter of 1999, operating income in the Asia-Pacific
Division was 12.4% of net sales as compared to .7% for the same period
in 1998. The increase in 1999 margins was due primarily to sales unit
volume increases of food and beverage cans in Thailand which offset (i)
sales unit volume decreases of beverage cans in Singapore and Malaysia
and (ii) competitive selling pressures across many product lines
throughout the region.
Net Interest Expense / Income
-----------------------------
Net interest expense was $83.9 in the second quarter, a decrease of
$7.8 or 8.5% compared to second quarter 1998 net interest expense of
$91.7. The decrease in net interest expense is due primarily to
generally lower interest rates and lower raw material costs which have
helped to reduce the early seasonal build-up of working capital.
13
<PAGE>
Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Taxes on Income
---------------
The effective tax rate at 33.8% in the second quarter of 1999 was
relatively unchanged from the second quarter 1998 effective rate of
33.7%. For the six months ended June 30, 1999, the effective tax rate
was 37.5% as compared to 35.7% for the same period in 1998. The
increase in the effective rate is due to lower pre-tax income whereby
the taxable effect of non-deductible goodwill amortization is
proportionately greater. Additionally, pre-tax income in the Company's
European operations was lower in the first six months of 1999 compared
to 1998. The Company's blended European tax rate is lower than the U.S.
statutory rate of 35%.
Minority Interests, Net of Equity in Earnings of Affiliates
-----------------------------------------------------------
The charge for minority interests, net of equity earnings, increased by
$7.3 in the second quarter of 1999 over 1998. This increase was due to
improved results in the Company's consolidated joint ventures in China,
Greece, Brazil and Thailand.
Liquidity and Capital Resources
-------------------------------
Cash from Operations
--------------------
Net cash used by operating activities during the six months ended June
30, 1999 of $133.4 was essentially the same as cash used of $133.8 for
the same period in 1998. Lower working capital was employed, a result
of lower raw material costs in 1999 compared to 1998 as well as
better working capital management which offset the decrease in
profits from operations.
Investing Activities
--------------------
Investing activities used cash of $210.9 during the six months ended
June 30, 1999 compared with cash used of $249.0 for the same period of
1998. Capital expenditures for the first six months of 1999 were
$177.6, a decrease of $59.7 as compared to capital expenditures of
$237.3 during the same period of 1998. The Company intends to limit
1999 capital spending to approximately $300.0 in 1999 as compared to
1998 capital expenditures of $487.0.
Financing Activities
--------------------
Financing activities provided cash of $291.3 in the first six months of
1999 compared with cash provided of $394.2 in the first six months of
1998. Lower raw material costs have held down the cost of pre-season
working capital build-ups in 1999 and, as such, the increase in
commercial paper borrowings in the first six months of 1999 is lower
than in the first six months of 1998.
Total debt, net of cash and cash equivalents, at June 30, 1999 was
$5,716.2 and represents an increase of $345.6 above the December 31,
1998 level of $5,370.6. Total debt, net of cash and cash equivalents,
as a percentage to total capitalization was 64.8% at June 30, 1999 as
compared to 62.3% at December 31, 1998. Total capitalization is defined
by the Company as total debt (net of cash and cash equivalents),
minority interests and shareholders' equity.
The increase in total debt, net of cash and cash equivalents, from
December 31, 1998 is due primarily to the funding of working capital
requirements on a short-term basis through the issuance of commercial
paper. The increase in total debt as a percentage to total
capitalization was also affected by a reduction in shareholders' equity
due to negative currency translation adjustments in the first six
months of 1999.
14
<PAGE>
Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Recent Accounting Developments
------------------------------
In June 1999, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 137,
an amendment of SFAS No. 133-Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 137 has deferred the effective date of
SFAS No. 133 from January 1, 2000 to January 1, 2001. SFAS No. 133
requires that the Company value all outstanding derivative instruments
at fair value and record those instruments on the balance sheet. The
standard also significantly changes the requirements for hedge
accounting. The Company continues to evaluate the requirements of the
standard and is preparing an implementation plan.
Market Risk
-----------
Since December 31, 1998, the notional value of outstanding foreign
exchange contracts has been reduced by approximately 35%. This decrease
is due primarily to the introduction of the Euro.
The following discussions related to the Year 2000 and Euro Conversion
are updated from the discussions included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
YEAR 2000
---------
Computers and computer dependent equipment are used throughout the
Company's operations. Certain computerized systems in use today were
designed using two digits rather than four digits to define the
applicable year, which could result in the systems recognizing a date
containing "00" as the year 1900 rather than the year 2000. This could
lead to miscalculations or system failures and is generally referred to
as the "Year 2000" or "Y2K" issue.
In order to address the Y2K issue, the Company established a steering
committee that reports to senior executive management and the Board of
Directors of the Company. The steering committee is responsible for the
formulation of the Company's Y2K global plan and oversight of strategy,
risk assessment, coordination and reporting. Project offices have also
been established within each division to roll out, monitor and manage
implementation of the Company's global plan.
The Company's global plan is divided into several major phases:
Inventory and Assessment, Remediation Analysis, Implementation, and
Contingency Planning.
Inventory and Assessment - The inventory phase was substantially
completed in June 1998 including the identification of internal
mission-critical business systems and vendor and other third party
relationships. The Company substantially completed its internal risk
assessment of potentially Y2K impacted information technology ("IT")
and non-IT equipment and facilities during October 1998. In that
regard, the Company has identified Y2K issues with various mid-range
IT systems, personal computers, servers, telephone systems and
embedded systems in manufacturing and related equipment. The
assessment of the Company's third-party risks involved the
identification of critical vendors, Y2K confirmation correspondence,
evaluations and selected vendor reviews. The Company has completed the
identification of its vendor relationships and has received
approximately 74% of its requested Y2K confirmation letters. Certain
top-critical vendors are being subjected to follow-up including
interviews, on-site visits and other available means. In addition, the
Company currently has an inadequate Y2K survey response from utility
suppliers and is in the process of evaluating its risk profile with
respect to utility service. Accordingly, the Company has initiated
alternate follow-up procedures and strategies to support its risk
evaluation and contingency planning efforts.
15
<PAGE>
Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
These assessments and reviews are expected to be ongoing through the
third quarter of 1999. Despite these efforts, the Company can provide
no assurance that critical suppliers of important goods and services
(including, but not limited to, utility service and communications)
will complete their Y2K compliance plans in a timely manner.
Remediation Analysis - The Company substantially completed this project
phase in February 1999. During this stage of the project, remediation
strategies were evaluated and planned to correct identified Y2K
non-compliance. Correction strategies included vendor-supported
upgrades, system or asset replacements, and correction of non-compliant
code and systems consolidation.
Implementation - This phase involves the correction and testing of
identified internal Y2K risks in conjunction with the remediation
analysis phase. The Company's implementation plan established
priorities for remediation or replacement. The business systems
considered most critical to ongoing operations have been given the
highest priority. Such mission-critical systems include business and
operating systems such as sales order billing, production planning,
procurement and disbursements, logistics and embedded systems in
manufacturing and related equipment that, if shutdown or interrupted,
could have a material adverse impact on the Company. All other systems
include business support systems such as personal computer technology,
internal data transmission and voice communication that, if shutdown or
interrupted, may have a less material impact on the Company's
operations.
Mission Critical IT Systems - Approximately 90% of the Company's
locations that contain mission-critical IT systems require some form
of correction. Approximately 72% of mission-critical business systems
have been remediated and 28% are currently being remediated. The
Company has achieved implementation of Y2K-capable mission-critical
systems covering 85% of its operating revenues at this time versus a
previously disclosed target cover of 80%. The Company plans to
complete the remaining mission-critical implementations during the
second half of 1999. Certain of these projects are awaiting the
release of Y2K compliant software upgrades or have modestly extended
project timelines to maximize the use of internal resources.
The Company's mission-critical system testing methods include obtaining
hardware and software certifications from critical vendors and
consultants and performing Y2K compliance tests including data exchange
with critical vendors and customers. Testing of critical systems is
expected to be completed on an ongoing basis during the second half of
the year.
Embedded Systems - During 1998, the Company performed a comprehensive
evaluation of embedded systems within its manufacturing and facilities
infrastructure. This evaluation covered approximately 27,000
inventoried systems and over 1,000 machinery and systems manufacturers.
Assessment results indicate a very low non-compliant rate. Accordingly,
while the Company cannot rule out some potential impact, overall risk
in this area is believed to be low. Unit replacements or reprogramming
will occur as part of the Company's normal maintenance program in 1999.
Such costs are not expected to be significant. The Company has
conducted detailed testing of certain manufacturing processes. The
results of these tests confirm the current risk assessment.
Personal Computer Technology - The Company is currently implementing
replacement or correction methods to address Y2K non-compliance in both
hardware and software. Modest portions of these corrections pertain to
mission-critical systems. Due to recent advances in networking
technology which could offer significant on-going savings in personal
desktop computer operating costs, the Company is employing new
remediation alternatives which involved a delay in completion of some
mission-critical personal computer projects to September 1999. The
Company considers its overall risk in this area to be low.
16
<PAGE>
Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Telephone Exchange Systems - The Company has substantially completed
its assessment of telephone exchange systems within its facilities.
Approximately 20% of these systems will be remediated during 1999.
Notwithstanding these efforts, the Company believes that certain
countries in which it operates may be subject to broader regional
communication system failures. Accordingly, an extended assessment of
this risk is in process to both evaluate the reliability of the initial
assessment and identify contingency options including the utilization
of satellite phones.
Contingency Planning - The Company is developing contingency plans to
address potential disruptions that may result from unresolved Y2K
issues. Because Y2K is a date-driven risk, the Company is actively
identifying practicable prevention plans for its core operations to
mitigate disruption, especially in January 2000. This contingency plan
will also be used to address potential disruption caused by the leap
year day (February 29, 2000). Prevention plans may include temporary
deactivation of certain systems and equipment just prior to January 1,
2000, targeted supply-chain management measures to ensure supply of
certain key commodities as well as customer supply initiatives. For
instance, facility and manufacturing supplies may be procured in 1999
to support production requirements in early 2000. Additionally, in
order to address any isolated or wide spread disruptions, the Company
is considering help-desk and manufacturing support options as part of
its planning scenarios. Risks of a less controllable nature, such as
utility service outages and communication system failure are being
addressed in contingency planning. Alternate site manufacturing
scenarios, alternative vendors and other scenarios are under current
consideration. The Company substantially completed its prevention and
contingency plan development and design in June 1999. The rollout of
the contingency plan was initiated in the first quarter of 1999. The
Company is also considering potential seasonality effects of Year 2000
on consumer demand and operating and working capital, particularly in
the fourth quarter of 1999 and first quarter of 2000.
The Company's Y2K global plan could be adversely affected if any of the
Company's factors or assumptions are incorrect or if its ongoing review
discovers unanticipated problems. The Company cannot give assurance
that its global plan will be completed on schedule or that it will not
uncover Y2K issues that could create a material impact on its
performance.
The Company believes that the most reasonably likely worst-case
scenario for the Company with respect to the Y2K problem is the failure
of a critical vendor, such as a utility supplier, to provide required
goods or services after December 31, 1999. Such a failure could result
in temporary production outages and lost sales and profits. The Company
believes that because of the high degree of geographic dispersion of
its operations (with approximately 223 plants in 49 countries), it is
unlikely an isolated third-party failure would have a material adverse
effect on the Company's results of operations, financial condition, or
cash flow. The Company also believes that the formulation of
contingency plans should reduce the severity and length of any such
possible disruptions and losses. Nevertheless, because the Company's
Y2K compliance is dependent upon key third party Y2K readiness, there
can be no assurance that the Company's Y2K compliance efforts will
prevent a Y2K problem outside its direct control from adversely
affecting the results of its operations, financial condition or cash
flow. In addition, although not anticipated, any failure by the Company
to correct critical internal computer systems before Year 2000 could
have such an adverse effect.
Year 2000 Project Expenditures - The Company estimates that it will
spend approximately $22-$25 (pre-tax) for its Y2K compliance efforts.
To date, the Company has spent approximately $14, of which $6 has been
expensed. The Company anticipates that funding for its Y2K compliance
program will be from operating cash flows. These cost estimates do not
include labor costs of employees allocated to the Y2K compliance
effort, as it is not practicable to accumulate such costs. The
Company's total Y2K project cost estimate is based on presently
available information and does not necessarily include all potential
costs related to ongoing assessment and remediation or any execution
of contingency plans brought about by internal or external Y2K issues
or cost estimate changes related to replacement systems or code
remediation efforts. Actual results could differ from these estimates.
17
<PAGE>
Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
EURO CONVERSION
---------------
On January 1, 1999, eleven of the fifteen member nations ("the
participating countries") of the European Union ("EU") established
fixed conversion rates between their existing sovereign currencies
(the "legacy currencies") and the Euro. For a period of three years,
the transition period, both the Euro and the individual participants'
currencies will remain in circulation. Parties may pay for goods and
services using either the Euro or the participating country's sovereign
currency. Conversion rates will be computed through a "triangulation"
process which will convert one sovereign currency into an amount
denominated in the Euro and then convert the Euro-denominated amount
into the second legacy currency. After January 1, 2002, the Euro will
be the sole legal tender for these countries. During the transition
period, the adoption of the Euro will affect a multitude of financial
systems and business applications as the commerce of these nations will
be transacted in the Euro and the legacy currencies.
The Company is currently addressing Euro-related issues and their
impact on information systems, currency exchange rate risk, employment
and benefits, taxation, contracts, competition and pricing. Under the
action plan developed by the Company, teams have been formed to address
selling prices and costs, personnel and communications, finance,
administration and information technology. The Company has incurred
and expects to continue to incur expenses for the internal technology
and operations staff to implement its Euro conversion plan. These
costs, although not expected to be material, will be incurred through
2003 to cover the costs of preparing for and making operational change
to accommodate the introduction of the Euro. The costs for this
conversion involve updated technology and are being addressed in
conjunction with Year 2000 remediation.
At June 30, 1999, approximately 61% of the contract notional value on
outstanding foreign exchange contracts involve the Euro, primarily with
sterling. Conversion to the Euro has reduced the amount of the
Company's exposure to exchange rate risk, due to the netting effect of
having assets and liabilities denominated in a single currency as
opposed to the various legacy currencies. The number of contracts
outstanding at the end of the quarter as compared to the end of the
year has been reduced by approximately 15% with a corresponding
reduction in notional value of approximately $925. This reduction in
outstanding foreign exchange contracts has generated approximately $.7
of transaction savings. Because there will be less diversity in the
Company's exposure to foreign currencies, movements of the Euro's value
in U.S. dollars could have a more pronounced effect, whether positive
or negative.
Although all key suppliers have committed that they will be
Euro-compliant, the Company can give no assurance that third parties on
whom it depends will have the systems necessary to process
Euro-denominated transactions. Moreover, disruption of activity in the
European markets because of the conversion could adversely affect the
Company's businesses in those markets, resulting in lost revenues and
increased costs.
As part of the conversion process the Company is developing contingency
plans. The contingency plans will include assessing and communicating
the impact of any delays. These plans will also address likely problems
in the aftermath of conversion with a view to maximizing the Company's
ability to avoid any disruption.
The Company does not expect the conversion to the Euro to have a
material adverse effect upon its results of operations, financial
condition or cash flow. However, the Company cannot guarantee that,
with respect to the Euro conversion, all problems, including long-term
competitive implications of the conversion, will be foreseen and
corrected, that no material disruption of the Company's business will
occur, or that there will be no delays in the dates targeted by the
Company for the Euro conversion process.
18
<PAGE>
Crown Cork & Seal Company, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Forward Looking Statements
--------------------------
Statements included herein in "Management's Discussion and Analysis of
Financial Condition and Results of Operations", including, but not
limited to, in the "Year 2000" and "Euro Conversion" sections, and in
the discussion of the restructuring plans in Note D to the Consolidated
Financial Statements included in this Quarterly Report on Form 10-Q and
also in Part I, Item 1: "Business" and Item 3: "Legal Proceedings" and
in Part II, Item 7: "Management's Discussion and Analysis of Financial
Condition and Results of Operations", within the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, which
are not historical facts (including any statements concerning plans and
objectives of management for future operations or economic performance,
or assumptions related thereto), are "forward-looking statements"
within the meaning of the federal securities laws. In addition, the
Company and its representatives may from time to time make other oral
or written statements which are also "forward-looking statements."
These forward-looking statements are made based upon management's
expectations and beliefs concerning future events affecting the Company
and therefore involve a number of risks and uncertainties. Management
cautions that forward-looking statements are not guarantees and that
actual results could differ materially from those expressed or implied
in the forward-looking statements.
While the Company periodically reassesses material trends and
uncertainties affecting the Company's results of operations and
financial condition in connection with the preparation of Management's
Discussion and Analysis of Financial Condition and Results of
Operations and certain other sections contained in the Company's
quarterly, annual or other reports filed with the Securities and
Exchange Commission ("SEC"), the Company does not intend to review or
revise any particular forward-looking statement in light of future
events.
A discussion of important factors that could cause the actual results
of operations or financial condition of the Company to differ from
expectations has been set forth in the Company's Annual Report on Form
10-K for the year ended December 31, 1998 within Part II, Item 7;
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" under the caption "Forward Looking Statements"
and is incorporated herein by reference. Some of the factors are also
discussed elsewhere in this Form 10-Q and in prior Company filings with
the SEC. In addition, other factors have been or may be discussed from
time to time in the Company's SEC filings.
19
<PAGE>
Crown Cork & Seal Company, Inc.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on April 22,
1999. The matters voted upon and the results thereof are set forth in
Part II, Item 4 of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 and such Item 4 is incorporated herein by
reference.
Item 5. Other Information
On July 22, 1999, the Company announced that John B. Neff, a former
Portfolio Manager of the Wellington Management Company, and Arnold W.
Donald, Senior Vice President of Monsanto Company, were elected to its
Board of Directors. These additions have increased the number of
directors to fifteen.
On July 22, 1999, the Company's Board of Directors declared cash
dividends of $.25 per share on the Company's common stock and $.4712
per share on the Company's 4.5% convertible preferred stock. Both
dividends are payable on August 20, 1999 to shareholders of record on
August 4, 1999.
On July 22, 1999, The Company's Board of Directors approved an amended
and restated version of the Company's by-laws which, among other
things, amended the advance notice provisions with respect to
shareholder nominations and other business. See Item 6 below.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3. By-laws of Crown Cork & Seal Company, Inc.,
as amended
10.a Amendment No. 1 to the Crown Cork & Seal Company, Inc.
1990 Stock-Based Incentive Compensation Plan, dated as
of September 21, 1998
10.b Amendment No. 1 to the Crown Cork & Seal Company, Inc.
1994 Stock-Based Incentive Compensation Plan, dated as
of September 21, 1998
10.c Amendment No. 1 to the Crown Cork & Seal Company, Inc.
1997 Stock-Based Incentive Compensation Plan, dated as
of September 21, 1998
10.d Crown Cork & Seal Company, Inc. Senior Executive
Retirement Plan, as amended and restated as of
June 30, 1999
27. Financial Data Schedule
b) Reports on Form 8-K
There were no reports on Form 8-K filed by Crown Cork & Seal
Company, Inc., during the quarter for which this report is
filed.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Crown Cork & Seal Company, Inc.
Registrant
By: /s/ Timothy J. Donahue
Timothy J. Donahue
Senior Vice President
and Corporate Controller
Date: August 13, 1999
21
- --------------------------------------------------------------------------------
BY-LAWS Exhibit 3
OF
CROWN CORK & SEAL COMPANY, INC.
(A PENNSYLVANIA CORPORATION)
ARTICLE 1
Shareholders
SECTION 1: Annual Meetings. The Corporation shall hold annually a regular
meeting of its shareholders for the election of Directors and for the
transaction of general business which may properly come before the meeting in
accordance with these By-Laws in Philadelphia, Pennsylvania, on the fourth (4th)
Thursday in April in each year, if not a legal holiday, and, if a legal holiday,
then on the first day following (excluding Saturday) which is not a legal
holiday, or on such other date as may be designated by the Board of Directors
which is not a legal holiday, at 11:00 a.m., local time.
SECTION 2: Special Meetings. Special meetings may be called by a majority of the
Board of Directors or the chief executive officer, to meet at such place or time
as may be designated by the Board of Directors or the chief executive officer,
respectively. Except as provided by law, the shareholders shall not be entitled
to call a special meeting.
SECTION 3: Notice of Meetings. Written or printed notice of every annual and
every special meeting of the shareholders shall be given to each shareholder of
record entitled to vote at such meeting by mail, postage prepaid and addressed
to the address on the books of the Corporation, or as otherwise provided by law,
at least ten (10) days before such meeting. Notice of every special meeting
shall state the place, date and time of the meeting and the business proposed to
be transacted. Failure to give notice of any annual meeting, or any irregularity
in such notice, shall not affect the validity of any annual meeting or of any
proceedings at any such meeting. Notice of any meeting of shareholders need not
be given to any shareholder who waives notice thereof in writing either before
or after the holding thereof, and attendance at any such meeting shall
constitute waiver of notice thereof except as otherwise provided by law. No
notice of any adjourned meeting of shareholders or of the business to be
transacted at an adjourned meeting need be given by the Corporation.
<PAGE>
SECTION 4: Quorum. At all meetings of shareholders, the presence, in person or
by proxy, of shareholders entitled to cast a majority in number of votes shall
be necessary to constitute a quorum for the transaction of business; but in the
absence of a quorum, the shareholders present in person or by proxy at the time
and place fixed for such meeting, or at the time and place of any adjournment
thereof, may, by majority vote, adjourn the meeting from time to time, but not
for a period of over fifteen (15) days with respect to any meeting at which
directors are to be elected or a period of over thirty (30) days with respect to
any other meeting at any one time.
SECTION 5: Voting. Except in cases in which it is by statute, by the Articles of
Incorporation or by these By-Laws otherwise provided, each shareholder entitled
to vote at such meeting shall be entitled to cast one vote for each share of
stock held by him, and a majority of the votes cast shall be sufficient to elect
and pass any measure.
SECTION 6: Proxies. Any shareholder entitled to vote at any meeting of
shareholders may vote by person or by proxy. Every proxy shall be in writing,
subscribed by the shareholder or his duly authorized attorney and dated.
SECTION 7: Judges of Election. Prior to any meeting of shareholders, the Board
of Directors may appoint three judges of election, and in default of such
appointment the shareholders at such meeting shall by majority vote appoint such
judges. The judges of election need not be shareholders and may not be
candidates for any office. The judges of election shall exercise all of the
powers and duties usually incident to their office.
SECTION 8: Nominations. (a)Only persons who are nominated in accordance with the
procedures set forth in these By-Laws shall be eligible to serve as Directors of
the Corporation. Nominations of persons for election to the Board of Directors
of the Corporation may be made at a meeting of shareholders (i) by or at the
direction of the Board of Directors or (ii) by any shareholder of the
Corporation who is a shareholder of record at the time of giving of notice
provided for in this By-Law, who shall be entitled to vote for the election of
Directors at the meeting and who complies with the notice procedures set forth
in this By-Law.
(b) Nominations by shareholders shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation (i) in the case of an annual
meeting, not less than ninety (90) days nor more than one-hundred twenty (120)
days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
changed by more than thirty (30) days from such anniversary date, notice by the
shareholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the earlier of the day on which
notice of the date of the meeting was mailed or public disclosure was made, and
(ii) in the case of a special meeting at which Directors are to be elected, not
later than the close of business on the tenth (10th) day following the earlier
of the day on which notice of the date of the meeting was mailed or public
-2-
<PAGE>
disclosure was made. Such shareholder's notice shall set forth (i) (A) the name,
age, business address and residence address of each proposed nominee, (B) the
principal occupation of each proposed nominee, (C) a representation that the
notifying shareholder intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, (D) if known, the class
and total number of shares of the Corporation that are beneficially owned by the
proposed nominee, (E) the total number of shares of the Corporation that will be
voted by the notifying shareholder for each proposed nominee, (F) a description
of all arrangements or understandings between the notifying shareholder and each
nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the notifying
shareholder, and (G) as to each proposed nominee all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a Director if elected and including information as to the
purpose of such nomination); (ii) as to the shareholder giving the notice (A)
the name and address, as they appear on the Corporation's books, of such
shareholder and (B) the class and number of shares of the Corporation which are
beneficially owned by such shareholder and also which are owned of record by
such shareholder; and (iii) as to the beneficial owner, if any, on whose behalf
the nomination is made (A) the name and address of such person and (B) the class
and number of shares of the Corporation which are beneficially owned by such
person. At the request of the Board of Directors, any person nominated by the
Board of Directors for election as a Director shall furnish to the Secretary of
the Corporation that information required to be set forth in a shareholder's
notice of nomination which pertains to the nominee. The Corporation may request
any proposed nominee to furnish such other information as may reasonably be
required by the Corporation to determine the qualifications of the proposed
nominee to serve as a Director of the Corporation.
(c) No person shall be eligible to serve as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
By-Law. The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by this By-Law, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded. Any
such decision by the chairman shall final, binding and conclusive upon all
parties in interest. Notwithstanding the foregoing provisions of this By-Law, a
shareholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this By-Law.
SECTION 9: Notice of Shareholder Business. (a) At an annual or special meeting
of the shareholders, only such business shall be conducted as shall have been
brought before the meeting (i) pursuant to the Corporation's notice of meeting,
(ii) by or at the direction of the Board of Directors or (iii) as to an annual
meeting, by any shareholder of the Corporation who is a shareholder of record at
the time of giving of the notice provided for in this By-Law, who shall be
entitled to vote at such meeting and who complies with the notice procedures set
forth in this By-Law.
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<PAGE>
(b) For business to be properly brought before an annual
meeting by a shareholder pursuant to clause (iii) of paragraph (a) of this
By-Law, the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than ninety (90) days nor more than one-hundred twenty
(120) days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the meeting is
changed by more than thirty (30) days from such anniversary date, notice by the
shareholder to be timely must be received no later than the close of business on
the tenth (10th) day following the earlier of the day on which notice of the
date of the meeting was mailed or public disclosure was made. A shareholder's
notice to the Secretary shall set forth as to each matter the shareholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, and if a specific action is to be proposed, the text of
the resolution or resolutions which the shareholder proposes that the
Corporation adopt, (ii) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made, (iii) the class and number of shares of the Corporation which are owned
beneficially and of record by such shareholder of record and by the beneficial
owner, if any, on whose behalf the proposal is made, (iv) any material interest
of such shareholder of record and the beneficial owner, if any, on whose behalf
the proposal is made in such business, (v) a representation that the shareholder
intends to appear in person or by proxy at the meeting to bring before the
meeting the business specified in the notice, and (vi) the total number of
shares of the Corporation that will be voted by the notifying shareholder for
such proposal.
(c) Notwithstanding anything in these By-Laws to the contrary,
no business shall be conducted at an annual or special meeting except in
accordance with the procedures set forth in this By-Law. The chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting and in accordance with the
procedures prescribed by this By-Law, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Any such decision by the chairman shall be
final, binding and conclusive upon all parties in interest. Notwithstanding the
foregoing provisions of this By-Law, a shareholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this By-Law.
SECTION 10: No Consents in Lieu of Meeting. No action of the shareholders shall
be taken by either unanimous consent or partial written consent or other consent
in lieu of a meeting.
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<PAGE>
ARTICLE II
Board of Directors
SECTION 1: Powers. The business and affairs of the Corporation, except as
otherwise provided by statute, the Articles of Incorporation or these By-Laws,
shall be conducted and managed by the Board of Directors. The number of
Directors of the Corporation, which shall be not more than eighteen (18) and not
less than ten (10), shall be determined from time to time by the Directors.
SECTION 2: Election. The Directors of the Corporation shall be elected by ballot
at the annual meeting of the shareholders and shall serve one (1) year and until
their successors shall be duly elected and qualified or until their earlier
death, resignation or removal.
SECTION 3: Annual Meeting. The regular annual meeting of the Board of Directors
shall be held immediately following each meeting of the shareholders at which a
Board of Directors shall have been elected for the purpose of organization and
the transaction of other business.
SECTION 4: Regular Meetings. In addition to the annual meeting, regular meetings
of the Board of Directors shall be held at such intervals as may be fixed from
time to time by the Board of Directors.
SECTION 5: Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board, the President, or a Vice President, or by a
majority of the Board of Directors, and shall be held at the time and place
specified in the call for such special meeting.
SECTION 6: Place of Meeting. Subject to the provisions of Section 4 of this
Article II, regular and special meetings of the Board of Directors may be held
within or without the Commonwealth of Pennsylvania, and at such times and places
as, in the case of a regular meeting, may be stated in the notice of the
meeting, or in the case of a special meeting, may be specified in the call for
such meeting.
SECTION 7: Conference Calls. Any one or more members of the Board of Directors
of the Corporation or any committee thereof may participate in a meeting of such
Board or committee by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting. No persons may participate in any meeting of the
shareholders by means of a conference telephone or similar communications
equipment.
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<PAGE>
SECTION 8: Notice of Meetings. Notice of the place, day and hour of every
regular and special meeting of the Board of Directors shall be given each
Director before the meeting personally be telegram, letter or telefax or by
mail, postage prepaid, to the address on the books of the Corporation or as
otherwise provided by law at least four (4) days before the meeting. No notice
need be given any director who waives such notice in writing either before or
after the holding thereof, and attendance at any such meeting shall constitute
waiver of notice thereof except as otherwise provided by law. No notice of any
adjournment meeting of the Board of Directors need be given.
SECTION 9: Quorum. No less than one-half of the Board of Directors shall
constitute a quorum for the transaction of any business at every meeting of the
Board of Directors, but if at any meeting there be less than a quorum present a
majority of those present may adjourn the meeting from time to time but not for
a period of over thirty (30) days at any one time, without notice other than by
announcement at the meeting until a quorum shall attend. At any such adjourned
meeting at which a quorum shall attend, any business may be transacted which
might have been transacted at the meeting as previously modified.
SECTION 10: Committees. From time to time, the Board of Directors may by
resolution provide for and appoint the members of an Executive Committee, or any
other regular or special committee, or committees, and all such committees shall
have and may exercise such powers as shall be conferred or authorized by the
resolution of appointment.
SECTION 11: Vacancies. Vacancies in the Board of Directors occurring during the
year shall be filled for the unexpired terms by a majority of the remaining
members of the Board of Directors although less than a quorum.
SECTION 12: Limitation on Liability. A Director shall not be personally liable
for monetary damages for any action taken, or any failure to take any action,
unless (a) the Director has breached or failed to perform the duties of his
office under Subchapter B of Chapter 17 of the Pennsylvania Business Corporation
Law of 1988, as the same may be amended (relating to standard of care and
justifiable reliance) and (b) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness. The provisions of this Section
12 shall not apply to (a) the responsibility or liability of a Director pursuant
to any criminal statute or (b) the liability of a Director for the payment of
taxes pursuant to local, state or federal law. Any repeal or modification of
this Section 12 shall be prospective only, and shall not affect, to the
detriment of any Director, any limitation on the personal liability of a
Director of the corporation existing at the time of such repeal or modification.
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<PAGE>
ARTICLE III
Officers
SECTION 1: Officers. The Officers of the Corporation shall be a Chairman of the
Board of Directors, a President, one or more Vice Presidents (one or more of
whom may be designated as Executive Vice Presidents or Senior Vice Presidents by
the Board of Directors), a Treasurer, one or more Assistant Treasurers, a
Secretary, and one or more Assistant Secretaries and a Controller. The Board of
Directors may elect such other officers as they may from time to time deem
necessary, who shall have such authority and shall perform such duties as from
time to time may be prescribed by the Board of Directors.
SECTION 2: Officers Holding More Than One Office. Any two (2) of the offices
provided for in this Article III may be held by the same person except that the
President may not hold the office of Vice President or Secretary, nor the
Treasurer that of Assistant Treasurer, nor the Secretary that of Assistant
Secretary.
SECTION 3: Chairman of the Board. The Chairman of the Board of Directors shall
preside at all meetings of the Board of Directors. He shall have supervision of
such matters as may be designated to him by the Board of Directors. The Board of
Directors may elect a Vice Chairman of the Board, who shall have such authority
and shall perform such duties as from time to time may be presented by the Board
of Directors.
SECTION 4: President. The President shall have such authority and perform such
duties as may from time to time be assigned to him by the Board of Directors,
and, in the absence of the Chairman of the Board and the Vice Chairman of the
Board, he shall preside at all meetings of the Board of Directors.
SECTION 5: Chief Executive Officer. Either the Chairman of the Board or the
President, as determined by the Board of Directors, shall be the chief executive
officer of the Corporation and, subject to the Board of Directors, shall have
general charge of the business and affairs of the Corporation.
SECTION 6: Vice Presidents. The Vice Presidents shall perform such duties as may
be incidental to their office and as may be assigned to them from time to time
by the Board of Directors. In the absence of the President, the specific duties
assigned to that officer shall be exercised by the Vice Presidents.
SECTION 7: Secretary. The Secretary shall keep the minutes of all meetings of
the Board of Directors and the minutes of all meetings of the shareholders in
books provided for that purpose. He shall attend to the giving and serving of
all notices of the Corporation and shall be the custodian of the corporate seal.
He shall have charge of and keep and preserve such books and records of the
Corporation as the Board of Directors may prescribe, and he shall perform all
other duties incidental to his office and as may be assigned to him by the Board
of Directors from time to time. Unless otherwise ordered by the Board of
Directors, he may certify copies of and extracts from any of the official
records of the Corporation and may also certify as to the Officers of the
Corporation and as to similar matters.
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SECTION 8: Treasurer. The Treasurer shall have the care and custody of the funds
and securities of the Corporation and shall deposit the same in such bank or
banks as the Board of Directors may select, or in the absence of such selection,
as may be selected by him. He shall disburse the funds of the Corporation in the
regular conduct of its business or as may be ordered by the Board. The Treasurer
shall perform such other duties as the Board of Directors may from time to time
require.
SECTION 9: Controller. The Controller shall maintain adequate records of all
assets, liabilities and transactions of the Corporation; see that adequate
audits thereof are currently and regularly made; and, in conjunction with other
officers and department heads, initiate and enforce measures and procedures
whereby the business of this Corporation shall be conducted with the maximum
safety, efficiency and economy. He shall have such other powers and perform such
other duties as the Board of Directors may from time to time prescribe.
SECTION 10: Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries and Assistant Treasurers shall have such powers and perform such
duties as may be assigned to them by the Board of Directors or by the President,
or by the Secretary or the Treasurer respectively, and in the absence or
incapacity of the Secretary or Treasurer, shall have the powers and perform the
duties of those officers respectively.
SECTION 11: Vacancies. Vacancies in any of the offices provided herein shall be
filled by the Board of Directors by majority vote for the unexpired terms.
SECTION 12: Contracts, Notes, Drafts, Etc. Except as otherwise provided by the
Board of Directors, all written material contracts, deeds, bonds and similar
instruments of the Corporation, shall be executed on its behalf by the Chairman
of the Board, the Vice Chairman of the Board, the President or any Vice
President or Treasurer and shall be either: (a) countersigned by the Secretary
or an Assistant Secretary of the Corporation or (b) have the corporate seal
affixed thereto and attested by the Secretary, an Assistant Secretary or a
member of the legal department of the Corporation. Notes drawn and drafts
accepted by the Corporation shall be valid only when signed by the Chairman of
the Board, the Vice Chairman of the Board, the President or any Vice President,
the Treasurer or the Controller, and countersigned by the Secretary, Assistant
Treasurer, any Assistant Secretary or any Assistant Controller. Funds of the
Corporation deposited in banks and other depositories by checks, drafts, or
other orders for the payment of money, bearing the signatures of any two (2) of
the officers and/or such other employees of the Corporation as the Board of
Directors may from time to time designate; and, in lieu of manual signature
thereof, the Board of Directors may adopt and thereupon the Corporation may use
a facsimile signature of any officer or officers, notwithstanding the fact that
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<PAGE>
such officer or officers may no longer be employed by the Corporation at the
time the checks bearing such facsimile signature are actually drawn or presented
for payment. The funds deposited in banks or other depositories in special
accounts for payroll or other purposes shall be drawn from such depositories by
checks signed by any two officers or such person or persons as the Board of
Directors may from time to time designate. Whenever the Board of Directors shall
provide by resolution that any contract or note shall be executed, or draft
accepted, in any other manner and by any other officer or agent than as
specified in these By-Laws, such method of execution, acceptance or endorsement
shall be as equally effective to bind the Corporation as if specified herein.
Access to the safe deposit boxes of the Corporation shall be had only in the
presence of any two of the following officers, that is to say, the Chairman of
the Board, the Vice Chairman of the Board, the President, any one of the Vice
Presidents, the Secretary, the Treasurer, or the Controller, or in the presence
of any one of the aforementioned officers and an Assistant Secretary or an
Assistant Treasurer. The signing of any instrument or the doing of any act by
any person elected a Vice President as such Vice President, or by any person
elected an Assistant Secretary or Assistant Treasurer as such Assistant
Secretary or Assistant Treasurer, as the case may be, shall not be subject to
any inquiry as to whether the President, the Secretary or the Treasurer, as the
case may be, was at the time of such signing or of such act, absent, unavailable
or under any disability.
ARTICLE IV
Indemnification
SECTION 1: Right to Indemnification. Subject to Section 3 of this Article IV,
theCorporation shall indemnify to the fullest extent permitted by applicable law
any person who was or is a party or is threatened to be made a party to or is
otherwise involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that such person is or was a Director or
Officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise or entity, whether or not for profit,
whether domestic or foreign, including service with respect to an employee
benefit plan, its participants or beneficiaries, against all liability, loss and
expense (including attorneys' fees and amounts paid in settlement) actually and
reasonably incurred by such person in connection with such Proceeding, whether
or not the indemnified liability arises or arose from any Proceeding by or in
the right of the Corporation.
SECTION 2: Advance of Expenses. Subject to Section 3 of this Article IV,
expenses incurred by a Director or Officer in defending (or acting as a witness
in) a Proceeding shall be paid by the Corporation in advance of the final
disposition of such Proceeding, subject to the provisions of applicable law,
upon receipt of an undertaking by or on behalf of the Director or Officer to
repay such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation under applicable law.
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<PAGE>
SECTION 3: Procedure for Determining Permissibility. To determine whether any
indemnification or advance of expenses under this Article IV is permissible, the
Board of Directors by a majority vote of a quorum consisting of Directors who
are not parties to such Proceeding may, and on request of any person seeking
indemnification or advance of expenses shall, determine (i) in the case of
indemnification, whether the standards under applicable law have been met, and
(ii) in the case of advance of expenses prior to a change of control of the
Corporation as set forth below, whether such advance is appropriate under the
circumstances, provided that each such determination shall be made by
independent legal counsel if such quorum is not obtainable, or, even if
obtainable, a majority vote of a quorum of disinterested Directors so directs;
and provided further that, if there has been a change in control of the
Corporation between the time of the action or failure to act giving rise to the
claim for indemnification or advance of expenses and the time such claim is
made, at the option of the person seeking indemnification or advance of
expenses, the permissibility of indemnification shall be determined by
independent legal counsel and the advance of expenses shall be obligatory
subject to receipt of the undertaking in Section 2 of this Artiicle IV. The
reasonable expenses of any Director or Officer in prosecuting a successful claim
for indemnification, and the fees and expenses of any independent legal counsel
engaged to determine permissibility of indemnification or advance of expenses,
shall be borne by the Corporation. As used herein, a "change of control" of the
Corporation means (a) the acquisition by any person or entity, or two or more
such persons or entities acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3, or any successor rule, of the Securities Exchange Act of
1934, as amended) of more than fifty percent (50%) of the outstanding voting
shares of the Corporation or (b) any change in one-third (1/3) or more of the
members of the Board of Directors unless such change was approved by a majority
of the Continuing Directors. The term "Continuing Directors" means the Directors
existing on July 22, 1999 or any person who subsequently becomes a Director if
such person's nomination for election or election to the Board of Directors is
recommended or approved by the Continuing Directors.
SECTION 4: Contractual Obligation. The obligations of the Corporation to
indemnify a Director or Officer under this Article IV, including, if applicable,
the duty to advance expenses, shall be considered a contract between the
Corporation and such Director or Officer, and no modification or repeal of any
provision of this Article IV shall affect, to the detriment of the Director or
Officer, such obligations of the Corporation in connection with a claim based on
any act or failure to act occurring before such modification or repeal.
SECTION 5: Indemnification Not Exclusive; Inuring of Benefit. The
indemnification and advancement of expenses provided by this Article IV shall
not be deemed exclusive of any other right to which one indemnified may be
entitled under any statute, agreement, vote of shareholders or otherwise, both
as to action in such person's official capacity and as to action in another
capacity while holding such office, and shall inure to the benefit of the heirs,
legal representatives and estate of any such person.
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<PAGE>
SECTION 6: Insurance and Other Indemnification. The Board of Directors shall
have the power to (a) authorize the Corporation to purchase and maintain, at the
Corporation's expense, insurance on behalf of the Corporation and on behalf of
others to the extent that power to do so has not been prohibited by statute, (b)
create any fund of any nature, whether or not under the control of a trustee, or
otherwise secure any of its indemnification obligations, and (c) give other
indemnification to the extent permitted by statute.
ARTICLE V
Capital Stock
SECTION 1: Share Certificates. Every shareholder of record shall be entitled to
a share certificate representing the shares held by him. Every share certificate
shall bear the corporate seal (which may be a facsimile) and the signature of
the President or a Vice President and the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer of the Corporation. Where a certificate
is signed by a transfer agent or registrar the signature of any corporate
officer may be a facsimile.
SECTION 2: Transfers. Transfers of share certificates and the shares represented
thereby shall be made on the books of the Corporation only by the registered
holder or by duly authorized attorney. Transfers shall be made only on surrender
of the share certificate or certificates.
ARTICLE VI
Record Dates
SECTION 1: Record Dates. Subject to the requirements of law and to the
provisions of the Articles of Incorporation, the Board of Directors may fix a
time not exceeding, except in the case of an adjourned meeting, ninety (90) days
preceding the date of any meeting of shareholders, or the date fixed for the
payment of any dividend or distribution, or for the allotment of rights, or when
any change or conversion or exchange of shares shall go into effect or any
consent of shareholders shall be obtained, as a record date for the
determination of the shareholders entitled to notice of or to vote at any such
meeting or entitled to receive any such dividend or distribution or any such
allotment of rights, or to exercise the rights in respect to any such change,
consent, conversion or exchange of shares, and in such case only shareholders of
record on the date so fixed shall be entitled to notice of or to vote at such
meeting or to receive such dividend, distribution or allotment of rights, or to
exercise such rights as the case may be, notwithstanding any transfer of any
shares of stock on the books of the Corporation after any record date fixed as
aforesaid. The Board of Directors, in their discretion, may close the books of
the Corporation against transfers of shares during the whole or any part of such
period.
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<PAGE>
ARTICLE VII
Dividends
SECTION 1: Declaration of Dividends. Subject to the provisions of statute and
the Articles of Incorporation, dividends may be declared and paid as often at
such times as the Board of Directors may determine.
ARTICLE VIII
Sundry Provisions
SECTION 1: Seal. The seal of the Corporation shall be in such force and shall
bear such inscription as may be adopted by the Board of Directors. If deemed
advisable by the Board of Directors, a duplicate seal or duplicate by seals may
be provided and kept for the necessary purposes of the Corporation.
SECTION 2: Fiscal Year. The fiscal year of the Corporation shall commence on
January 1st of each year and end on December 31st of each year, unless otherwise
provided by the Board of Directors.
SECTION 3: Voting Stock of Other Corporations. Any stock in other corporations,
which may from time to time be held by this Corporation, may be represented and
voted at any meeting of shareholders of such other corporations or instructions
given to any nominee holding such stock, by the Chairman of the Board, the
President or Vice Presidents of the Corporation, or by proxy executed in the
name of this Corporation by its Chairman of the Board, Vice Chairman of the
Board, President or a Vice President, with the corporate seal affixed and
attested by the Secretary or an Assistant Secretary.
ARTICLE IX
Amendments
SECTION 1: Amendments. Except as otherwise provided by law, these By-Laws may be
amended at any meeting of the Board of Directors at which a quorum is present by
a majority vote of the Directors present, or they may be amended by a majority
vote at any meeting of shareholders entitled to vote thereon, provided, in
either case, notice of the proposed amendment was included in the notice of the
meeting (unless, in the case of amendment at a meeting of the Board of
Directors, such notice is waived by a majority vote of the Directors present).
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ARTICLE X
Certain Matters Relating to
Pennsylvania Act No. 36 of 1990
SECTION 1: Section 511. Subsections (d) through (f) of Section 511, Standard of
Care and Justifiable Reliance, of the Pennsylvania Associations Code, as
amended, shall not be applicable to the Corporation.
SECTION 2: Section 1721. Subsections (e) through (g) of Section 1721, Board of
Directors, of Pennsylvania Associations Code, as amended, shall not be
applicable to the Corporation.
SECTION 3: Subchapter G, Chapter 25. Subchapter G, Control-Share Acquisitions,
of Chapter 25 of the Pennsylvania Associations Code, as amended, shall not be
applicable to the Corporation.
SECTION 4: Subchapter H, Chapter 25. Subchapter H, Disgorgement by Certain
Controlling Shareholders Following Attempts to Acquire Control, of Chapter 25 of
the Pennsylvania Associations Code, as amended, shall not be applicable to the
Corporation.
ARTICLE XI
Separability; Effect of Determination by the Board
SECTION 1: Separability. The provisions of these By-Laws are independent of and
separate from each other, and no provision shall be affected or rendered invalid
or unenforceable because for any reason any other or others of them may be
invalid or unenforceable in whole or in part.
SECTION 2: Effect of Determination by the Board. Any determination involving the
interpretation or application of these By-Laws made in good faith by the Board
of Directors shall be final, binding and conclusive on all parties in interest.
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Amendment No. 1 Exhibit 10.a
---------------
CROWN CORK & SEAL COMPANY, INC.
-------------------------------
1990 STOCK-BASED INCENTIVE COMPENSATION PLAN
--------------------------------------------
Pursuant to the power reserved to it in Section 11 of the Crown Cork & Seal
Company, Inc. 1990 Stock-Based Incentive Compensation Plan ("Plan"), Crown Cork
& Seal Company, Inc. hereby amends the Plan, effective September 21, 1998,
as follows:
1. SECTION 8.08 is amended in its entirety to read as follows:
"8.08 Termination by Reason of Retirement or Disability:
-------------------------------------------------
(A) If a Holder's employment by the Company or a Subsidiary or
Affiliate terminates by reason of disability (as determined by
the Committee) any Option held by such Holder may thereafter be
exercised by the Holder (or, where appropriate, the Holder's
legal representative), to the extent it was exercisable at the
time of termination or on such accelerated basis as the Committee
may determine at or after grant, for a period of 3 months from
the date of such termination of employment or until the
expiration of the stated term of the Option, whichever period is
shorter.
(B) If a Holder's employment by the Company or a Subsidiary or
Affiliate terminates by reason of Retirement, any Option held by
such Holder may thereafter be exercised by the Holder (or, where
appropriate, the Holder's legal representative) to the extent it
was exercisable at the time of the Holder's Retirement or on such
accelerated basis as the Committee may determine at or after
grant, for a period of up to five years (as specified by the
Committee), but only three months in the case of an Incentive
Stock Option, from the date of the Holder's Retirement or until
the expiration of the stated term of the Option, whichever period
is shorter."
* * * * * *
To record the adoption of this Amendment No. 1 to the Plan, Crown Cork &
Seal Company, Inc. has authorized its officers to affix its corporate name and
seal effective as of the day and year first above written.
CORPORATE SEAL CROWN CORK & SEAL COMPANY, INC.
Attest: By: /s/ Alan W. Rutherford
Title: Executive Vice President and
Chief Financial Officer
Amendment No. 1 Exhibit 10.b
---------------
CROWN CORK & SEAL COMPANY, INC.
-------------------------------
1994 STOCK-BASED INCENTIVE COMPENSATION PLAN
--------------------------------------------
Pursuant to the power reserved to it in Section 11 of the Crown Cork & Seal
Company, Inc. 1994 Stock-Based Incentive Compensation Plan ("Plan"), Crown Cork
& Seal Company, Inc. hereby amends the Plan, effective September 21, 1998, as
follows:
1. SECTION 8.8 is amended in its entirety to read as follows:
"8.8. Termination by Reason of Retirement or Disability:
-------------------------------------------------
(A) If a Holder's employment by the Company, a Subsidiary or Affiliate
terminates by reason of disability (as determined by the Committee)
any unexercised Option granted to the Holder may thereafter be
exercised by the Holder (or, where appropriate, the Holder's
transferee or legal representative), to the extent it was exercisable
at the time of termination or on such accelerated basis as the
Committee may determine at or after grant, for a period of 24 months
or such shorter period as determined by the Committee (3 months in the
case of an Incentive Stock Option) from the date of such termination
of employment or until the expiration of the stated term of the
Option, whichever period is shorter.
(B) If a Holder's employment by the Company, a Subsidiary or Affiliate
terminates by reason of Retirement, any unexercised Option granted to
the Holder may thereafter be exercised by the Holder (or, where
appropriate, the Holder's transferee or legal representative), to the
extent it was exercisable at the time of termination or on such
accelerated basis as the Committee may determine at or after grant,
for a period of up to five years or such shorter period as determined
by the Committee (3 months in the case of an Incentive Stock Option)
from the date of such termination of employment or until the
expiration of the stated term of the Option, whichever period is
shorter."
* * * * * *
To record the adoption of this Amendment No. 1 to the Plan, Crown Cork &
Seal Company, Inc. has authorized its officers to affix its corporate name and
seal effective as of the day and year first above written.
CORPORATE SEAL CROWN CORK & SEAL COMPANY, INC.
Attest: By: /s/ Alan W. Rutherford
Title: Executive Vice President and
Chief Financial Officer
Amendment No. 1 Exhibit 10.c
---------------
CROWN CORK & SEAL COMPANY, INC.
-------------------------------
1997 STOCK-BASED INCENTIVE COMPENSATION PLAN
--------------------------------------------
Pursuant to the power reserved to it in Section 11 of the Crown Cork & Seal
Company, Inc. 1997 Stock-Based Incentive Compensation Plan ("Plan"), Crown Cork
& Seal Company, Inc. hereby amends the Plan, effective September 21, 1998, as
follows:
1. SECTION 8.8 is amended in its entirety to read as follows:
"8.8 Termination by Reason of Retirement or Disability:
-------------------------------------------------
(A) If a Holder's employment by the Company, a Subsidiary or Affiliate
terminates by reason of disability (as determined by the Committee),
any unexercised Option granted to the Holder may thereafter be
exercised by the Holder (or, where appropriate, the Holder's
transferee or legal representative), to the extent it was exercisable
at the time of termination or on such accelerated basis as the
Committee may determine at or after grant, for a period of 24 months
or such shorter term as determined by the Committee (3 months in the
case of an Incentive Stock Option) from the date of such termination
of employment or until the expiration of the stated term of the
Option, whichever period is shorter.
(B) If a Holder's employment by the Company, a Subsidiary or Affiliate
terminates by reason of Retirement, any unexercised Option granted to
the Holder may thereafter be exercised by the Holder (or, where
appropriate, the Holder's transferee or legal representative), to the
extent it was exercisable at the time of termination or on such
accelerated basis as the Committee may determine at or after grant,
for a period of up to five years or such shorter term as determined by
the Committee (3 months in the case of an Incentive Stock Option) from
the date of such termination of employment or until the expiration of
the stated term of the Option, whichever period is shorter."
* * * * * *
To record the adoption of this Amendment No. 1 to the Plan, Crown Cork &
Seal Company, Inc. has authorized its officers to affix its corporate name and
seal effective as of the day and year first above written.
CORPORATE SEAL CROWN CORK & SEAL COMPANY, INC.
Attest: By: /s/ Alan W. Rutherford
Title: Executive Vice President and
Chief Financial Officer
CROWN CORK & SEAL COMPANY, INC. Exhibit 10.d
SENIOR EXECUTIVE RETIREMENT PLAN
Amended and Restated June 30, 1999
INDEX
ARTICLE PAGE
I. DEFINITIONS........................................................ 1
II. PARTICIPATION.......................................................6
2.1 Eligibility Requirements...................................6
2.2 Participation Commencement Date............................6
III. RETIREMENT BENEFITS.................................................7
3.1 Normal Retirement Benefits.................................7
3.2 Early Retirement Benefit...................................8
3.3 Total Disability Benefit...................................8
3.4 Deferred Vested Benefit....................................9
3.5 Reduction of Payments to Group B, C and D Participants
on Account of Surviving Spouse Benefit Elections...........9
IV. VESTING............................................................10
4.1 Vesting - Retirement Benefits.............................10
4.2 Vesting - Death and Surviving Spouse Benefits.............10
4.3 Vesting - Elective Deferral Benefits......................10
V. DEATH BENEFITS.....................................................10
5.1 Group A Participants......................................10
5.2 Group B, Group C and Group D Participants.................11
VI. PAYMENT OF RETIREMENT, DEATH AND SURVIVOR BENEFITS.................12
6.1 Payment of Retirement Benefits............................12
6.2 Payment of Death and Surviving Spouse Benefits............12
6.3 Lump Sum Retirement Benefits..............................12
VII. ELECTIVE DEFERRALS.................................................13
7.1 Election to Defer.........................................13
7.2 Date of Filing Election...................................13
7.3 Commencement of Deferral..................................13
7.4 Reduction or Termination of Future Deferral...............14
VIII. INVESTMENT ALTERNATIVES FOR ELECTIVE DEFERRALS.....................14
8.1 Establishment of an Account...............................14
8.2 Investment of the Account.................................14
8.3 Function of Committee.....................................14
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IX. DISTRIBUTION OF PARTICIPANT ELECTIVE DEFERRAL ACCOUNTS.............15
9.1 Distributions.............................................15
9.2 Hardship Distributions....................................15
9.3 Administration of Hardship Distributions..................15
9.4 Termination of Employment.................................15
9.5 Participant's Death.......................................15
9.6 Form of Distribution......................................15
X. SHORT TERM DISABILITY BENEFIT......................................16
10.1 Eligibility for Short Term Disability Benefit.............16
10.2 Short Term Disability.....................................16
10.3 Amount of Short Term Disability Benefit...................16
XI. HEALTH AND RELATED BENEFITS........................................16
XII. CONTRIBUTIONS......................................................17
12.1 Contributions.............................................17
12.2 Contributions Immediately Before Change in Control
of the Company............................................17
12.3 General Assets............................................17
XIII. ADMINISTRATION.....................................................17
13.1 Administration by the Committee...........................17
13.2 Acceleration of Payments of Benefits......................17
XIV. AMENDMENT AND TERMINATION..........................................18
14.1 Amendment.................................................18
14.2 Termination of the Plan...................................18
XV. MISCELLANEOUS......................................................18
15.1 Title to Assets...........................................18
15.2 Non-alienation............................................18
15.3 Incapacity................................................18
15.4 No Employment Contract....................................19
15.5 Succession................................................19
15.6 Gender and Number.........................................19
15.7 Governing Law.............................................19
SCHEDULE A-1
SCHEDULE A-2
SCHEDULE B
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CROWN CORK & SEAL COMPANY, INC.
SENIOR EXECUTIVE RETIREMENT PLAN
This is the Crown Cork & Seal Company, Inc. Senior Executive
Retirement Plan, which is an amendment and restatement effective June 30, 1999
of the Crown Cork & Seal Company, Inc. Executive Deferred Compensation Plan,
originally effective November 8, 1991, and previously amended and restated
effective January 1, 1994, that Crown Cork & Seal Company, Inc. maintains to
provide retirement and death benefits to certain of its key management employees
and those of its affiliated companies, and to their beneficiaries and surviving
spouses.
ARTICLE I. DEFINITIONS.
The following words and phrases as used herein have the following
meanings unless a different meaning is plainly required by the context:
1.1. "Account" means the separate bookkeeping account established under Article
VIII.
1.2. "Agreement" means a Senior Executive Retirement Agreement, including
amendments thereto, between the Company and a Participant.
1.3. "Average Annual Compensation" means 12 times the average of the
Compensation payable to the Participant by the Employer during the 60
consecutive months in the last 120 consecutive months ending immediately before
termination of employment that produces the highest average.
1.4. "Board of Directors" means the Board of Directors of the Company.
1.5. "Change in Control" means if:
1.5.1. A "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the "beneficial owner" (as defined
in Rule 13D-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities; or
1.5.2. During any period of two consecutive years (not including
any period prior to the original effective date of the Plan, November
8, 1991), individuals who at the beginning of such period constitute
the Board of Directors and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in Section 1.5.1, Section
1.5.3 or Section 1.5.4 hereof whose election by the Board of Directors
or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved), cease
for any reason to constitute a majority thereof; or
<PAGE>
1.5.3. The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation that would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 75% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; or
1.5.4. The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
1.6. "Committee" means the Compensation Committee of the Board of Directors.
1.7. "Company" means Crown Cork & Seal Company, Inc.
1.8. "Compensation" means (a) base salary, including amounts deferred from
salary under Article VII, below, and under any tax-qualified employee pension
benefit plan maintained by the Employer, (b) incentive awards, including
portions of awards that are deferred for payment at a later date, and (c) salary
continuation payments on account of short-term disability under Article X,
below. Compensation shall not include (i) the compensatory portion of any
exercise of a stock option, (ii) the value of any stock appreciation right, or
(iii) any amounts previously deferred under (a) or (b) above, and included in
the Participant's pay by the Employer in a subsequent year.
1.9. "Crown Pension" means the annual amount or amounts payable to the
Participant under the basic pension benefit portion of the Salaried Pension Plan
or the basic pension benefit portion of any other tax-qualified employee defined
benefit pension plan maintained by the Employer, as a single life annuity
beginning at or after retirement age 65.
1.10. "Crown Thrift Amount" means the amount or amounts payable to the
Participant under any tax-qualified employee defined contribution pension plan
maintained by the Employer, and that are attributable to employer matching
contributions to such plan by the Company, any other Employer while it is a
member of the Company's controlled group or any acquired company. Crown Thrift
Amount shall not include amounts attributable to the Crown Cork & Seal Company,
Inc. Employee Stock Ownership Plan and employer profit sharing contributions.
The amount shall first be determined as of the Participant's date of termination
of employment, then converted to an annuity beginning at the Participant's
Normal Retirement Date under the Plan by (a) accumulating the balance to such
Normal Retirement Date at the interest rate payable on 30 year Treasury
securities at termination of employment and (b) dividing by the applicable
annuity factor in Schedule A-1.
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1.11. "Deferred Vested Benefit Date" means:
1.11.1. for a Group A Participant, the Early Retirement Date set
forth in the Agreement between the Company and the Group A
Participant; or
1.11.2. for a Group B Participant, a Group C Participant or a
Group D Participant, his Early Retirement Date.
1.12. "Early Retirement Date" means:
1.12.1. for a Group A Participant, the Early Retirement Date set
forth in the Agreement between the Company and the Group A
Participant; or
1.12.2. for a Group B Participant, a Group C Participant or a
Group D Participant, the later of age 62 or the first day of the month
after the completion of five years of participation in the Plan.
1.13. "Employer" means Crown Cork & Seal Company, Inc. and any affiliate
thereof.
1.14. "Group A Participant" means an eligible employee of the Company designated
as a Participant by the Committee before January 1, 1994. Each employee so
designated shall, as a condition of participation, enter into an Agreement with
the Company, setting forth, among other things, the amount of retirement and
death benefits to which he is entitled under the Plan. The names of all Group A
Participants are set forth on Schedule B attached hereto and made a part hereof.
1.15. "Group B Participant" means an eligible employee of the Employer who is an
executive vice president and designated as a Group B Participant by the
Committee, with the consent of the Board of Directors, after December 31, 1993.
Each employee so designated shall, as a condition of participation, enter into
an Agreement with the Company, setting forth, among other things, the amount of
retirement and death benefits to which he is entitled under the Plan. The names
of all Group B Participants are set forth on Schedule B attached hereto.
1.15.A "Group C Participant" means an eligible employee of the Employer who is
a senior vice president, or employee of a lower rank, and designated as a Group
C Participant by the Committee, with the consent of the Board of Directors,
after December 31, 1997. Each employee so designated shall, as a condition of
participation, enter into an Agreement with the Company, setting forth, among
other things, the amount of retirement and death benefits to which he is
entitled under the Plan. The names of all Group C Participants are set forth on
Schedule B attached hereto.
1.15.B "Group D Participant" means an eligible employee of the Employer who is a
vice president, or any employee of a lower rank, and designated as a Group D
Participant by the Committee, with the consent of the Board of Directors, after
December 31, 1997. Each employee so designated shall, as a condition of
participation, enter into an Agreement with the Company, setting forth, among
other things, the amount of retirement and death benefits to which he is
entitled under the Plan. The names of all Group D Participants are set forth on
Schedule B attached hereto.
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1.16. "Hardship" means, as determined by the Committee, a severe financial
hardship to the Participant resulting from a sudden and unexpected illness or
accident of the Participant or Participant's dependent (as defined in section
152 of the Internal Revenue Code of 1986, as amended), loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant.
1.17. "Normal Retirement Date" means:
1.17.1. for a Group A Participant, the Normal Retirement Date set
forth in the Agreement between the Company and the Group A
Participant; or
1.17.2. for a Group B Participant, a Group C Participant or a
Group D Participant, the later of age 65 or the first day of the month
after the completion of five years of participation in the Plan, or
(if earlier) the Normal Retirement Date set forth in the Agreement
between the Company and such Participant.
1.18. "Participant" means an eligible employee who has been designated as a
Group A Participant, a Group B Participant, a Group C Participant or a Group D
Participant.
1.19. "Plan" means the Crown Cork & Seal Company, Inc. Senior Executive
Retirement Plan as set forth in this document, the related Agreements, the
related trust agreement pursuant to which the Trust is maintained and any
amendments thereto.
1.20. "Primary Insurance Amount Offset" means the annual amount payable to the
Participant under the old age portion of the Social Security Act beginning at
age 65, without reduction for Medicare premiums, (a) determined by considering
in the calculation only compensation paid to the Participant by the Employer,
and (b) based on the provisions of the Social Security Act in effect at the date
of the Participant's termination of employment.
1.21. "Salaried Pension Plan" means the Crown Cork & Seal Company, Inc.
Salaried Pension Plan or any successor plan.
1.22. "Termination Following a Change in Control" means a termination of
employment upon or within the five year period beginning immediately following a
Change in Control either:
1.22.1. initiated by the Employer other than for "cause," which
shall mean misappropriation of funds, habitual insobriety, substance
abuse, conviction of a crime involving moral turpitude, willful and
material misrepresentation to the directors or officers of the
Employer or gross negligence in the performance of the Participant's
duties having a material adverse effect on the business, operations,
assets, properties or financial condition of the Employer; or
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1.22.2. initiated by the Participant following one or more of the
following occurrences:
1.22.2.1. an assignment to the Participant of any
duties inconsistent with, or a reduction or change by the
Employer in the nature or scope of the authority, duties or
responsibilities of the Participant from those assigned to
or held by the Participant immediately prior to the Change
in Control;
1.22.2.2. any removal of the Participant from the
officer positions held immediately prior to the Change in
Control, except in connection with promotions to positions
of greater responsibility and prestige;
1.22.2.3. any reduction by the Employer in the
Participant's Compensation as in effect immediately prior to
the Change in Control or as the same may be increased
thereafter;
1.22.2.4. revocation or any modification of any
employee benefit plan or any action taken pursuant to the
terms of any such plan, that materially reduces the
opportunity of the Participant to receive benefits under any
such plan;
1.22.2.5. a transfer or relocation of the site of
employment of the Participant immediately preceding the
Change in Control, without the Participant's express written
consent, to a location more than 20 miles distant therefrom,
or that is otherwise an unacceptable commuting distance from
the Participant's principal residence at the date of the
Change in Control; or
1.22.2.6. a requirement that the Participant undertake
business travel to an extent substantially greater than the
Participant's business travel obligations immediately prior
to the Change in Control.
1.23. "Total Disability" means the total permanent incapacity of a Participant,
as defined in the Salaried Pension Plan, irrespective of his number of years of
service under that plan.
1.24. "Total Disability Date" means, the first day of the month after the later
of the date a Participant incurs a Total Disability or the date he has received
all salary continuation payments on account of short term disability under
Article X, below; provided that he has not then reached his Normal Retirement
Date.
1.25. "Trust" means the grantor trust created by the trust agreement between the
Company and the Trustee, fixing the rights and liabilities with respect to
controlling and managing assets for the purposes of the Plan.
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1.26. "Trustee" means the corporation with fiduciary powers that is appointed by
the Board of Directors as trustee or successor trustee and named in the trust
agreement or any amendment thereto; provided that, on or after a Change in
Control, the appointment or removal of the Trustee or any successor trustee by
the Board of Directors shall be effective only if at least two-thirds of the
Participants in the Plan at such time give written consent to such action.
1.27. "Value" means:
1.27.1. the sum of a Participant's deferred compensation under
Section 7.1 and earnings, gains and losses thereon, less any
distributions to the Participant, valued as of the date of
distribution of his Account; or
1.27.2. if a Participant elects to receive a distribution of his
Account in cash, the amount of cash that the liquidation of the
investments of the Participant's Account, or any portion thereof,
yields as of the date of such liquidation.
1.28. "Years of Service" means (a) all years (and fractions thereof) of
employment of the Participant, whether or not continuous, with the Employer,
measured from the later of the Participant's date of hire or the date his
employer becomes an affiliate of the Company, unless otherwise stated in the
Participant's Agreement, (b) all periods during which the Participant receives
salary continuation payments on account of short-term disability under Article
X, below, and (c) for the purpose of calculating a Participant's early and
normal retirement benefits, all periods during which the Participant receives
Total Disability benefits under Section 3.3. Notwithstanding the foregoing, in
the case of an individual who becomes a Participant after July 31, 1997, no
service after the Participant reaches his Normal Retirement Date, as defined in
Section 1.17, shall be counted in determining his Normal Retirement Benefit
under Section 3.1. The foregoing provision shall not apply to an individual who
was a Participant as of July 31, 1997. The Committee may grant credit for
service with a previous employer for purposes of determining a Participant's
Years of Service.
ARTICLE II. PARTICIPATION.
2.1. Eligibility Requirements. Each employee who has been designated as a Group
A Participant, a Group B Participant, a Group C Participant or a Group D
Participant shall be eligible to participate in the Plan.
2.2 Participation Commencement Date. An employee shall be a
Participant effective as of the first day of the month following the
later of the month in which he has been designated as a Participant or
the month in which his Agreement is effective.
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ARTICLE III. RETIREMENT BENEFITS.
3.1. Normal Retirement Benefits.
3.1.1.Benefit Formula for Group A Participants, Group B
Participants and Certain Group C Participants. The formula for the
annual benefit of a Group A or a Group B Participant or an individual
who becomes a Group C Participant before November 1, 1998, payable
monthly beginning upon his retirement at or after his Normal
Retirement Date, shall be the product of A times B, minus the sum of C
and D and E, where:
A = Participant's Years of Service multiplied by 2.25% for the
first 20 years of such service and by 1.67% for the next 15
years of such service
B = Participant's Average Annual Compensation
C = Participant's Crown Pension
D = Participant's Crown Thrift Amount
E = Participant's Primary Insurance Amount Offset.
3.1.2. Benefit Formula for Certain Group C Participants and Group
D Participants. The formula for the annual benefit of an individual
who becomes a Group C Participant after October 31, 1998 or a Group D
Participant, payable monthly beginning upon his retirement at or after
his Normal Retirement Date, shall be the product of A times B, minus
the sum of C and D, where:
A = Participant's Years of Service multiplied by 2.00% for the
first 20 years of such service and by 1.45% for the next
15 years of such service
B = Participant's Average Annual Compensation
C = Participant's Crown Pension
D = Participant's Primary Insurance Amount Offset.
3.1.3. Additional Service Credit - All Participants. The
Committee, in its sole discretion, may grant additional benefit credit
to a Participant under Section 3.1.1 or Section 3.1.2 for Years of
Service in excess of 35 years, at a rate not to exceed 1% for each
such additional year.
3.1.4. Amount of Normal Retirement Benefit - All Participants.
The normal retirement benefit of a Participant shall be the greater of
the amount set forth in his Agreement or the amount determined under
Section 3.1.1 or Section 3.1.2, as applicable, and Section 3.1.3, if
applicable.
3.1.5. No Effect on Annual Benefit Formula for Changes in Group
Designation. If an individual first designated as a Group C
Participant after October 31, 1998 or as a Group D Participant is
subsequently designated as a Group A Participant or as a Group B
Participant, his annual benefit shall nonetheless continue to be
calculated under Section 3.1.2, rather than Section 3.1.1
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3.2. Early Retirement Benefit.
3.2.1. Amount of Early Retirement Benefit - Group A Participants.
The early retirement benefit of a Group A Participant who retires on
or after his Early Retirement Date but before his Normal Retirement
Date shall be the greater of (a) the amount set forth in his Agreement
or (b) the amount determined under Section 3.1.1, and, if applicable,
Section 3.1.3, reduced by either the rate applicable under the early
retirement reduction formula in the Salaried Pension Plan or as
otherwise stated in the Participant's Agreement, for the period by
which the beginning date of the payments precedes his Normal
Retirement Date.
3.2.2. Amount of Early Retirement Benefit - Group B, C and D
Participants. The early retirement benefit of a Group B Participant, a
Group C Participant or a Group D Participant who retires on or after
his Early Retirement Date but before his Normal Retirement Date shall
be the amount determined under Section 3.1.1 or Section 3.1.2, as
applicable, and Section 3.1.3, if applicable, reduced by the rate
applicable under the early retirement reduction formula in the
Salaried Pension Plan, for the period by which the beginning date of
the payments precedes his Normal Retirement Date.
3.3. Total Disability Benefit.
3.3.1. Initial Benefit. The initial total disability benefit of a
Participant who retires at a Total Disability Date shall be the amount
described below for him less the amount of Employer - paid long-term
disability benefits, based upon the greater of his rate of
Compensation for the calendar year in which his Total Disability
occurs or the average rate of Compensation for the three consecutive
calendar years ending immediately before the calendar year in which
his Total Disability occurs.
3.3.1.1. A Group A Participant or a Group B Participant,
100% of the amount calculated above;
3.3.1.2. A Group C Participant, 75% of the amount calculated
above; or
3.3.1.3. A Group D Participant, 50% of the amount calculated
above.
3.3.2. Annual Cost of Living Increases. A Participant's total
disability benefit determined under Section 3.3.1 shall be increased,
if at all, as of January 1 of each successive year that follows by at
least 12 months the calendar year in which the Participant's Total
Disability Date occurs. The increase shall be equal to the increase in
the Consumer Price Index for the Philadelphia Metropolitan Area,
published by the United States Department of Labor (or the comparable
successor standard), for the 12 months ending on the December 31
immediately preceding each such January 1.
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3.3.3. Cessation of Benefit Payments. Payment of a Participant's
total disability benefit shall cease as of the first to occur of the
Participant's:
3.3.3.1. cessation of Total Disability;
3.3.3.2. death; or
3.3.3.3. reaching his Normal Retirement Date.
Upon the cessation of payments under this Section 3.3.3 by reason of the
Participant's reaching his Normal Retirement Date, he shall be entitled to
receive his normal retirement benefit calculated for him under Section 3.1,
without further cost of living increases, subject in the case of a Group B
Participant, a Group C Participant or a Group D Participant, to any election of
a surviving spouse benefit under Section 5.2.2.3.
3.4. Deferred Vested Benefit.
3.4.1. Group A Participants. The vested retirement benefit, if
any, payable to a Group A Participant who terminates employment before
his Early Retirement Date or Total Disability Date shall be the
greater of (a) the amount set forth in his Agreement or (b) the amount
determined under Section 3.1.1, and shall be paid beginning on the
Participant's Deferred Vested Benefit Date. If payments are made
pursuant to Section 3.4.1(b), above, the amount shall be reduced by
either the rate applicable under the deferred vested benefit reduction
formula in the Salaried Pension Plan or as otherwise stated in the
Participant's Agreement, for the period by which the beginning date of
the payments precedes the Participant's Normal Retirement Date.
3.4.2. Group B, C and D Participants. The vested retirement
benefit, if any, payable to a Group B Participant, a Group C
Participant or a Group D Participant, who terminates employment before
his Early Retirement Date or Total Disability Date, shall be paid
beginning on or after the Participant's first possible Early
Retirement Date and by his Normal Retirement Date, as elected by the
Participant. The amount of the benefit shall be as determined under
Section 3.1.1, reduced, if payments begin before Normal Retirement
Date, by the rate applicable under the deferred vested benefit
reduction formula in the Salaried Pension Plan, for the period by
which the beginning date of the payments precedes the Participant's
Normal Retirement Date. A Participant's election to receive payments
hereunder before his Normal Retirement Date shall be made by December
31 of the calendar year before the calendar year in which payments are
to begin.
3.5. Reduction of Payments to Group B, C and D Participants on Account of
Surviving Spouse Benefit Elections. If an eligible Group B Participant elects
surviving spouse benefits pursuant to Section 5.2.2.3, his retirement benefit
under this Article III shall be reduced accordingly.
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ARTICLE IV. VESTING.
4.1. Vesting - Retirement Benefits. A Participant who, before his Early
Retirement Date, terminates employment for any one of the three following
conditions or reasons shall be 100% vested in his retirement benefit under the
Plan:
4.1.1. after five years of participation in the Plan, or
4.1.2. by reason of a Termination Following a Change in Control,
or
4.1.3. by reason of a Total Disability.
The vested deferred retirement benefit shall be payable either in accordance
with Section 3.4, beginning at the Participant's Deferred Vested Benefit Date,
if termination is after five years of participation or by reason of a
Termination Following a Change in Control, or in accordance with Section 3.3
beginning immediately if termination is by reason of Total Disability. A
Participant who, before his Early Retirement Date, terminates employment due to
"cause" (as defined in Section 1.22.1) or death shall not be entitled to a
retirement benefit under the Plan, irrespective of his number of years of
participation in the Plan.
4.2. Vesting - Death and Surviving Spouse Benefits. The beneficiary or surviving
spouse of a Participant who terminates employment due to death or who has
previously terminated employment with a vested right to a retirement benefit
under Section 4.1 or a right to a normal, early or disability benefit shall be
entitled to death or surviving spouse benefits only as provided in Articles V
and IX. No other death benefits shall be payable under the Plan.
4.3. Vesting - Elective Deferral Benefits. A Participant shall be 100% vested in
his elective deferral benefits under Article VII.
ARTICLE V. DEATH BENEFITS.
5.1. Group A Participants.
5.1.1. Lump Sum Death Benefits. The named beneficiary of a Group
A Participant who dies after meeting the requirements of Section 4.2
shall receive a death benefit equal to five times the Participant's
annual normal retirement benefit, as set forth in his Agreement, and
shall be subject to reduction or offset, if any, also as set forth in
his Agreement.
5.1.2. Surviving Spouse Benefits. The surviving spouse of a Group
A Participant who dies after meeting the requirements of Section 4.2
shall receive a survivor benefit equal to 50%, subject to reduction as
described below, of the Participant's normal retirement benefit, as
described in Section 3.1.2, payable in the form and manner described
in Section 6.2.2, for the life of the surviving spouse. The amount
payable hereunder shall be reduced proportionately by an amount
calculated to reflect the portion of the deceased Participant's
retirement benefit he elected to receive as a lump sum payment under
Section 6.3.1, so that if the Participant elected to receive his
entire retirement benefit as a lump sum, no amount shall be payable to
the surviving spouse under this Section 5.1.2. This provision shall
not adversely affect any right the surviving spouse may have as a
named beneficiary to receive a lump sum death benefit under Section
5.1.1 above.
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<PAGE>
5.2. Group B, Group C and Group D Participants.
5.2.1. Lump Sum Death Benefits. The named beneficiary of a Group
B Participant, a Group C Participant or Group D Participant who dies
after meeting the requirements of Section 4.2 shall receive a death
benefit equal to five times his annual normal retirement benefit, as
determined under Section 3.1 accrued as of the date of his death, and
shall be subject to reduction or offset, if any, also as set forth in
his Agreement. Notwithstanding the foregoing, the minimum lump sum
death benefit for such a Participant shall be $200,000.
5.2.2. Surviving Spouse Benefits. The surviving spouse of a Group
B, Group C or Group D Participant who meeting the requirements of
Sections 4.1 and 4.2 shall receive a survivor benefit, if any, as
follows:
5.2.2.1. Death Before Termination of Employment or After
Termination of Employment but Before Retirement Payments Begin.
If the Group B Participant, Group C Participant or Group D
Participant dies (a) before termination of employment but after
meeting the requirements of Section 5.2.2, above, or (b) after
termination of employment and after meeting the requirements of
Section 5.2.2, above, but before payment of his retirement
benefits has begun, his surviving spouse shall be entitled to
receive as a survivor benefit the survivor portion of the benefit
the Participant would have received under a joint and 50% to
survivor benefit with his spouse, with the joint and 50% to
survivor benefit being the actuarial equivalent of his retirement
benefit payable immediately.
5.2.2.2. Death After Termination of Employment and After
Retirement Payments Begin. If the Group B Participant, Group C
Participant or Group D Participant dies after termination of
employment but (a) after meeting the requirements of Section
5.2.2, above and (b) after payment of his retirement benefits has
begun, his surviving spouse shall be entitled to receive any
survivor benefit elected by the Participant before his death, in
accordance with Section 5.2.2.3, below.
5.2.2.3. Election of Surviving Spouse Benefit. An eligible
Group B Participant, Group C Participant or Group D Participant
under Section 5.2.2.2 may elect, in accordance with procedures
established by the Committee, and subject to reduction as
described below if the Participant elects a partial lump sum
retirement benefit payment under Section 6.3.1, to have his
retirement benefit reduced and to have 100%, 75%, 50% or 25% of
such reduced amount, as elected by the Participant, paid to the
surviving spouse of the Participant for the life of the surviving
spouse. The amount payable in such event to the Participant and
his spouse shall be the actuarial equivalent of the amount
payable to the Participant as a single life annuity, using the
factors set forth in Schedule A-1 attached hereto. The election
hereunder shall be irrevocable once retirement payments have
begun. If the Participant elects a partial lump sum retirement
benefit payment under Section 6.3.1, the amount used hereunder in
determining the joint and survivor benefit of the Participant and
his spouse shall first be reduced proportionately by an amount
calculated to reflect the portion of the Participant's retirement
benefit he elected to receive as a lump sum payment under Section
6.3.1, so that if the Participant elects to receive his entire
retirement benefit as a lump sum, no amount shall be payable to
the surviving spouse under this Section 5.2.2.3. This provision
shall not adversely affect any right the surviving spouse may
have as a named beneficiary to receive a lump sum death benefit
under Section 5.2.1 above.
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<PAGE>
ARTICLE VI. PAYMENT OF RETIREMENT, DEATH AND SURVIVOR BENEFITS.
6.1. Payment of Retirement Benefits. Subject to Section 6.3, the retirement
benefit due to a Participant pursuant to the Plan shall be paid in cash in
monthly installments for the life of the Participant.
6.2. Payment of Death and Surviving Spouse Benefits.
6.2.1. The death benefits due a beneficiary shall be paid in cash in a
lump sum.
6.2.2. The survivor benefit due a surviving spouse shall be paid in
cash in monthly installments for the life of the surviving spouse.
6.3. Lump Sum Retirement Benefits.
6.3.1. Group A and B Participants - Retirement Prior to Change in
Control. A Group A Participant or a Group B Participant eligible to receive
a normal or early retirement benefit under Section 3.1 or Section 3.2 may
make a single election to receive any whole percentage between 1% and 100%
of the present value of his retirement benefit in cash in a lump sum in
lieu of all or a portion of the retirement benefit under Section 3.1 and
Section 3.2, and to receive the balance, if any, as determined and payable
under Section 3.1 or Section 3.2, as applicable. The lump sum shall be paid
as of the date retirement benefits are payable to the Participant under
Section 3.1 or Section 3.2, as applicable. In order to elect a partial or
full lump sum payment, the Participant shall file a written election with
the Committee at least 13 months in advance of the date monthly installment
payments of such benefit are scheduled to begin. The present value of such
benefit shall be determined by using the factors set forth on Schedule A-1
attached hereto. A Participant's election to receive a partial or full lump
sum payment shall reduce proportionately any surviving spouse benefit under
Section 5.1.2 or Section 5.2.2. If any portion of a lump sum payment
elected under this Section 6.3.1 is not eligible to be claimed as a
deduction by the Employer by reason of section 162(m) of the Code for the
year otherwise payable, the Employer shall first pay to the Participant any
monthly installment payments due him and so much of the lump sum payment as
is not subject to section 162(m) of the Code in such year and the Employer
shall pay the balance of the lump sum, without adjustment, to the
Participant on March 31 of the following year.
6.3.2. Groups A, B, C and D Participants - Change in Control. A Group
A, Group B, Group C or a Group D Participant (including a Group A or a
Group B Participant who has made a prior lump sum election under Section
6.3.1) who has a Termination Following a Change in Control shall
immediately receive 100% of the present value of his normal retirement
benefit in cash in a lump sum, unless he elects to receive monthly
installments of such retirement benefit by filing a written election to
receive installments with the Committee by the last day of the calendar
year immediately before the calendar year in which the Termination
Following a Change in Control occurs. The present value of such lump sum
benefit shall be determined by using the factors set forth on Schedule A-1
attached hereto.
6.3.3. Groups A, B, C and D Participants - Gross-Up Payments. Any
Group A, Group B, Group C or Group D Participant who receives a lump sum
payment under Section 6.3.2 on account of a Termination Following a Change
in Control shall, contemporaneously therewith, also receive an additional
lump sum payment from the Plan such that the Participant receives, on a
net, after-tax basis, the amount the Participant would have received if the
lump sum payment had not been subject to any federal, state or local tax
imposed on the lump sum payment, including, without limitation, any income,
wage, payroll, or excise taxes and any interest, penalties or other
additions to tax thereon (other than those related to actions taken by the
Participant or actions that the Participant fails to take). The
determination of the amount of the additional lump sum payment shall be
made by such one of the six largest national certified public accounting
firms as the Participant shall select. All fees of such accounting firm
shall be paid by the Employer.
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<PAGE>
ARTICLE VII. ELECTIVE DEFERRALS.
7.1. Election to Defer. A Participant may elect to defer receipt of up to 15% of
his Compensation for any calendar year by filing an election form with the
Committee, which form shall specify:
7.1.1. the amount or percentage of Compensation to be
deferred; and
7.1.2. the beneficiary of his Account in the event of the
Participant's death.
An election to defer Compensation pursuant to this Article VII shall remain in
effect until amended or revoked in accordance with Section 7.4.
7.2. Date of Filing Election. An election to defer a
Participant's Compensation shall be filed by the Participant with the
Committee before the date such Compensation first becomes currently
available to the Participant.
7.3. Commencement of Deferral. The deferral period for a
Participant's Compensation paid during a calendar year shall begin as
soon as administratively feasible after the filing of the
Participant's election to defer Compensation.
7.4. Reduction or Termination of Future Deferral.
7.4.1. A Participant may elect to reduce the amount of
Compensation that will be deferred in the future or may elect to
terminate the deferral election for the future by filing an
election with the Committee; the election shall specify the
amount of future Compensation, if any, that shall continue to be
deferred.
7.4.2. The reduction or termination of the deferral of
future Compensation shall be effective as of the first day of the
next calendar quarter following the receipt of the election by
the Committee.
ARTICLE VIII. INVESTMENT ALTERNATIVES FOR ELECTIVE DEFERRALS.
8.1. Establishment of an Account. The Committee shall establish an Account for
each Participant who elects deferrals under Article VII. Compensation deferred
into the Account shall be credited to such Account not later than 60 days after
the date such Compensation would otherwise have been paid to the Participant.
Earnings, gains and losses, if any, on the balance standing to the credit of the
Account shall be credited to the Account as provided in Section 8.2.
8.2. Investment of the Account. The Committee may cause each
Participant's Account to be invested in accordance with a written
investment request provided to the Committee by the Participant. A
Participant may only request that the Committee invest his Account in
any security listed on a national securities exchange and in shares of
regulated investment companies registered under the Investment Company
Act of 1940 and eligible for sale in Pennsylvania. Such requests shall
not be binding upon the Committee. A Participant may file an amended
investment request not more often than one time in any six month
calendar period. A Participant's Account shall be credited or debited
with all earnings, gains, losses and ordinary expenses incurred
through execution of the Committee's investment instructions. If the
Committee determines not to invest the Participant's Account, the
Account shall be assumed to be invested at the interest rate at which
Citibank, N.A. is lending to its most credit-worthy customers, less
2%; provided that in no event shall such rate exceed 8%.
8.3. Function of Committee. By deferring Compensation pursuant to
Article VII, each Participant agrees that the Company, Employer and
Committee are in no way responsible for the investment results of the
Participant's Account, whether or not the Account is invested in
accordance with the Participant's request.
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<PAGE>
ARTICLE IX. DISTRIBUTION OF PARTICIPANT ELECTIVE DEFERRAL ACCOUNT.
9.1. Distributions. A Participant's Account shall be distributed only in
accordance with Section 9.2, Section 9.4 or Section 9.5.
9.2. Hardship Distributions. A Participant may request that all
or a portion of the Value of his Account be distributed at any time
before termination of employment by submitting a written request to
the Committee, provided that the Participant has incurred a Hardship,
and the distribution is necessary to alleviate such Hardship. The
Committee shall deem a distribution to be necessary to alleviate a
Hardship if:
9.2.1. the distribution is not in excess of the amount of
the Participant's Hardship; and
9.2.2. the Hardship may not be relieved through
reimbursement by insurance or otherwise, by liquidation of the
Participant's assets (to the extent that such liquidation would
not itself cause severe financial hardship) or by cessation of
deferrals under the Plan.
9.3. Administration of Hardship Distributions. The Account
balance that is not distributed pursuant to Section 9.2 shall remain
in the Plan. Distributions to alleviate a Hardship shall be made as
soon as administratively feasible after the Committee has reviewed and
approved the request. Deferral of Compensation shall be suspended
effective with the beginning of the pay period following the date of
the Committee's approval of the request and may not be resumed until
the beginning of the next calendar year.
9.4. Termination of Employment. A Participant who has terminated
employment with the Employer (for any reason other than death,
including retirement or involuntary termination) shall receive a
distribution of the entire Value of his Account as soon as
administratively feasible following the Participant's written request
to the Committee.
9.5. Participant's Death. If the Participant dies while employed
by the Employer, the entire Value of the Participant's Account shall
be distributed to his beneficiary as soon as administratively feasible
following delivery of the beneficiary's written request to the
Committee, but in no event later than two years after the
Participant's death.
9.6. Form of Distribution. The Value of the Account of a
Participant shall be distributed to such Participant, or to his
beneficiary if distribution is on account of the Participant's death,
in cash less costs of distribution and applicable taxes.
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<PAGE>
ARTICLE X. SHORT TERM DISABILITY BENEFIT.
10.1. Eligibility for Short Term Disability Benefit. A Participant shall be
eligible for short term disability benefits under the Plan in lieu of any other
short term disability benefits that the Employer provides for its salaried
employees. To be eligible to receive short term disability benefits, the
Participant shall be required to have met the conditions of a short term
disability, as defined in Section 10.2.
10.2. Short Term Disability. For purposes of this Article X,
short term disability means the temporary incapacity of a Participant
that, as determined by the Committee in a uniformly-applied manner,
renders the Participant temporarily incapable of engaging in his usual
executive function and as a result the Participant is under the direct
care and treatment of a physician who certifies to such incapacity.
10.3. Amount of Short Term Disability Benefit. A Participant who
meets the conditions set forth in Section 10.2 shall receive a short
term disability benefit, payable monthly, for the following applicable
period:
10.3.1. Chief executive officer: an amount equal to one year
of base salary and incentive payments, at the rates for such
payments in effect for the calendar year in which disability
begins;
10.3.2. Executive vice president: an amount equal to six
months of base salary and incentive payments, at the rates for
such payments in effect for the calendar year in which disability
begins; and
10.3.3. Any other Participant: an amount equal to three
months of base salary and incentive payments, at the rates for
such payments in effect for the calendar year in which disability
begins;
provided that all payments under this Article X shall cease as of the earliest
of the Participant's cessation of short term disability, occurrence of Total
Disability, death or attainment of his first possible Early Retirement Date or
his Normal Retirement Date.
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<PAGE>
ARTICLE XI. HEALTH AND RELATED BENEFITS. A Participant who (a) has a Termination
Following a Change in Control, (b) retires or (c) becomes disabled, and the
surviving spouse of such a Participant, shall be entitled to receive health and
dental benefits until the date each reaches the age of entitlement for Medicare
benefits. The Employer shall pay the cost of such health and dental benefits and
such benefits shall be no less comprehensive than those in effect for senior
executives of the Company and their spouses immediately before (x) the Change in
Control, (y) the Participant's retirement, or (z) the Participant's disability,
as the case may be.
ARTICLE XII. CONTRIBUTIONS.
12.1. Contributions. In order to meet its obligation hereunder, the Employer
will contribute to the Trust the funds necessary to provide the benefits
hereunder or life insurance policies covering the lives of the Participants
or the funds necessary for the purchase of such policies.
12.2. Contributions Immediately Before Change in Control of the
Company. Immediately before a Change in Control of the Company, the
Company shall transfer to the Trust cash, marketable securities or
other property having a fair market value in an amount equal to the
sum of the amounts, determined by an actuary selected by the Company
and satisfactory to a majority of the Participants, using reasonable
assumptions, that will be sufficient to fund fully the Employer's
obligations to pay the full amount of all benefits to which the
Participants (and their beneficiaries and spouses) may become entitled
pursuant to the Plan.
12.3. General Assets. Notwithstanding Sections 12.1 and 12.2
above, however, the Employer's obligations hereunder shall constitute
general, unsecured obligations, payable solely out of its general
assets, and no Participant or other person shall have any right to
specific assets.
ARTICLE XIII. ADMINISTRATION
13.1. Administration by the Committee. The Plan shall be administered by the
Committee; provided, however, that any member of the Committee who is a
Participant in the Plan shall be precluded from voting on any matter relating
solely to his rights under the Plan. The Committee shall have the authority,
responsibility and discretion to interpret and construe the Plan and to decide
all questions arising thereunder, including, without limitation, questions of
eligibility for participation, eligibility for benefits and the time of the
distribution thereof, and shall have the authority to deviate from the literal
terms of the Plan to the extent the Committee shall determine to be necessary or
appropriate to operate the Plan in compliance with the provisions of applicable
law.
13.2. Acceleration of Payments of Benefits. Upon a Participant's
written request on the basis of a demonstrated financial hardship,
subject solely to the Committee's discretion, which shall be uniformly
applied, the Committee may accelerate the beginning date of payment of
benefits under Section 3.4, if it determines such action is in the
best interest of the Employer and the Participant.
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<PAGE>
ARTICLE XIV. AMENDMENT AND TERMINATION
14.1. Amendment. The Company reserves the right, by action of its Board of
Directors, to amend the Plan at any time, in any manner whatsoever, after
delivery of written notification to all Participants and to surviving spouses
and beneficiaries then entitled to benefits of its intention and the effective
date thereof; provided, however, that no such amendment shall operate to reduce
the benefit that any Participant who is participating at the time such amendment
is adopted would otherwise receive hereunder at retirement, or that his
surviving spouse or beneficiary would receive in the event of his death, and no
amendment shall operate to limit the Employer's obligations in the event of a
Change in Control of the Company.
14.2. Termination of the Plan. Continuance of the Plan is
completely voluntary, and is not assumed as a contractual obligation
of the Company or other Employer. The Company, and each other
Employer, having adopted the Plan, shall have the right, at any time,
prospectively to discontinue the Plan as to its eligible employees;
provided, however, that such termination shall not operate to reduce
the benefit that any Participant who is participating at the time such
amendment is adopted would otherwise receive hereunder at retirement,
or that his surviving spouse or beneficiary would receive in the event
of his death. Furthermore, the Company shall not have the right to
terminate the Plan as to existing Participants (or the surviving
spouses or beneficiaries of deceased Participants) upon or following a
Change in Control of the Company.
ARTICLE XV. MISCELLANEOUS
15.1. Title to Assets. Title to and beneficial ownership of any assets, whether
cash or investments, that the Employer may set aside or earmark to meet its
obligations hereunder, shall at all times remain in the Employer; provided that
legal title to any assets placed in the Trust shall be in the Trustee. No
Participant, surviving spouse or beneficiary shall under any circumstances
acquire any property interest in any specific assets set aside in trust by the
Employer. Any funds that may be invested under the provisions of the Plan shall
continue for all purposes to be a part of the general funds of the Employer and
no person other than the Employer shall by virtue of the provisions of the Plan
have any interest in such funds. To the extent that any person acquires a right
to receive payments under the Plan, such right shall be no greater than the
right of any unsecured general creditor of the Employer.
15.2. Non-alienation. The right of a Participant or any other
person to the payment of any benefit hereunder shall not be assigned,
transferred, pledged or encumbered.
15.3. Incapacity. If the Committee shall find that any person to
whom any payment is due under the Plan is unable to care for his
affairs because of illness or accident, or is a minor, any payment due
(unless a prior claim therefor shall have been made by a duly
appointed guardian, committee or other legal representative) may be
paid to the spouse, a child, a parent, or a brother or sister, or to
any person deemed by the Committee to have incurred expense for such
person otherwise entitled to payment, in such manner and proportions
as the Committee may determine. Any such payment shall be a complete
discharge, to the extent of the payment, of the liabilities of the
Plan, the Employer, the Committee, and the Trustee.
15.4. No Employment Contract. Nothing contained herein or in any
Agreement shall be construed as conferring upon a Participant the
right to continue in the employ of the Employer in any capacity.
15.5. Succession. The Plan and the related Agreements shall be
binding upon and inure to the benefit of the Company and the Employer,
their successors and assigns, and the Participants and their heirs,
executors, administrators and legal representatives.
15.6. Gender and Number. For purposes of the Plan, the singular
shall include the plural and the masculine shall include the feminine,
and vice versa.
15.7. Governing Law. The Plan shall be construed in accordance
with and governed by the laws of the Commonwealth of Pennsylvania,
except to the extent superseded by federal law.
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<PAGE>
IN WITNESS WHEREOF, Crown Cork & Seal Company, Inc. has caused
this amendment and restatement of the Plan to be executed and attested by its
duly authorized officers as of the date first above written.
[CORPORATE SEAL] CROWN CORK & SEAL COMPANY, INC.
Attest: /s/ Richard L. Krzyzanowski By: /s/ Alan W. Rutherford
Secretary Executive Vice President
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<PAGE>
CROWN CORK & SEAL COMPANY, INC.
SENIOR EXECUTIVE RETIREMENT PLAN
SCHEDULE A-1
ACTUARIAL FACTORS USED IN CALCULATING
LUMP SUM VALUES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Retirement Interest Rate
- -------------------------------------------------------------------------------------------------------------------------------
Age 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0%
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 15.1133 14.3411 13.6338 12.9846 12.3874 11.8371 11.3288 10.8585 10.4225 10.0175 9.6408
56 14.7897 14.0510 13.3732 12.7499 12.1756 11.6455 11.1551 10.7007 10.2788 9.8864 9.5209
57 14.4583 13.7530 13.1045 12.5072 11.9558 11.4460 10.9737 10.5353 10.1278 9.7482 9.3942
58 14.1191 13.4467 12.8275 12.2560 11.7277 11.2383 10.7842 10.3621 9.9691 9.6026 9.2603
59 13.7720 13.1324 12.5421 11.9965 11.4911 11.0222 10.5864 10.1808 9.8025 9.4493 9.1189
60 13.4175 12.8102 12.2487 11.7286 11.2462 10.7978 10.3804 9.9913 9.6279 9.2881 8.9699
61 13.0563 12.4807 11.9476 11.4530 10.9933 10.5654 10.1664 9.7939 9.4455 9.1193 8.8133
62 12.6892 12.1448 11.6397 11.1701 10.7330 10.3254 9.9449 9.5889 9.2556 8.9430 8.6495
63 12.3174 11.8035 11.3258 10.8809 10.4661 10.0787 9.7164 9.3770 9.0587 8.7597 8.4787
64 11.9421 11.4579 11.0070 10.5865 10.1936 9.8260 9.4817 9.1588 8.8554 8.5702 8.3015
65 11.5648 11.1096 10.6848 10.2880 9.9166 9.5686 9.2421 8.9353 8.6468 8.3751 8.1189
66 11.1873 10.7601 10.3607 9.9869 9.6365 9.3076 8.9986 8.7078 8.4339 8.1755 7.9316
67 10.8112 10.4110 10.0361 9.6846 9.3546 9.0444 8.7525 8.4773 8.2178 7.9726 7.7409
68 10.4378 10.0635 9.7123 9.3824 9.0722 8.7801 8.5047 8.2449 7.9994 7.7672 7.5473
69 10.0676 9.7182 9.3897 9.0807 8.7896 8.5150 8.2558 8.0109 7.7791 7.5596 7.3514
70 9.7008 9.3751 9.0685 8.7796 8.5069 8.2494 8.0059 7.7754 7.5570 7.3499 7.1532
71 9.3368 9.0340 8.7483 8.4787 8.2239 7.9828 7.7545 7.5381 7.3327 7.1377 6.9523
72 8.9750 8.6939 8.4284 8.1774 7.9397 7.7145 7.5010 7.2982 7.1056 6.9224 6.7480
73 8.6151 8.3549 8.1086 7.8754 7.6543 7.4445 7.2452 7.0557 6.8754 6.7037 6.5401
74 8.2577 8.0173 7.7895 7.5734 7.3682 7.1731 6.9876 6.8109 6.6426 6.4821 6.3289
75 7.9041 7.6825 7.4722 7.2724 7.0823 6.9014 6.7290 6.5647 6.4080 6.2583 6.1152
76 7.5560 7.3522 7.1584 6.9740 6.7984 6.6309 6.4712 6.3187 6.1730 6.0337 5.9004
77 7.2156 7.0284 6.8502 6.6804 6.5183 6.3637 6.2159 6.0746 5.9395 5.8101 5.6862
78 6.8846 6.7130 6.5494 6.3932 6.2439 6.1013 5.9648 5.8342 5.7090 5.5891 5.4740
79 6.5645 6.4074 6.2573 6.1138 5.9765 5.8451 5.7193 5.5986 5.4829 5.3719 5.2652
80 6.2561 6.1124 5.9749 5.8432 5.7171 5.5963 5.4803 5.3691 5.2622 5.1595 5.0608
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CROWN CORK & SEAL COMPANY, INC.
SENIOR EXECUTIVE RETIREMENT PLAN
SCHEDULE A-2
DESCRIPTIONS OF LUMP SUM VALUE AND
GROSS-UP PAYMENT CALCULATIONS
These are descriptions of (i) how the lump sum values of early
and normal retirement benefits are calculated for Participants in the
Supplemental Executive Retirement Plan ("Plan"), using the Monthly Life Annuity
Factors set forth in Schedule A-1, and (ii) how a gross-up payment is calculated
for Participants under Section 6.3.3 of the Plan. THESE DESCRIPTIONS ARE FOR
ILLUSTRATIVE PURPOSES ONLY. ALL CALCULATIONS OF LUMP SUM VALUES AND GROSS-UP
PAYMENTS ARE PREPARED IN ACCORDANCE WITH THE TERMS OF THE PLAN.
I. BACKGROUND
Schedule A-1 is used to convert a monthly annuity value to a
present, lump sum amount. In general, the lump sum value of an annuity benefit
is determined by multiplying the monthly amount of a Participant's benefit by 12
(to determine the annual amount of the Participant's benefit). This amount is
then multiplied by the applicable factor from Schedule A-1. The applicable
factor is determined by cross referencing on Schedule A-1 the Participant's age
and the relevant interest rate. Therefore, three variables must be known to use
Schedule A-1: (a) the amount of the Participant's monthly annuity, (b) the
Participant's age, and (c) the applicable interest rate.
The amount of the Participant's monthly annuity is a function
of the terms of the Plan. If the lump sum value of a Participant's early
retirement benefit is being determined, for example, it is first necessary to
actuarially reduce the Participant's normal retirement benefit, as provided in
Section 3.2 of the Plan, using the early retirement reduction factor in the
Crown Salaried Pension Plan, to determine the monthly annuity value of the
Participant's early retirement benefit. This monthly amount is then converted to
a lump sum value.
For purposes of Schedule A-1, the Participant's age is the age
on which the monthly annuity payments are expected to start, rather than the
Participant's age on the date the calculation is performed. For instance, if a
Participant is age 55 and would like to determine the lump sum value of his
early retirement benefit (which is payable only upon reaching age 62), the
Participant's age, for purposes of Schedule A-1, is age 62, not age 55.
The applicable interest rate will be the then current interes
rate payable on 30-year U.S. Treasury Bonds.
<PAGE>
II. CALCULATING THE LUMP SUM VALUE OF AN EARLY OR NORMAL RETIREMENT BENEFIT
Section 6.3.1 of the Plan provides that a Participant may
elect to receive between 1% and 100% of the value of his early or normal
retirement benefit in a lump sum. Accordingly, to determine the amount that a
Participant may elect to receive in a lump sum, it is necessary to convert the
Participant's monthly annuity to a lump sum amount.
A. LUMP SUM VALUE OF A NORMAL RETIREMENT BENEFIT
Assume for purposes of this example that a Participant is age
65 and his monthly normal retirement benefit amount is $3,500. Also assume that
the applicable interest rate is 6.5%.
As described above, the lump sum value of the Participant's
annuity benefit is determined by multiplying his monthly annuity benefit
($3,500) by 12 ($42,000) and then multiplying this amount by the applicable
factor from Schedule A-1. The applicable factor is determined by cross
referencing the Participant's age (65) and the relevant interest rate (6.5%) on
Schedule A-1, which, in this case, yields a factor of 9.5686. Therefore, the
lump sum value of the Participant's normal retirement benefit is $401,881
($42,000 x 9.5686). The Participant would receive 50% of this amount in a lump
sum ($200,940) and a monthly benefit of $1,750 (i.e., the other 50% of his
normal retirement benefit).
B. LUMP SUM VALUE OF AN EARLY RETIREMENT BENEFIT
Assume for purposes of this example that a Participant is age
62 and the monthly value of his normal retirement benefit is $3,500. Also assume
that the applicable interest rate is 7.5%.
To determine the lump sum value of the Participant's early
retirement benefit, his normal retirement benefit must be actuarially reduced to
reflect an annuity starting date of age 62, rather than age 65. Assume that this
yields a monthly early retirement benefit of $3,000. The lump sum value of this
amount is determined in the same manner as described above. First, the monthly
annuity benefit ($3,000) is multiplied by 12 ($36,000). This amount is then
multiplied by the applicable factor derived from Schedule A-1. The applicable
factor for an individual age 62 with an interest rate assumption of 7.5% is
9.5889. Therefore, the lump sum value of the Participant's early retirement
benefit is $345,200 ($36,000 x 9.5889). The Participant would receive 50% of
this amount in a lump sum ($172,600) and a monthly benefit of $1,500 (i.e., the
other 50% of his early retirement benefit).
-2-
<PAGE>
III. LUMP SUM VALUE OF BENEFIT AFTER A CHANGE IN CONTROL
In addition to providing a partial lump sum distribution upon
a Participant's normal or early retirement, Section 6.3.2 of the Plan also
permits a Participant to receive a total distribution of the present value of
the Participant's normal retirement benefit in the event of a termination
following a Change in Control. Section 6.3.3 further provides that this amount
will be "grossed up" to compensate the employee for the payment of taxes on the
distribution. Therefore, the calculation of payment upon termination following a
Change in Control involves two parts: (a) the calculation of the lump sum value
of the Participant's normal retirement benefit, and (b) the calculation of the
amount of the additional gross-up payment.
A. CALCULATION OF PRESENT VALUE OF NORMAL RETIREMENT BENEFIT
The calculation for the present value of a Participant's
normal retirement benefit is similar to that described above. However, because
the Plan provides that the Participant will receive a distribution of the
present value of his normal retirement benefit, the Participant's age, for
purposes of the calculation, will always be his normal retirement age,
regardless of his age on the date the calculation is performed. The lump sum
value of this benefit is then present valued using the applicable interest rate.
Assume a Participant is age 55 and has a monthly normal
retirement benefit of $2,750. Also assume that the applicable interest rate is
6%.
To determine the lump sum value of the Participant's normal
retirement benefit, his monthly benefit at normal retirement age ($2,750) is
multiplied by 12 ($33,000). This amount is then multiplied by the applicable
factor derived from Schedule A-1. As noted above, the Participant's age for this
purpose is his normal retirement age (65) and not his current age (55). The
applicable factor for an individual age 65 and an interest rate of 6% is 9.9166.
Therefore, the lump sum value of the Participant's normal retirement benefit is
$327,248 ($33,000 x 9.9166). However, Section 6.3.2 provides that a Participant
is entitled to receive only the present value of his normal retirement benefit.
Because the value determined above ($327,248) is the lump sum value of the
Participant's normal retirement benefit as if he were age 65 (i.e., 10 years in
the future), this amount must be present valued using the same 6% interest rate.
The present value of $327,248 paid beginning 10 years in the future using a 6%
interest rate assumption is approximately $176,260. Accordingly, the Participant
would be entitled to a lump sum distribution of $176,260, which is the present,
lump sum value of his normal retirement benefit.
-3-
<PAGE>
B. CALCULATION OF GROSS-UP PAYMENT
The amount of a gross-up payment is generally determined under
the following formula:
Amount of Distribution x Tax Rate
--------------------
(1 - Tax Rate)
The "Tax Rate" for this purpose is the Participant's marginal
tax rate, taking into account all federal, state and local taxes, including
income, employment and excise taxes.
To continue the example above, assume that the Participant is
entitled to a distribution of $176,260 and his marginal tax rate is 45%. The
amount of the gross-up payment to which the Participant would be entitled is
equal to:
$176,260 x .45 = $144,212.
---------
1 - .45
Therefore, in the example the Participant would be entitled to
a lump sum distribution of $176,260 and a gross-up payment of $144,212. Thus,
his total distribution would equal $320,472.
* * *
June 1999
-4-
<PAGE>
CROWN CORK & SEAL COMPANY, INC.
SENIOR EXECUTIVE RETIREMENT PLAN
SCHEDULE B
----------
GROUP A PARTICIPANTS
Name Effective Date of Participation
William J. Avery November 10, 1991
Michael J. McKenna November 10, 1991
Mark W. Hartman November 10, 1991
Ronald R. Thoma November 10, 1991
Richard L. Krzyzanowski November 10, 1991
Alan W. Rutherford April 29, 1993
* * *
GROUP B PARTICIPANTS
Name Effective Date of Participation
John W. Conway July 28, 1994
William H. Voss December 12, 1996
* * *
GROUP C PARTICIPANTS
Name Effective Date of Participation
Craig L. Calle December 11, 1997
Frank J. Mechura December 11, 1997
Robert J. Truitt December 11, 1997
Clint J. Waring December 11, 1997
Daniel A. Abramowicz December 10, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets, consolidated statements of income and the
notes to the consolidated financial statements on pages 2 thru 10 of the
Company's Quarterly Report on Form 10-Q for the period ended June 30, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 203
<SECURITIES> 0
<RECEIVABLES> 1501
<ALLOWANCES> 37
<INVENTORY> 1534
<CURRENT-ASSETS> 3300
<PP&E> 5708
<DEPRECIATION> 2238
<TOTAL-ASSETS> 12124
<CURRENT-LIABILITIES> 4723
<BONDS> 3072
0
351
<COMMON> 779
<OTHER-SE> 1694
<TOTAL-LIABILITY-AND-EQUITY> 12124
<SALES> 3791
<TOTAL-REVENUES> 3791
<CGS> 2947
<TOTAL-COSTS> 3211
<OTHER-EXPENSES> 10
<LOSS-PROVISION> 11
<INTEREST-EXPENSE> 184
<INCOME-PRETAX> 222
<INCOME-TAX> 83
<INCOME-CONTINUING> 129
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129
<EPS-BASIC> .99
<EPS-DILUTED> .99
</TABLE>
