<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act of
1934 for the Quarterly Period Ended September 24, 1994
--------------------------------------------
Commission File No. 1-2300
------------------------------------------------------------
Scott Paper Company
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1065080
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Scott Plaza, Philadelphia, Pennsylvania 19113
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(610) 522-5000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
None
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 1, 1994
- --------------------------- -------------------------------
Common Shares, no par value 75,209,226 shares
----------------
<PAGE>
SCOTT PAPER COMPANY
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated statement of earnings for the three month
and nine month periods ended September 24, 1994,
and September 25, 1993...................................... 3
Consolidated balance sheet at September 24, 1994,
December 25, 1993, and September 25, 1993................... 4
Consolidated statement of changes in common share-
holders' equity for the three month period ended
December 25, 1993, and the nine month period
ended September 24, 1994.................................... 5
Consolidated statement of cash flows (condensed) for
the nine month periods ended September 24, 1994
and September 25, 1993...................................... 6
Notes to Consolidated Financial Statements................... 7
Item 2. Management's Discussion and Analysis......................... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 13
Signatures .............................................................. 14
Exhibit Index ........................................................... 15
</TABLE>
<PAGE>
SCOTT PAPER COMPANY
-------------------
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Millions, Except on a Per Share Basis)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -------------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
-------- -------- --------- ---------
1994 1993(a) 1994 1993(a)
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $1,172.0 $1,175.1 $3,449.1 $3,528.8
-------- -------- -------- --------
Costs and expenses
Product costs 857.5 874.2 2,562.5 2,649.7
Marketing and distribution 129.9 147.3 409.7 450.0
Research, administration and general 53.4 60.6 173.1 177.3
Other (0.9) (3.0) 0.6 4.0
-------- -------- -------- --------
1,039.9 1,079.1 3,145.9 3,281.0
-------- -------- -------- --------
Income from operations 132.1 96.0 303.2 247.8
Interest expense 47.0 46.5 137.3 138.8
Other income and (expense) 1.8 1.0 4.1 3.2
-------- -------- -------- --------
Income before taxes 86.9 50.5 170.0 112.2
Taxes on income 32.6 29.9 63.8 53.7
-------- -------- -------- --------
Income before share of earnings of
international equity affiliates and
cumulative effect of accounting
change 54.3 20.6 106.2 58.5
Share of earnings of international
equity affiliates 6.3 4.0 19.8 13.1
-------- -------- -------- --------
Income before cumulative effect of
accounting change 60.6 24.6 126.0 71.6
Cumulative effect of change in
accounting for income taxes - - - 21.7
-------- -------- -------- --------
Net Income $ 60.6 $ 24.6 $ 126.0 $ 93.3
======== ======== ======== ========
Earnings per share:
Income before cumulative effect of
accounting change $ 0.80 $ 0.33 $ 1.68 $ 0.97
Cumulative effect of change in
accounting for income taxes - - - 0.29
-------- -------- -------- --------
Net income $ 0.80 $ 0.33 $ 1.68 $ 1.26
======== ======== ======== ========
Dividends per share $ 0.20 $ 0.20 $ 0.60 $ 0.60
Average shares outstanding 74.8 74.0 74.6 74.0
</TABLE>
(a) Certain accounting reclassifications (not affecting net income) have been
made to present more clearly the results of operations.
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
SCOTT PAPER COMPANY
-------------------
CONSOLIDATED BALANCE SHEET
--------------------------
(Millions)
<TABLE>
<CAPTION>
September 24, 1994 December 25, 1993 September 25, 1993
-------------------- -------------------- --------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Assets
- ------
Current assets
Cash and cash equivalents $ 106.1 $ 133.6 $ 138.5
Receivables 602.1 600.3 587.6
Inventories
Finished products $ 189.5 $ 220.0 $ 239.1
Work in process 86.0 69.6 84.2
Raw materials and other 222.9 498.4 234.1 523.7 253.1 576.4
--------- --------- ---------
Deferred income taxes 223.2 277.9 173.2
Prepaid items and other 68.9 74.4 64.8
-------- -------- --------
1,498.7 1,609.9 1,540.5
Plant assets at cost 7,527.8 7,298.9 7,227.3
Accumulated depreciation (3,447.9) 4,079.9 (3,275.0) 4,023.9 (3,256.3) 3,971.0
--------- --------- ---------
Timber resources 112.8 113.0 113.8
Investments in and advances
to affiliates 310.4 307.9 341.2
Construction funds held by trustees 91.4 87.1 1.5
Notes receivable, goodwill
and other assets 502.8 483.3 484.0
-------- -------- --------
Total $6,596.0 $6,625.1 $6,452.0
======== ======== ========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities
Payable to suppliers and others $ 779.5 $ 891.5 $ 860.3
Accruals for restructuring programs 418.2 639.0 179.8
Current maturities of long-term debt 108.1 180.2 313.0
Accrued taxes on income 51.6 59.1 52.5
-------- -------- --------
1,357.4 1,769.8 1,405.6
Long-term debt 2,518.1 2,366.2 2,161.2
Deferred income taxes and
other liabilities 1,004.6 913.4 883.4
-------- -------- --------
4,880.1 5,049.4 4,450.2
Preferred shares 7.1 7.1 7.1
Common shareholders' equity 1,708.8 1,568.6 1,994.7
-------- -------- --------
Total $6,596.0 $6,625.1 $6,452.0
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
SCOTT PAPER COMPANY
-------------------
CONSOLIDATED STATEMENT OF CHANGES IN COMMON SHAREHOLDERS' EQUITY
----------------------------------------------------------------
(Millions)
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Reinvested Common Treasury Translation
Earnings Shares Shares Adjustment Total
---------- ------ -------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance at September 25, 1993 $1,757.0 $450.0 $(12.4) $(199.9) $1,994.7
Net loss (370.3) (370.3)
Dividends
Common shares (14.8) (14.8)
Preferred shares (0.1) (0.1)
Shares issued for the
exercise of stock options,
stock awards, and
restricted stock grants 0.4 0.4
Foreign currency
translation adjustment (27.6) (27.6)
Minimum pension liability charge (13.7) (13.7)
- ------------------------------------------------------------------------------------------
Balance at December 25, 1993 1,358.1 450.4 (12.4) (227.5) 1,568.6
Net income 126.0 126.0
Dividends
Common shares (44.7) (44.7)
Preferred shares (0.2) (0.2)
Shares issued for the
exercise of stock options,
stock awards, and
restricted stock grants 32.2 1.4 33.6
Foreign currency
translation adjustment 25.5 25.5
- ------------------------------------------------------------------------------------------
Balance at September 24, 1994 $1,439.2 $482.6 $(11.0) $(202.0) $1,708.8
======== ====== ====== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
SCOTT PAPER COMPANY
-------------------
CONSOLIDATED STATEMENT OF
-------------------------
CASH FLOWS (Condensed)
----------------------
(Millions)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
Sept. 24, Sept. 25,
--------- ---------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income $ 126.0 $ 93.3
Adjustments to reconcile net income to
net cash provided by operating
activities:
Cumulative effect of
accounting change - (21.7)
Share of earnings of
affiliates, net of
distributions (15.0) (7.6)
Depreciation, cost of timber
harvested and amortization 230.7 223.5
Deferred income taxes 41.3 23.6
Gains on asset sales (0.3) (4.6)
Postretirement benefits, net
(funding) cost (9.9) 18.5
Net changes in current assets (170.2) (203.0)
and current liabilities ------ -------
Net cash provided by operating 202.6 122.0
activities ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Investments in plant assets, timber
resources and other assets (276.1) (293.7)
Advances to affiliates, net (1.8) (1.9)
Other investing 8.6 8.8
------- -------
Net cash used for investing activities (269.3) (286.8)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Dividends paid (44.9) (44.6)
Proceeds from issuance of long-term debt 537.7 434.5
Repayments of long-term debt (466.8) (213.0)
Net decrease in short-term borrowings (10.6) (12.9)
Other financing 20.5 1.2
------- -------
Net cash provided by financing
activities 35.9 165.2
------- -------
Effect of exchange rate changes on cash 3.3 (3.6)
------- -------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (27.5) (3.2)
Cash and cash equivalents at beginning
of period 133.6 141.7
------- -------
Cash and cash equivalents at end of
period $ 106.1 $ 138.5
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. Statement of Information Furnished
----------------------------------
The accompanying financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, these consolidated financial
statements give effect to all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of
Scott Paper Company and its subsidiaries as of September 24, 1994, September
25, 1993, and December 25, 1993, and the earnings and cash flows for the nine
month periods ended September 24, 1994, and September 25, 1993.
The Company presumes that users of this Quarterly Report on Form 10-Q have
read or have access to the audited financial statements contained in the
Company's Annual Report on Form 10-K for the year ended December 25, 1993.
Accordingly, footnote disclosures which would substantially duplicate the
disclosures contained therein have been omitted.
2. Supplemental Cash Flow Information
----------------------------------
Cash payments for interest, net of amounts capitalized, were $129.2 million
and $119.2 million during the first nine months of 1994 and 1993,
respectively. Cash payments for income taxes were $30.6 million and $20.6
million during the first nine months of 1994 and 1993, respectively.
3. Restructuring and Productivity Improvement
------------------------------------------
At year-end 1993, the Company had accruals for restructuring programs of
$639.0 million recorded in its balance sheet including the 1993 charges for
restructuring and productivity improvement programs. During the first nine
months of 1994, $220.8 million was charged to these reserves primarily for
lump sum payments related to early retirements, the reclassification to the
appropriate long-term liability accounts of special termination benefits
related to those retirements, and the effects of the sale of the polystyrene
bead operations.
Based on current estimates of total cost to accomplish the broader and
accelerated restructuring plan announced on August 3, the Company estimates
that no additional reserves will be required.
4. Accounting Standards Change
---------------------------
The Company adopted Financial Accounting Standards No. 112, Employers'
Accounting for Postemployment Benefits (FAS 112), during the first quarter of
1994. This standard requires employers to recognize and, when necessary,
accrue for the estimated cost of benefits provided to former or inactive
employees after employment but before retirement. The effect on the Company
of adopting this statement was not material.
Beginning in 1993, the Company adopted Financial Accounting Standards No.
109, Accounting for Income Taxes (FAS 109). This standard requires that the
deferred tax liability account at the beginning of the year be adjusted to
equal the taxes that will be paid on taxable income deferred into future
years based on the tax rates in effect for the future years. The Company
reported a positive adjustment for the cumulative effect of adopting the
provisions of FAS 109 of $21.7 million, or $.29 per share, in the first
quarter of 1993.
-7-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- ------------------------------------------
5. Subsequent Event
----------------
On October 8, 1994, the Company signed an agreement with a global investment
group for the sale of S. D. Warren, the Company's printing and publishing
papers subsidiary, for $1.6 billion, subject to certain adjustments. The
investment group is headed by Sappi, Ltd., a paper and forest products
company. The group also includes DLJ Merchant Banking Partners, L.P. and its
affiliated funds as well as UBS Capital Corporation, the U.S. private
investment arm of Union Bank of Switzerland. Under the terms of the
agreement, the Company will retain responsibility for certain environmental,
restructuring and other liabilities. The transaction is expected to close by
mid-December 1994, once certain conditions are met.
On October 24, 1994, the Company announced that it had signed a letter of
intent to sell its Mobile, Alabama, energy and recovery complex for $350
million to a wholly owned subsidiary of The Southern Company. The
transaction, pending regulatory approvals, is expected to close by mid-
December 1994.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations -
- ---------------------
Third Quarter 1994 Compared With Third Quarter 1993
- ---------------------------------------------------
The Company's third quarter net income on a comparable basis increased 73% to
$60.6 million from $35.1 million for the same period in 1993. Including the
effect of the tax law change, net income was $24.6 million for the third quarter
of 1993. Earnings per share for the quarter were up 67% to $0.80 from $0.48 in
1993 ($0.33 per share including the effect of the tax law change recorded last
year). These results were achieved on sales of $1.17 billion which are
approximately the same as last year.
The third quarter results represent the best quarterly performance in four years
and reflect the initial benefits of the cost reduction and restructuring efforts
which were first announced in late 1993 and expanded and accelerated in August
1994. By the end of the third quarter, the Company's worldwide work force was
approximately 27,600, a reduction of almost 7,000 people since the start of the
cost reduction program. By the end of 1994, the Company expects to complete the
broader restructuring, which includes a reduction in its worldwide work force of
approximately 10,500, significant decreases in controllable expenses, and
closing and reducing capacity at certain older, high-cost production facilities.
The Company expects annual pre-tax benefits in excess of $400 million following
successful implementation of the program.
Income from operations for the consolidated global tissue business increased 48%
in the third quarter of 1994 compared with the same period last year. All
regions contributed significantly higher earnings due primarily to lower
manufacturing and administrative costs, and the operating margin for this
business reached a new high of 13.6%. Income from operations for the U.S.
tissue business increased 47% over the same quarter last year, despite a 2%
decline in sales revenue on 3% lower volume. This increase was due primarily to
lower manufacturing and administrative costs.
Outside the U.S., earnings of the European tissue business increased 47% from
1993, while the market remained weak. For the Pacific region, sales revenue in
the third quarter was 10% above last year and earnings were 46% higher. The
Company recently became the first international tissue company to have a
presence in China, with the announcement of its joint venture with Shanghai
Paper Corporation. Scott's share of earnings from its equity affiliates also
increased in the quarter primarily due to cost reductions.
Third quarter income from operations for S. D. Warren, the Company's printing
and publishing papers subsidiary, increased 1% from last year. Sales revenue
was up 1% and volume was 4% higher. For the first time since the end of 1990,
the U.S. coated paper market is no longer oversupplied. Strengthening demand
and prices for S. D. Warren's coated papers were experienced as the quarter
progressed. On October 8, 1994, the Company signed an agreement for the sale of
S. D. Warren. See Note 5 in the Notes To Consolidated Financial Statements for
further detail on this subsequent event.
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations -
- ---------------------
Nine Months 1994 Compared With Nine Months 1993
- -----------------------------------------------
For the first nine months of 1994, net income and earnings per share were $126.0
million and $1.68 per share, respectively, compared to $93.3 million of net
income and per share earnings of $1.26 in 1993. Excluding the negative effect
of the income tax law change and the positive effect of the required adoption of
Financial Accounting Standard No. 109, Accounting for Income Taxes, net income
and earnings per share were $82.1 million and $1.12, respectively, in 1993.
Dollar sales for the first nine months of 1994 declined 2% to $3.45 billion.
Results for the first nine months of 1994 reflect the Company's progress in its
cost reduction and restructuring efforts which were first announced in late 1993
and which were expanded and accelerated in August 1994. By the end of the third
quarter, the Company's worldwide work force was approximately 27,600, a
reduction of almost 7,000 people since the start of the cost reduction program.
By the end of 1994, the Company expects to complete the broader restructuring,
which includes a reduction in its worldwide work force of approximately 10,500,
significant decreases in controllable expenses, and closing and reducing
capacity at certain older, high-cost production facilities. The Company expects
annual pretax benefits in excess of $400 million following successful
implementation of the program.
Income from operations for the consolidated global tissue business was up 36% in
the first nine months of 1994 despite a 2% decline in sales revenue. All
regions reported higher earnings, with cost reductions being a primary factor in
the improvement. Income from operations for the U.S. tissue business increased
40% in the first nine months of 1994 versus the same period last year, primarily
due to reduced manufacturing and administrative costs. Sales revenue was flat
on 2% lower volume. Outside the U.S., income from operations for the European
tissue business increased 24%, with sales revenue declining 8% as the market
remained weak. For the Pacific region, sales revenue for the nine months was 8%
above last year on higher volume and earnings increased 40%. Scott's share of
earnings from its equity affiliates also increased in the first nine months of
1994 compared to the prior year, primarily due to cost reductions.
S. D. Warren's income from operations declined 42% during the first nine months
of 1994. Sales revenue declined 2% while volume was 1% higher. During the
first half of 1994, coated paper markets continued to be over-supplied by excess
industry capacity and imported paper, which caused downward pressure on pricing.
Demand and prices for Warren's coated papers strengthened during the third
quarter, with orders and backlogs increasing significantly compared to the prior
year. On October 8, 1994, the Company signed an agreement for the sale of S. D.
Warren. See Note 5 in the Notes To Consolidated Financial Statements for
further detail on this subsequent event.
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Condition -
- -------------------
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations during the first nine months of 1994 and 1993 was
$202.6 million and $122.0 million, respectively. The net amount of cash
provided by operations for these periods was affected by increases in working
capital. The increase in working capital for the nine months ended September
24, 1994 was primarily due to a decrease in payable to suppliers and others.
Capital expenditures were $276.1 million during the first nine months of 1994
compared with $293.7 million during the same period in 1993. During 1994 and
1995, the Company plans to invest between $600 and $650 million in capital
projects. The projects include: the modernization of the pulp mill in Mobile,
Alabama; capacity expansion for the wet wipes business in Dover, Delaware;
construction of a converting facility in Yucca, Arizona and a state-of-the-art
tissue mill in Owensboro, Kentucky; and other projects designed to sustain
existing operations and reduce costs. The Company expects to finance this
spending primarily from internally-generated funds.
Total debt at September 24, 1994 was $2,626.2 million compared with $2,546.4
million at December 25, 1993 and $2,474.2 million at September 25, 1993. During
the first nine months of 1994, the Company's financing activities included the
issuance of $45 million of tax-exempt bonds, which will be used to finance a
portion of the Owensboro tissue mill construction. The Company retired $85.4
million of debentures primarily through the issuance of commercial paper. The
Company also amended a loan agreement to extend maturities of $75.3 million of
notes, which were transferred from current maturities of long-term debt to long-
term debt. The Company intends to use the after-tax proceeds from the sale of
S. D. Warren and the Mobile energy and recovery complex to reduce debt and,
possibly, repurchase Company stock.
To maintain financing flexibility, the Company maintains two long-term revolving
credit agreements totaling $775 million, all unused at September 24, 1994.
The Company's debt to equity ratios at September 24, 1994, December 25, 1993 and
September 25, 1993 are set forth below:
<TABLE>
<CAPTION>
September 24, 1994 December 25, 1993 September 25, 1993
------------------- ------------------ -------------------
<S> <C> <C> <C>
Debt to equity 153% 162% 124%
</TABLE>
September 24, 1994 Compared With December 25, 1993
- --------------------------------------------------
Total assets at September 24, 1994 of $6,596.0 million decreased $29.1 million
compared with total assets of $6,625.1 million at December 25, 1993. Current
assets decreased $111.2 million, primarily due to decreases in deferred income
taxes, inventories and cash and cash equivalents. Net plant assets increased
$56.0 million during the nine months ended September 24, 1994.
Total liabilities of $4,880.1 million at September 24, 1994 decreased $169.3
million or 3.4% compared with total liabilities of $5,049.4 million of December
25, 1993. The decrease was primarily due to a decrease in payable to suppliers
and others of $112.0 million.
Common shareholders' equity at September 24, 1994 of $1,708.8 million was $140.2
million greater than the balance at December 25, 1993 of $1,568.6 million due
primarily to reinvested earnings, shares issued for the exercise of stock
options, awards and grants, net of dividends paid.
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------
Financial Condition (Continued)
- -------------------
September 24, 1994 Compared With September 25, 1993
- ---------------------------------------------------
Total assets of $6,596.0 million at September 24, 1994 increased $144.0 million
or 2.2% compared with total assets of $6,452.0 million at September 25, 1993.
The increase was primarily due to increases in construction funds held by
trustees of $89.9 million and net plant assets of $108.9 million.
Total liabilities of $4,880.1 million at September 24, 1994 increased $429.9
million or 9.7% compared with total liabilities of $4,450.2 million of September
25, 1993. The increase was primarily due to an increase in the accruals for
restructuring programs of $238.4 million and an increase in total debt of $152.0
million.
Common shareholders' equity at September 24, 1994 of $1,708.8 million decreased
$285.9 million compared with the September 25, 1993 balance of $1,994.7 million
due primarily to a net loss resulting from restructuring charges during 1993 as
well as dividends paid.
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
<TABLE>
<CAPTION>
Number Description
- ------ ------------
<S> <C>
3(b) The Company's Bylaws, amended July 19, 1994, effective January
1, 1995
10(a) 1994 Long-Term Incentive Plan, as amended July 19, 1994,
incorporated by reference to Exhibit 4(a) to the Company's
Registration Statement No. 33-56159 on Form S-8
10(b) Form of Restricted Stock Agreement dated as of September 16,
1994 between the Company and other grantees of restricted
shares under the 1994 Long-Term Incentive Plan
10(c) Directors' Retirement Benefit Plan, as amended July 19, 1994
10(d) Directors' Deferred Compensation Plan, as amended July 19,
1994
10(e) Agreement dated August 11, 1994 between the Company and J.R.
Leaman, Jr.
</TABLE>
(b) Reports on Form 8-K:
Forms 8-K were filed September 1, 1994 (reporting under Item 4), October
11, 1994 (reporting under Item 5) and October 25, 1994 (reporting under Item 5).
-13-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Scott Paper Company
-----------------------------
(Registrant)
DATE: November 4, 1994 /s/ Edward B. Betz
-------------------- -----------------------------
Edward B. Betz
Vice President & Controller
(Authorized Signer and
Chief Accounting Officer)
-14-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
3(b) The Company's Bylaws, amended July 19, 1994, effective January
1, 1995
10(a) 1994 Long-Term Incentive Plan, as amended July 19, 1994,
incorporated by reference to Exhibit 4(a) to the Company's
Registration Statement No. 33-56159 on Form S-8
10(b) Form of Restricted Stock Agreement dated as of September 16,
1994 between the Company and other grantees of restricted
shares under the 1994 Long-Term Incentive Plan
10(c) Directors' Retirement Benefit Plan, as amended July 19, 1994
10(d) Directors' Deferred Compensation Plan, as amended July 19,
1994
10(e) Agreement dated August 11, 1994 between the Company and J.R.
Leaman, Jr.
</TABLE>
-15-
<PAGE>
Exhibit 3(b)
------------
BYLAWS
of
SCOTT PAPER COMPANY
(a Pennsylvania Registered Corporation)
[As Amended Effective July 19, 1994]
ARTICLE I
Offices and Fiscal Year
Section 1.01. Registered Office. The registered office of the
-----------------
corporation in the Commonwealth of Pennsylvania shall be at Industrial
Highway at Tinicum Island Road, Delaware County, until otherwise established
by the Board of Directors and a record of such change is filed with the
Department of State in the manner provided by law, and the post office
address shall be Scott Plaza, Philadelphia, Pennsylvania 19113.
Section 1.02. Other Offices. The corporation may also have offices at
-------------
such other places within or without the Commonwealth of Pennsylvania as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
Section 1.03. Fiscal Year. The fiscal year of the corporation shall
-----------
end on the last Saturday in December of each year.
ARTICLE II
Notice, Waivers and Meetings Generally
Section 2.01. Manner of Giving Notice.
-----------------------
(a) General Rule. Whenever written notice is required to be given
------------
to any person under the provisions of the Business Corporation Law or by the
articles or these bylaws, it may be given to the person either personally or
by sending a copy thereof by any class of mail permitted under the Business
Corporation Law, postage prepaid, or by telegram (with messenger service
specified), or courier service, charges prepaid, or by telecopier, to the
address (or to the telecopier or telephone number) of the person appearing on
the books of the corporation or, in the case of Directors, supplied by the
Director to the corporation for the purpose of notice. If the notice is sent
by mail, telegraph or courier service, it shall be deemed to have been given
to the person entitled thereto when deposited in the United States mail or
with a telegraph office or courier service for delivery to that person or, in
the case of telecopier, when transmitted. A notice of meeting shall specify
the place, day and hour of the meeting and any other information required by
any other provision of the Business Corporation Law, the articles or these
bylaws.
(b) Adjourned Shareholder Meetings. When a meeting of
------------------------------
shareholders is adjourned, it shall not be necessary to give any notice of
the adjourned meeting or of the business to be transacted at an adjourned
meeting, other than by announcement at the meeting at which the adjournment
is taken, unless the Board of Directors fixes a new record date for the
adjourned meeting.
Section 2.02. Notice of Meetings of Board of Directors. Notice of a
----------------------------------------
regular meeting of the Board of Directors need not be given. Notice of every
special meeting of the Board of Directors shall be given to each Director by
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telephone or in writing at least 24 hours (in the case of notice by
telephone) or 48 hours (in the case of notice by telecopier, telegram,
courier service or express mail) or three days (in the case of notice by
first-class mail) before the time at which the meeting is to be held. Every
such notice shall state the date, time and place of the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in a notice of the
meeting.
Section 2.03. Notice of Meetings of Shareholders.
----------------------------------
(a) General Rule. Written notice of every meeting of the
------------
shareholders shall be given by, or at the direction of, the Secretary to each
shareholder of record entitled to vote at the meeting at least (1) ten days
prior to the day named for a meeting called to consider amendment of the
articles or adoption of a plan of merger, consolidation, exchange, asset
transfer, division or conversion or adoption of a proposal of dissolution or
(2) five days prior to the day named for the meeting in any other case. If
the Secretary neglects or refuses to give notice of a meeting, the person or
persons calling the meeting may do so. In the case of a special meeting of
shareholders, the notice shall specify the general nature of the business to
be transacted.
(b) Notice of Action by Shareholders on Bylaws. In the case of a
------------------------------------------
meeting of shareholders that has as one of its purposes action on the bylaws,
written notice shall be given to each shareholder that the purpose, or one of
the purposes, of the meeting is to consider the adoption, amendment or repeal
of the bylaws. There shall be included in, or enclosed with, the notice a
copy of the proposed amendment or a summary of the changes to be effected
thereby.
Section 2.04. Waiver of Notice.
----------------
(a) Written Waiver. Whenever any written notice is required to be
--------------
given under the provisions of the Business Corporation Law, the articles or
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of the notice. Except as otherwise
required by this subsection, neither the business to be transacted at, nor
the purpose of, a meeting need be specified in the waiver of notice of the
meeting. In the case of a special meeting of shareholders, the waiver of
notice shall specify the general nature of the business to be transacted.
(b) Waiver by Attendance. Attendance of a person at any meeting
--------------------
shall constitute a waiver of notice of the meeting except where a person
attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting was not
lawfully called or convened.
Section 2.05. Use of Conference Telephone and Similar Equipment. One
-------------------------------------------------
or more persons may participate in a meeting of the Board of Directors, and
if so specified by a resolution of the Board of Directors with respect to a
meeting of the shareholders of the corporation, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this section shall constitute presence in person at the meeting.
ARTICLE III
Shareholders
Section 3.01. Place of Meetings. All meetings of the shareholders of
-----------------
the corporation shall be held at the registered office of the corporation
unless another place has been designated by the Board of Directors and is set
forth in the notice of such meeting.
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Section 3.02. Annual Meeting. The Board of Directors may fix and
--------------
designate the date and time of the annual meeting of the shareholders, but if
no such date and time is fixed and designated by the Board of Directors, the
meeting for any calendar year shall be held on the third Tuesday of April in
such year, if not a legal holiday under the laws of Pennsylvania, and, if a
legal holiday, then on the next succeeding business day, at ten o'clock a.m.,
and at said meeting the shareholders then entitled to vote shall elect
Directors and shall transact such other business as may properly be brought
before the meeting. If the annual meeting shall not have been called and held
within six months after the designated time, any shareholder may call the
meeting at any time thereafter.
Section 3.03. Special Meetings. Special meetings of the shareholders
----------------
may be called at any time by resolution of the Board of Directors, which may
fix the date, time and place of the meeting. If the Board does not fix the
date, time or place of the meeting, it shall be the duty of the Secretary to
do so. A date fixed by the Secretary shall not be more than 60 days after the
date of the adoption of the resolution of the Board calling the special
meeting.
Section 3.04. Quorum and Adjournment.
----------------------
(a) General Rule. A meeting of shareholders of the corporation
------------
duly called shall not be organized for the transaction of business unless a
quorum is present. The presence of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a
particular matter to be acted upon at the meeting shall constitute a quorum
for the purposes of consideration and action on the matter. Shares of the
corporation owned, directly or indirectly, by it and controlled, directly or
indirectly, by the Board of Directors of this corporation, as such, shall not
be counted in determining the total number of outstanding shares for quorum
purposes at any given time.
(b) Withdrawal of a Quorum. The shareholders present at a duly
----------------------
organized meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
(c) Adjournments Generally. Any regular or special meeting of the
----------------------
shareholders, including one at which Directors are to be elected and one
which cannot be organized because of absence of a quorum, may be adjourned
for such period and to such place as the shareholders present and entitled to
vote shall direct.
(d) Electing Directors at Adjourned Meeting. Those shareholders
---------------------------------------
entitled to vote who attend a meeting called for the election of Directors
that has been previously adjourned for lack of a quorum, although less than a
quorum as fixed in this section, shall nevertheless constitute a quorum for
the purpose of electing Directors.
(e) Other Action in Absence of Quorum. Those shareholders
---------------------------------
entitled to vote who attend a meeting of shareholders that has been
previously adjourned for one or more periods aggregating at least 15 days
because of an absence of a quorum, although less than a quorum as fixed in
this section, shall nevertheless constitute a quorum for the purpose of
acting upon any matter set forth in the notice of the meeting if the notice
states that those shareholders who attend the adjourned meeting shall
nevertheless constitute a quorum for the purpose of acting upon the matter.
Section 3.05. Action by Shareholders. Except as otherwise provided in
----------------------
the Business Corporation Law or the articles or these bylaws, whenever any
corporate action is to be taken by vote of the shareholders of the
corporation, it shall be authorized by a majority of the votes cast at a duly
organized meeting of shareholders by the holders of shares entitled to vote
thereon. Except when acting by unanimous consent to remove a Director or
Directors, the shareholders of the corporation may act only at a duly
organized meeting.
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Section 3.06. Organization. At every meeting of the shareholders, the
------------
Chairman of the Board, if there be one, or in the case of vacancy in office
or absence of the Chairman of the Board, one of the following officers
present in the order stated: the Vice Chairman of the Board, if there be one,
the President, the Vice Presidents in their order of rank and seniority, or a
Chairman chosen by vote of the shareholders present, shall act as Chairman.
The Secretary, or, in the absence of the Secretary, an Assistant Secretary,
or in the absence of both the Secretary and every Assistant Secretary, a
person appointed by the Chairman shall act as Secretary.
Section 3.07. Voting Rights of Shareholders. Unless otherwise provided
-----------------------------
in the articles, every shareholder of the corporation shall be entitled to
one vote for every share standing in the name of the shareholder on the books
of the corporation.
Section 3.08. Determination of Shareholders of Record.
---------------------------------------
(a) Fixing Record Date. The Board of Directors may fix a time
------------------
prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled notwithstanding
any transfer of shares on the books of the corporation after any record date
fixed as provided in this subsection. The Board of Directors may similarly
fix a record date for the determination of shareholders of record for any
other purpose. When a determination of shareholders of record has been made
as provided in this section for purposes of a meeting, the determination
shall apply to any adjournment thereof unless the Board of Directors fixes a
new record date for the adjourned meeting.
(b) Determination When No Record Date Fixed. If a record date is
---------------------------------------
not fixed:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the day immediately preceding the day on which notice is given.
(2) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
(c) Certification by Nominee. The Board of Directors may adopt a
------------------------
procedure whereby a shareholder of the corporation may certify in writing to
the corporation that all or a portion of the shares registered in the name of
the shareholder are held for the account of a specified person or persons.
Upon receipt by the corporation of a certification complying with the
procedure, the persons specified in the certification shall be deemed, for
the purposes set forth in the certification, to be the holders of record of
the number of shares specified in place of the shareholder making the
certification.
Section 3.09. Voting and Other Action by Proxy.
--------------------------------
(a) General Rule.
------------
(1) Every shareholder entitled to vote at a meeting of
shareholders may authorize another person to act for the shareholder by
proxy.
(2) The presence of, or vote or other action at a meeting of
shareholders by a proxy of a shareholder shall constitute the presence of, or
vote or action by the shareholder.
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<PAGE>
(3) Where two or more proxies of a shareholder are present,
the corporation shall, unless otherwise expressly provided in the proxy,
accept as the vote of all shares represented thereby the vote cast by a
majority of them and, if a majority of the proxies cannot agree whether the
shares represented shall be voted or upon the manner of voting the shares,
the voting of the shares shall be divided equally among those persons.
(b) Minimum Requirements. Every proxy shall be executed in
--------------------
writing by the shareholder or by the duly authorized attorney-in-fact of the
shareholder and filed with the Secretary of the corporation. A proxy, unless
coupled with an interest, shall be revocable at will, notwithstanding any
other agreement or any provision in the proxy to the contrary, but the
revocation of a proxy shall not be effective until written notice thereof has
been given to the Secretary of the corporation. An unrevoked proxy shall not
be valid after three years from the date of its execution unless a longer
time is expressly provided therein. A proxy shall not be revoked by the death
or incapacity of the maker unless, before the vote is counted or the
authority is exercised, written notice of the death or incapacity is given to
the Secretary of the corporation.
(c) Expenses. The corporation shall pay the reasonable expenses
--------
of solicitation of votes, proxies or consents of shareholders by or on behalf
of the Board of Directors or its nominees for election to the Board,
including solicitation by professional proxy solicitors and otherwise.
Section 3.10. Voting by Corporations.
----------------------
(a) Voting by Corporate Shareholders. Any corporation that is a
--------------------------------
shareholder of this corporation may vote at meetings of shareholders of this
corporation by any of its officers or agents, or by proxy appointed by any
officer or agent, unless some other person, by resolution of the Board of
Directors of the other corporation or a provision of its articles or bylaws,
a copy of which resolution or provision certified to be correct by one of its
officers has been filed with the Secretary of this corporation, is appointed
its general or special proxy in which case that person shall be entitled to
vote the shares.
(b) Controlled Shares. Shares of this corporation owned, directly
-----------------
or indirectly, by it and controlled, directly or indirectly, by the Board of
Directors of this corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares
for voting purposes at any given time.
Section 3.11. Voting Lists.
------------
(a) General Rule. The officer or agent having charge of the
------------
transfer books for shares of the corporation shall make a complete list of
the shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by
each. The list shall be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting for the purposes thereof except that, if the
corporation has 5,000 or more shareholders, in lieu of the making of the list
the corporation may make the information required therein available at the
meeting by any other means.
(b) Effect of List. Failure to comply with the requirements of
--------------
this section shall not affect the validity of any action taken at a meeting
prior to a demand at the meeting by any shareholder entitled to vote thereat
to examine the list. The original share register or transfer book, or a
duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima
facie evidence as to who are the shareholders entitled to examine the list or
share register or transfer book or to vote at any meeting of shareholders.
5
<PAGE>
Section 3.12. Judges of Election.
------------------
(a) Appointment. In advance of any meeting of shareholders of the
-----------
corporation, the Board of Directors may appoint judges of election, who need
not be shareholders, to act at the meeting or any adjournment thereof. If
judges of election are not so appointed, the presiding officer of the meeting
may, and on the request of any shareholder shall, appoint judges of election
at the meeting. The number of judges shall be one or three. A person who is
a candidate for an office to be filled at the meeting shall not act as a
judge.
(b) Vacancies. In case any person appointed as a judge fails to
---------
appear or fails or refuses to act, the vacancy may be filled by appointment
made by the Board of Directors in advance of the convening of the meeting or
at the meeting by the presiding officer thereof.
(c) Duties. The judges of election shall determine the number of
------
shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, the authenticity, validity and effect
of proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The judges
of election shall perform their duties impartially, in good faith, to the
best of their ability and as expeditiously as is practical. If there are
three judges of election, the decision, act or certificate of a majority
shall be effective in all respects as the decision, act or certificate of
all.
(d) Report. On request of the presiding officer of the meeting or
------
of any shareholder, the judges shall make a report in writing of any
challenge or question or matter determined by them, and execute a certificate
of any fact found by them. Any report or certificate made by them shall be
prima facie evidence of the facts stated therein.
Section 3.13. Nominations for Director.
------------------------
A nomination for election of a Director may be made by any shareholder
entitled to vote for the election of Directors only if written notice (the
"Notice") of such shareholder's intent to nominate a Director at the meeting
is given by the shareholder and received by the Secretary of the corporation
in the manner and within the time specified herein. The Notice shall be
delivered to the Secretary of the corporation not less than 60 days prior to
the date fixed by these bylaws for the annual meeting of shareholders;
provided, however, that if Directors are to be elected by the shareholders at
any other time, the Notice shall be delivered to the Secretary of the
corporation not later than the seventh day following the day on which notice
of the meeting was first mailed to shareholders. In lieu of delivery to the
Secretary of the corporation, the Notice may be mailed to the Secretary of
the corporation by certified mail, return receipt requested, but shall be
deemed to have been given only upon actual receipt by the Secretary of the
corporation.
The Notice shall be in writing and shall contain or be accompanied by:
(a) the name and residence of such shareholder;
(b) a representation that the shareholder is a holder of the
corporation's voting stock and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the Notice:
(c) such information regarding each nominee as would have been required
to be included in a proxy statement filed pursuant to Regulation 14A of the
rules and regulations established by the Securities Exchange Act of 1934 (or
pursuant to any successor act or regulation) had proxies been solicited with
respect to such nominee by the management or Board of Directors of the
corporation:
6
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(d) a description of all arrangements or understandings among the
shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which such nomination or nominations are to be
made by the shareholder; and
(e) the consent of each nominee to serve as Director of the corporation
if so elected.
The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that any nomination made at the meeting was not made
in accordance with the foregoing procedures and, in such event, the
nomination shall be disregarded.
The Board of Directors shall determine in good faith whether the
proposed nominee meets the qualifications for Director as set forth in these
bylaws or in a resolution approved by the Board of Directors or the committee
of the Board of Directors responsible for identifying candidates for
Director.
ARTICLE IV
Board of Directors
Section 4.01. Powers; Personal Liability.
--------------------------
(a) General Rule. Unless otherwise provided by the Business
------------
Corporation Law, all powers vested by law in the corporation shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the Board of Directors.
(b) Personal Liability of Directors.
-------------------------------
A Director shall not be personally liable for monetary damages,
as such, for any action taken, or any failure to take any action, unless the
Director has breached or failed to perform the duties of his or her office
under Section 1721 of the Business Corporation Law and the breach or failure
to perform con stitutes self-dealing, willful misconduct or recklessness. The
provisions of this subsection shall not apply to the responsibility or
liability of a Director pursuant to any criminal statute or the liability of
a Director for the payment of taxes pursuant to local, state or federal law.
(The provisions of this subsection (b) were first adopted by the shareholders
of the corporation on April 21, 1987 and referenced the predecessor to
Section 1721 of the Business Corporation Law.)
(c) Notation of Dissent. A Director who is present at a meeting of
-------------------
the Board of Directors, or of a committee of the Board, at which action on
any corporate matter is taken shall be presumed to have assented to the
action taken unless his or her dissent is entered in the minutes of the
meeting or unless the Director files a written dissent to the action with the
Secretary of the meeting before the adjournment thereof or transmits the
dissent in writing to the Secretary of the corporation immediately after the
adjournment of the meeting. The right to dissent shall not apply to a
Director who voted in favor of the action. Nothing in this section shall bar
a Director from asserting that minutes of the meeting incorrectly omitted his
or her dissent if, promptly upon receipt of a copy of such minutes, the
Director notifies the Secretary, in writing, of the asserted omission or
inaccuracy.
Section 4.02. Qualifications and Selection of Directors.
-----------------------------------------
(a) Qualifications. No person shall be eligible to serve as a
--------------
Director (1) unless he or she is a natural person of full age, (2) unless he
or she is a shareholder of the corporation, (3) after the termination of his
or her service as an officer of the corporation, unless his or her further
service as a Director is approved by resolution of the Board, or (4) after
the Annual
7
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Meeting of Shareholders coincident with or next following his or her
attainment of age seventy (70). When any person serving as a Director shall
cease to be eligible to serve as such pursuant to item (2), (3) or (4) of the
foregoing requirements, he or she shall immediately cease to be a Director
and his or her office shall thereupon become vacant.
(b) Selection. Except as otherwise provided in these bylaws,
---------
Directors of the corporation shall be elected by the shareholders. If prior
to any such election the Chairman or the Secretary shall receive notice that
any person, who is listed as a nominee for the office of Director in the
proxy statement that is mailed to the shareholders in connection with such
meeting, has for any reason become unable or unwilling to serve as a
Director, the number of Directors to be elected at such meeting shall
automatically be reduced by the number of such persons, but without limiting
the authority of the Board of Directors to increase or further decrease the
number of Directors either prior or subsequent to such meeting.
Section 4.03. Number and Term of Office.
-------------------------
(a) Number. The Board of Directors shall consist of such number
------
of Directors, not less than ten (10) nor more than seventeen (17), as may be
determined from time to time by resolution of the Board of Directors.
(b) Term of Office. Each Director shall hold office for one year
--------------
and until the expiration of the term for which he or she was selected and
until a successor has been selected and qualified or until his or her earlier
death, resignation or removal. A decrease in the number of Directors shall
not have the effect of shortening the term of any incumbent Director.
(c) Resignation. Any Director may resign at any time upon written
-----------
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as shall be specified
in the notice of resignation.
Section 4.04. Vacancies. Vacancies in the Board of Directors,
---------
including vacancies resulting from an increase in the number of Directors,
may be filled by a majority vote of the remaining members of the Board of
Directors though less than a quorum, or by a sole remaining Director, and
each person so selected shall be a Director to serve until a successor has
been selected and qualified or until his or her earlier death, resignation or
removal.
Section 4.05. Removal of Directors.
--------------------
(a) Removal by the Shareholders. The entire Board of Directors or
---------------------------
any individual Director may be removed from office by vote of the
shareholders entitled to vote thereon without assigning any cause. In case
the Board or any one or more Directors are so removed, new Directors may be
elected at the same meeting.
(b) Removal by the Board. The Board of Directors may declare
--------------------
vacant the office of a Director who has been judicially declared of unsound
mind or who has been convicted of an offense punishable by imprisonment for a
term of more than one year or if, within 60 days after notice of his or her
selection, the Director does not accept the office either in writing or by
attending a meeting of the Board of Directors.
Section 4.06. Place of Meetings. Meetings of the Board of Directors
-----------------
may be held at such place within or without the Commonwealth of Pennsylvania
as the Board of Directors may from time to time appoint or as may be
designated in the notice of the meeting.
Section 4.07. Organization of Meetings. At every meeting of the Board
------------------------
of Directors, the Chairman of the Board, if there be one, or, in the case of
a vacancy in the office or absence of the Chairman of the Board, any other
officer
8
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then serving as Chief Executive Officer, that Vice Chairman of the Board who
is most senior in his or her service as a Director and is present, the
President, that Vice President who is most senior in his or her service as a
Director and is present, or a Chairman chosen by a majority of the Directors
present, shall preside. The Secretary, or, in the absence of the Secretary,
an Assistant Secretary, or in the absence of the Secretary and every
Assistant Secretary, any person appointed by the Chairman of the meeting,
shall act as Secretary.
Section 4.08. Regular Meetings. Regular meetings of the Board of
----------------
Directors shall be held six times per year. The meetings shall be held at
such time and place as shall be designated from time to time by resolution of
the Board of Directors or by the Chairman of the Board in a notice given in
accordance with these bylaws. The Chairman of the Board may postpone any
regular meeting by giving notice, provided that two consecutive regular
meetings may not be postponed unless authorized by a resolution of the Board
of Directors.
Section 4.09. Special Meetings. Special meetings of the Board of
----------------
Directors shall be held whenever called by the Chairman or by two or more of
the Directors.
Section 4.10. Quorum of and Action by Directors.
---------------------------------
(a) General Rule. A majority of the Directors in office of the
------------
corporation shall be necessary to constitute a quorum for the transaction of
business and the acts of a majority of the Directors present and voting at a
meeting at which a quorum is present shall be the acts of the Board of
Directors.
(b) Action by Written Consent. Any action required or permitted
-------------------------
to be taken at a meeting of the Directors may be taken without a meeting if,
prior or subsequent to the action, a consent or consents thereto by all of
the Directors in office is filed with the Secretary of the corporation.
Section 4.11. Committees of the Board.
-----------------------
(a) Establishment and Powers. The Board of Directors may, by
------------------------
resolution adopted by a majority of the Directors in office, establish one or
more committees to consist of one or more Directors of the corporation. Any
committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all of the powers and authority of the
Board of Directors except that a committee shall not have any power or
authority as to the following:
(1) The submission to shareholders of any action requiring
approval of shareholders under the Business Corporation Law.
(2) The creation or filling of vacancies in the Board of
Directors.
(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the Board of
Directors that by its terms is amendable or repealable only by the Board of
Directors.
(5) Action on matters committed by a resolution of the Board
of Directors to another committee of the Board of Directors.
(b) Alternate Committee Members. The Board may designate one or
---------------------------
more Directors as alternate members of any committee who may replace any
absent or disqualified member at any meeting of the committee or for the
purposes of any written action by the committee. In the absence or
disqualification of a member and alternate member or members of a committee,
the member or members thereof present at any meeting and not disqualified
from voting, whether or not constituting a quorum, may unanimously appoint
another Director to act at the
9
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meeting in the place of the absent or disqualified member.
(c) Term. Each committee of the Board of Directors shall serve at
----
the pleasure of the Board of Directors.
(d) Committee Procedures. The term "Board of Directors" when used
--------------------
in any provision of these bylaws relating to the organization or procedures
of or the manner of taking action by the Board of Directors, shall be
construed to include and refer to any committee of the Board of Directors.
Section 4.12. Compensation. The Board of Directors shall have the
------------
authority to fix the compensation of Directors for their services as
Directors and a Director may be a salaried officer of the corporation.
Section 4.13. Exercise of Fiduciary Duty. In taking action in the best
--------------------------
interests of the Company, the Board shall consider the long-term interests of
shareholders, in addition to considering any other factors that may be
pertinent, and shall always endeavor to take such action in a manner that
enhances the long-term interests of shareholders.
ARTICLE V
Officers
Section 5.01. Officers Generally.
------------------
(a) Number, Qualifications and Designation. The officers of the
--------------------------------------
corporation shall be a President, one or more Vice Presidents (of whom, if
there are more than one, one or more may be an Executive Vice President, Vice
President and Group Executive, Senior Vice President, or bear such other
title as may be designated by the Board of Directors), a Secretary, a
Treasurer, a Controller and such other officers as may be elected in
accordance with the provisions of Section 5.03. Officers may but need not be
Directors or shareholders of the corporation. The President and Secretary
shall be natural persons of full age. The Treasurer may be a corporation
but, if a natural person, shall be of full age. The Board of Directors may
elect from among the members of the Board a Chairman of the Board and one or
more Vice Chairmen of the Board, all of whom shall be officers of the
corporation. Any number of offices may be held by the same person, except
that the same person shall not be Treasurer and Controller.
(b) Bonding. The corporation may secure the fidelity of any or
-------
all of its officers by bond or otherwise.
Section 5.02. Election, Term of Office and Resignations.
-----------------------------------------
(a) Election and Term of Office. The officers of the corporation,
---------------------------
except those elected by delegated authority pursuant to Section 5.03, shall
be elected annually by the Board of Directors, and each such officer shall
hold office for a term of one year and until a successor has been selected
and qualified or until his or her earlier death, resignation or removal.
(b) Resignations. Any officer may resign at any time upon written
------------
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as may be specified in
the notice of resignation.
Section 5.03. Subordinate Officers, Committees and Agents. The Board
-------------------------------------------
of Directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more Assistant Secretaries and one or more
Assistant Treasurers, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these bylaws, or
as the Board of Directors may from time to time determine. The Board of
Directors may delegate
10
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to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
Section 5.04. Removal of Officers and Agents. Any officer, committee,
------------------------------
employee or agent of the corporation may be removed, with or without cause,
by the Board of Directors and, if elected by an officer or committee given
such power by Section 5.03, by such officer or committee. The removal shall
be without prejudice to the contract rights, if any, of any person so
removed. Election or appointment of an officer, committee, employee or agent
shall not of itself create contract rights.
Section 5.05. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause, may be filled by
the Board of Directors or by the officer or committee to which the power to
fill such office has been delegated pursuant to Section 5.03, as the case may
be, and if the office is one for which these bylaws prescribe a term, shall
be filled for the unexpired portion of the term.
Section 5.06. Authority. All officers of the corporation, as between
---------
themselves and the corporation, shall have such authority and perform such
duties in the management of the corporation as may be provided by or pursuant
to resolutions or orders of the Board of Directors or, in the absence of
controlling provisions in the resolutions or orders of the Board of
Directors, as may be determined by or pursuant to these bylaws.
Section 5.07. The Chief Executive Officer. The Chief Executive Officer
---------------------------
of the corporation shall have general supervision over the business and
operations of the corporation, subject however, to the control of the Board
of Directors. The Chief Executive Officer shall sign, execute and
acknowledge, in the name of the corporation, deeds, mortgages, bonds,
contracts or other instruments, authorized by the Board of Directors, except
in cases where the signing and execution thereof shall be expressly delegated
by the Board of Directors, or by these bylaws, to some other officer or agent
of the corporation; and, in general, shall perform all duties incident to the
office of a president of a corporation and such other duties as from time to
time may be assigned by the Board of Directors. If a Chief Executive Officer
has not been elected by the Board of Directors and a President of the
corporation has been elected, the President shall perform the duties of the
Chief Executive Officer.
Section 5.08. The Chairman and Vice Chairman of the Board. The
-------------------------------------------
Chairman of the Board or in the absence of the Chairman, the Vice Chairman of
the Board, shall preside at all meetings of the shareholders and of the Board
of Directors, and shall perform such other duties as may from time to time be
requested by the Board of Directors.
Section 5.09. The Vice Presidents. In the absence or unavailability of
-------------------
the Chief Executive Officer or the President, if there be one, the Vice
Presidents shall perform the duties of the President and such other duties as
may from time to time be assigned to them by the Board of Directors, the
Chief Executive Officer and the President.
Section 5.10. The Secretary. The Secretary or an Assistant Secretary
-------------
shall attend all meetings of the shareholders and of the Board of Directors
and shall record all the votes of the shareholders and of the Board of
Directors and the minutes of the meetings of the shareholders and of the
Board of Directors and of committees of the Board in a book or books to be
kept for that purpose; shall see that notices are given and records and
reports properly kept and filed by the corporation as required by law; shall
be the custodian of the seal of the corporation and see that it is affixed to
all documents to be executed on behalf of the corporation under its seal;
and, in general, shall perform all duties incident to the office of
Secretary, and such other duties as may from time to time be assigned by the
Board of Directors, the Chief Executive Officer and the
11
<PAGE>
President.
Section 5.11. The Treasurer. The Treasurer or an Assistant Treasurer
-------------
shall have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and
receipt of moneys earned by or in any manner due to or received by the
corporation; shall deposit all funds in his or her custody as Treasurer in
such banks or other places of deposit as the Board of Directors may from time
to time designate; shall, whenever so required by the Board of Directors,
render an account showing all transactions as Treasurer, and the financial
condition of the corporation; and, in general, shall perform all duties
incident to the office of Treasurer and such other duties as may from time to
time be assigned by the Board of Directors, the Chief Executive Officer and
the President.
Section 5.12. The Controller. The Controller shall have charge of the
--------------
accounts of the corporation and shall perform all duties incident to the
office of Controller and such other duties as may from time to time be
assigned by the Board of Directors, the Chief Executive Officer and the
President.
Section 5.13. Assistant Officers. Each Assistant Officer shall, in the
------------------
absence or disability of his superior in office, perform the duties and
exercise the powers of such superior as directed by such superior, by the
Chief Executive Officer, or by the Board of Directors, and shall also have
such other powers and shall perform such other duties as may be granted to or
required of him or her in accordance with this Article or by his or her
superior in office. Performance of any of the duties or the exercise of any
of the powers of his or her superior in office by any such Assistant Officer
shall, as to third parties, be conclusive evidence of his or her authority to
act in such respect.
Section 5.14. Salaries. The salaries of the officers elected by the
--------
Board of Directors shall be fixed from time to time by the Board of Directors
or by such committee as may be designated by resolution of the Board of
Directors. The salaries or other compensation of any other officers,
employees and other agents shall be fixed from time to time by the committee
or officer as may be designated by resolution of the Board. No officer shall
be prevented from receiving such salary or other compensation by reason of
the fact that the officer is also a Director of the corporation.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
Section 6.01. Share Certificates. Certificates for shares of the
------------------
corporation shall be in such form as approved by the Board of Directors, and
shall state that the corporation is incorporated under the laws of the
Commonwealth of Pennsylvania, the name of the person to whom issued, and the
number and class of shares and the designation of the series (if any) that
the certificate represents. The share record books and blank share
certificates shall be kept by the Treasurer or by any transfer agent or
registrar designated by the Board of Directors for that purpose.
Section 6.02. Issuance. The share certificates of the corporation
--------
shall be numbered and registered in the share ledger and transfer books of
the corporation as they are issued. They shall be signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President
and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and shall bear the corporate seal, which may be a
facsimile, engraved or printed; but where such certificate is signed by a
transfer agent or a registrar the signature of any corporate officer upon
such certificate may be a facsimile, engraved or printed. In case any
officer who has signed, or whose facsimile signature has been placed upon any
share certificate shall have ceased to be such officer because of death,
resignation or otherwise, before the
12
<PAGE>
certificate is issued, it may be issued with the same effect as if the
officer has not ceased to be such at the date of its issue. The provisions
of this Section 6.02 shall be subject to any inconsistent or contrary
agreement at the time between the corporation and any transfer agent or
registrar.
Section 6.03. Transfer. Transfers of shares shall be made on the books
--------
of the corporation upon surrender of the certificates therefor, endorsed by
the person named in the certificate or by an attorney lawfully constituted in
writing. No transfer shall be made inconsistent with the provisions of the
Uniform Commercial Code, 13 Pa.C.S. (S)(S)8101 et seq., and its amendments
-- ----
and supplements.
Section 6.04. Recordholder of Shares. The corporation shall be
----------------------
entitled to treat the person in whose name any share or shares of the
corporation stand on the books of the corporation as the absolute owner
thereof, and shall not be bound to recognize any equitable or other claim to,
or interest in, such share or shares on the part of any other person.
Section 6.05. Lost, Destroyed or Mutilated Certificates. The holder of
-----------------------------------------
any shares of the corporation shall immediately notify the corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board of
Directors may, in its discretion, cause a new certificate or certificates to
be issued to such holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate, or, in case of loss or destruction of
the certificate, upon satisfactory proof of such loss or destruction, and, if
the Board of Directors shall so determine, the deposit of a bond in such form
and in such sum, and with such surety or sureties, as it may direct.
ARTICLE VII
Indemnification of Directors, Officers and
Other Authorized Representatives
[Effective as to acts or omissions occurring after
April 20, 1976 and prior to April 21, 1987]
Section 7.01 Indemnification of Authorized Representatives in Third
------------------------------------------------------
Party Proceedings. The corporation shall indemnify any person who was or is
-----------------
an "authorized representative" of the corporation (which shall mean for
purposes of this Article a Director, officer, employee or agent of the
corporation or a person serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise) and who
was or is a party (which shall include for purposes of this Article the
giving of testimony or similar involvement) or is threatened to be made a
party to any "third party proceeding" (which shall mean for purposes of this
Article any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, other than an
action by or in the right of the corporation) by reason of the fact that he
or she was or is an authorized representative of the corporation, against
expenses (including attorneys' fees), judgments, penalties, fines and amounts
paid in settlement actually and reasonably incurred by him or her in
connection with such third party proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to any criminal third
party proceeding (which shall include for the purposes of this Article any
administrative or investigative proceeding which could or does lead to a
criminal third party proceeding), had no reasonable cause to believe his or
her conduct was unlawful. The termination of any third party proceeding by
judgment, order, settlement, indictment, conviction or upon a plea of nolo
----
contendere or its equivalent, shall not, of itself, create a presumption that
----------
the authorized representative did not act in good faith and in a manner which
he or she reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, with respect to
13
<PAGE>
any criminal third party proceeding, had reasonable cause to believe that his
or her conduct was unlawful.
Section 7.02. Indemnification of Authorized Representatives in
------------------------------------------------
Derivative Actions. The corporation shall indemnify any person who was or is
------------------
an authorized representative of the corporation and who was or is a party, or
is threatened to be made a party to any "derivative action" (which shall mean
for purposes of this Article any threatened, pending or completed action or
suit by or in the right of the corporation or procure a judgment in its
favor) by reason of the fact that he or she was or is an authorized
representative of the corporation against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such derivative action if he or she acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed
to, the best interests of the corporation except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or misconduct in
the performance of his or her duty to the corporation unless and only to the
extent that the court of common pleas of the county in which the registered
office of the corporation is located or the court in which such derivative
action was pending shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such authorized representative is fairly and reasonably entitled to indemnity
for such expenses which the court of common pleas or such other court shall
deem proper.
Section 7.03. Mandatory Indemnification of Authorized Representatives.
-------------------------------------------------------
To the extent that an authorized representative of the corporation has been
successful on the merits or otherwise in defense of any third party
proceeding or derivative action or in defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
therewith.
Section 7.04. Determination of Entitlement to Indemnification. Any
-----------------------------------------------
indemnification under Section 7.01., 7.02. or 7.03. of this Article (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the authorized
representative is proper in the circumstances because he or she has either
met the applicable standard of conduct set forth in Section 7.01. or 7.02. or
has been successful on the merits or otherwise as set forth in Section 7.03.,
and that the amount requested has been actually and reasonably incurred.
Such determination shall be made:
(A) By the Board of Directors by a majority of a quorum consisting of
Directors who were not parties to such third party proceeding or derivative
action, or
(B) If such a quorum is not obtainable, or, even if obtainable a
majority vote of such a quorum so directs, by independent legal counsel in a
written opinion, or
(C) By the shareholders.
Section 7.05. Independent Legal Counsel. Independent legal counsel may
-------------------------
be appointed by the Board of Directors, even if a quorum consisting of
Directors who were not parties to the third party proceeding or derivative
action is not available, or by a person designated by the Board of Directors.
Independent legal counsel shall not include any employee of the corporation
nor any law firm which has rendered services to the corporation during the
preceding three years. If independent legal counsel shall determine in its
written opinion that indemnification is proper under this Article, it shall
be made without further action of the Board of Directors.
14
<PAGE>
Section 7.06. Advancing Expenses. Expenses actually and reasonably
------------------
incurred in defending a third party proceeding or derivative action shall be
paid on behalf of an authorized representative by the corporation in advance
of the final disposition of such third party proceeding or derivative action
as authorized in the manner provided in Section 7.04. of this Article upon
receipt of an undertaking by or on behalf of the authorized representative to
repay such amount unless it shall ultimately be determined that he or she is
entitled to be indemnified by the corporation as authorized in this Article.
The financial ability of such authorized representative to make such
repayment shall not be a prerequisite to the making of an advance.
Section 7.07. Scope of Article. The indemnification provided by this
----------------
Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any statute, agreement, vote of
shareholders or disinterested Directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be
an authorized representative and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 7.08. Reliance on Provisions. Each person who shall act as an
----------------------
authorized representative of the corporation shall be deemed to be doing so
in reliance upon the rights of indemnification provided by this Article.
ARTICLE VIII
Indemnification of Directors, Officers and
Other Authorized Representatives
[Effective as to any act or failure to
act occurring on or after April 21, 1987]
Section 8.01. Indemnification of Authorized Representatives. The
---------------------------------------------
corporation shall indemnify any person who was or is an "authorized
representative" of the corporation (which shall mean for purposes of this
Article a Director, officer, employee or agent of the corporation, or a
person serving at the request of the corporation as a director, officer,
partner, trustee, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other entity or
enterprise) and who was or is a party (which shall include for purposes of
this Article the giving of testimony or similar involvement) or is threatened
to be made a party to any "proceeding" (which shall mean for purposes of this
Article any threatened, pending or completed action, suit, appeal or
proceeding of any nature, whether civil, criminal, administrative, or
investigative, whether formal or informal, including an action by or in the
right of the corporation or a class of its security holders) by reason of the
fact that he or she was or is an authorized representative of the
corporation, against any liability (which shall mean for purposes of this
Article any damage, judgment, penalty, fine, amount paid in settlement,
punitive damages, excise tax assessed with respect to an employee benefit
plan, or cost or expense of any nature [including, without limitation,
attorneys' fees and disbursements]) including, without limitation,
liabilities resulting from any actual or alleged breach or neglect of duty,
error, misstatement or misleading statement, negligence, gross negligence or
act giving rise to strict or products liability, except where such
indemnification is for acts or failures to act constituting self-dealing,
willful misconduct or recklessness. "Self-dealing" shall mean the receipt of
a personal benefit from the corporation to which the authorized
representative is not legally entitled. If an authorized representative is
entitled to indemnification in respect of a portion, but not all, of any
liabilities to which such person may be subject, the corporation shall
indemnify such authorized representative to the maximum extent for such
portion of the liabilities. The termination of any proceeding
15
<PAGE>
by judgment, order, settlement, indictment or conviction or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
---------------
that the authorized representative is not entitled to indemnification.
Section 8.02. Proceedings Initiated by Authorized Representatives.
---------------------------------------------------
Notwithstanding any other provision of this Article, the corporation shall
not indemnify under this Article an authorized representative for any
liability incurred in a proceeding initiated (which shall not be deemed to
include counter-claims or affirmative defenses) or participated in as an
intervenor or amicus curiae by the person seeking indemnification unless such
-------------
initiation of or participation in the proceeding is authorized, either before
or after its commencement, by the affirmative vote of a majority of the
Directors in office. This section does not apply to successfully prosecuting
or defending the rights of an authorized representative granted by or
pursuant to this Article.
Section 8.03. Advancing Expenses. Expenses (including attorneys' fees
------------------
and disbursements) incurred in good faith shall be paid by the corporation on
behalf of an authorized representative in advance of the final disposition of
a proceeding described in Section 8.01. of this Article upon receipt of an
undertaking by or on behalf of the authorized representative to repay such
amount if it shall ultimately be determined pursuant to Section 8.06. of this
Article that such person is not entitled to be indemnified by the corporation
as authorized in this Article. The financial ability of such authorized
representative to make such repayment shall not be a prerequisite to the
making of an advance.
Section 8.04. Securing of Indemnification Obligations. To further
---------------------------------------
effect, satisfy or secure the indemnification obligations provided herein or
otherwise, the corporation may maintain insurance, obtain a letter of credit,
act as self-insurer, create a reserve, trust, escrow, cash collateral or
other fund or account, enter into indemnification agreements, pledge or grant
a security interest in any assets or properties of the corporation, or use
any other mechanism or arrangement whatsoever in such amounts, at such costs,
and upon such other terms and conditions as the Board of Directors shall deem
appropriate. Absent fraud, the determination of the Board of Directors, with
respect to such amounts, costs, terms and conditions shall be conclusive
against all security holders, officers and Directors and shall not be subject
to voidability.
Section 8.05. Payment of Indemnification. An authorized representative
--------------------------
shall be entitled to indemnification within 30 days after a written request
for indemnification has been received by the Secretary of the corporation.
Section 8.06. Arbitration. Any dispute related to the right to
-----------
indemnification or advancement of expenses as provided under this Article,
except with respect to indemnification for liabilities arising under the
Securities Act of 1933 which the corporation has undertaken to submit to a
court for adjudication, shall be decided only by arbitration in the
metropolitan area in which the corporation's executive offices are located,
in accordance with the commercial arbitration rules then in effect of the
American Arbitration Association, before a panel of three arbitrators, one of
whom shall be selected by the corporation, the second of whom shall be
selected by the authorized representative and the third of whom shall be
selected by the other two arbitrators. In the absence of the American
Arbitration Association or if for any reason arbitration under the
arbitration rules of the American Arbitration Association cannot be
initiated, or if the arbitrators selected by the corporation and the
authorized representative cannot agree on the selection of the third
arbitrator within 30 days after such time as the corporation and the
authorized representative have each been notified of the selection of the
other's arbitrator, the necessary arbitrator or arbitrators shall be selected
by the presiding judge of the court of general jurisdiction in such
metropolitan area. Each arbitrator selected as provided herein is required
to be or have been a director of a corporation whose shares of common stock
were listed during at least one year of such service on the New York Stock
Exchange or the American Stock Exchange or quoted on the National Association
of Securities Dealers
16
<PAGE>
Automated Quotations Systems. The party or parties challenging the right of
an authorized representative to the benefits of this Article shall have the
burden of proof. The corporation shall reimburse an authorized
representative for the expenses (including attorneys' fees and disbursements)
incurred in successfully prosecuting or defending such arbitration. Any
award entered by the arbitrators shall be final, binding and nonappealable,
and judgment may be entered thereon by any party in accordance with
applicable law in any court of competent jurisdiction. This arbitration
provision shall be specifically enforceable.
Section 8.07. Discharge of Duty. An authorized representative shall be
-----------------
deemed to have discharged such person's duty to the corporation if he or she
has relied in good faith on information, advice or an opinion, report or
statement prepared by:
(a) one or more officers or employees of the corporation whom such
authorized representative reasonably believes to be reliable and competent
with respect to the matter presented;
(b) legal counsel, public accountants or other persons as to
matters that the authorized representative reasonably believes are within the
person's professional or expert competence; or
(c) a committee of the Board of Directors on which he or she does
not serve as to matters within its area of designated authority, which
committee he or she reasonably believes to merit confidence.
Section 8.08. Contract Rights; Amendment or Repeal. All rights to
------------------------------------
indemnification under this Article shall be deemed a contract between the
corporation and the authorized representative pursuant to which the
corporation and each authorized representative intend to be legally bound.
Any repeal, amendment or modification hereof shall be prospective only and
shall not affect any rights or obligations then existing.
Section 8.09. Scope of Article. The indemnification and advancement of
----------------
expenses provided by, or granted pursuant to, this Article shall not be
deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any statute,
certificate or articles of incorporation, bylaw, agreement, vote of
shareholders or Directors or otherwise, both as to action in his or her
official capacity and as to action in any other capacity, and shall continue
as to a person who has ceased to be an authorized representative in respect
of matters arising prior to such time and shall inure to the benefit of the
heirs, executors, administrators and personal representatives of such a
person.
Section 8.10. Reliance on Provisions. Each person who shall act as an
----------------------
authorized representative of the corporation shall be deemed to be doing so
in reliance upon the rights of indemnification provided by this Article.
ARTICLE IX
Miscellaneous
Section 9.01. Execution of Instruments. All checks, drafts, bills of
------------------------
exchange, acceptances, notes and other obligations and evidences of
indebtedness, deeds, conveyances, bills of sale, assignments and other
instruments of transfer and all other instruments and documents in writing of
any nature, may be signed, executed, accepted, endorsed, verified,
acknowledged or delivered on behalf of the corporation by such Officer or
Officers or other person or persons as the Board of Directors may from time
to time designate. The Board of Directors at its discretion may authorize
the use of an appropriate facsimile signature of any such Officer or person
in lieu of his or her manual signature.
17
<PAGE>
Section 9.02. Amendment of Bylaws. These bylaws may be amended or
-------------------
repealed, or new bylaws may be adopted, either (a) by vote of the
shareholders at any duly organized annual or special meeting of shareholders,
or (b) with respect to those matters which are not by statute committed
expressly to the shareholders and regardless of whether the shareholders have
previously adopted or approved the bylaw being amended or repealed, by vote
of a majority of the Board of Directors of the corporation in office at any
regular or special meeting of the Board of Directors. Any change in these
bylaws shall take effect when adopted unless otherwise provided in the
resolution effecting the change.
18
<PAGE>
Exhibit 10(b)
RESTRICTED STOCK AGREEMENT
--------------------------
AGREEMENT, made as of ---------------, 1994, by and between Scott Paper
Company, a Pennsylvania corporation (the "Company") and --------- ("Grantee");
WHEREAS, Scott Paper Company maintains the 1994 Long-Term Incentive Plan
("Plan") under which the Compensation Committee of the Company's Board of
Directors ("Committee") may, among other things, award the Company's Common
Shares (the "Shares") to such employees of the Company and its United States
Subsidiaries as the Committee may determine, subject to such terms, conditions,
or restrictions as it may deem appropriate; and
WHEREAS, pursuant to the Plan, the Committee has awarded to the Grantee a
restricted stock award subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. AWARD OF SHARES
---------------
In accordance with the provisions of the Plan, the Committee has awarded to
the Grantee on the date first set forth herein ("Initial Date") the right to
receive _______ Shares ("Restricted Shares") subject to the terms, conditions,
and restrictions set forth herein and in the Plan. Capitalized terms not
otherwise defined herein shall be as defined in the Plan.
2. AWARD RESTRICTION
-----------------
(a) Ownership of the Restricted Shares shall not vest in the Grantee, and
such Restricted Shares shall be subject to forfeiture, until the conditions of
each of Sections 2(b) and 2(c) are fully satisfied. (The lapse of all of the
restrictions hereunder with
<PAGE>
respect to the Grantee's rights in the Restricted Shares shall be hereafter
referred to as "Vesting"; the period between the date ("Grant Date") upon which
the Restricted Shares are awarded to the Grantee pursuant to Section 2(b) and
the date of Vesting hereafter is referred to as the "Restricted Period"; and the
date of Vesting shall be hereafter referred to as the "Vesting Date.")
(b) In order to be entitled to an award of Restricted Shares, the Grantee
must purchase Shares ("Qualifying Shares") in a Qualifying Transaction. For
these purposes, a Qualifying Transaction shall mean the acquisition of Shares in
which such Grantee owns the legal and beneficial interest by any means other
than through a Company program, including without limitation (x) Shares received
from the Company pursuant to a base salary or incentive award deferral program,
the exercise of stock options, Vesting in a Restricted Stock award or the
reallocation of Shares to the Grantee with respect to such an award or (y)
Shares purchased on behalf of the Grantee's account in the Company's 401(k),
savings or other qualified profit sharing plan; provided, further, that to be
treated as a Qualifying Share, an acquisition must increase the Grantee's actual
ownership of Shares by not less than the number of Shares acquired in the
Qualifying Transaction.
(i) Subject to the provisions hereof, the Grantee shall be awarded three
(3) Restricted Shares for each one (1) Qualifying Share acquired in a Qualifying
Transaction occurring on or after June 4, 1994 and before September 25, 1998;
provided, however, that the maximum number of Restricted Shares which may be
awarded to the Grantee hereunder shall not exceed the number set forth in
Paragraph 1.
(ii) The Grantee may purchase all or any portion of the aggregate number
of Qualifying Shares required to obtain the maximum number of Restricted
- 2 -
<PAGE>
Shares which may be awarded hereunder at any time on or after June 4, 1994 and
before September 25, 1998; provided, however, to the extent that the Grantee has
not previously purchased such maximum number of Qualifying Shares, the Grantee
must purchase not less than five hundred (500) Qualifying Shares on or before
December 15, 1994 or, if applicable, within the first 60 day period thereafter
that the Grantee may purchase Qualifying Shares without causing a violation of
Federal or State securities laws due to his or her status as an "insider" and an
additional five hundred (500) Qualifying Shares during the twelve month period
ending on or before each subsequent September 25 thereafter to and including
September 25, 1998. In the event a minimum purchase is not made during any
twelve month period, the Grantee will forfeit his or her right to purchase
Qualifying Shares during any subsequent 12 month period. Vesting in Restricted
Shares with respect to which Qualifying Shares were purchased during the 12
month period(s) prior to the period in which the failure to purchase (500)
Qualifying Shares occurs shall continue in accordance with the terms of this
Agreement, however, Shares purchased during such period shall not be considered
Qualifying Shares for purposes of this Agreement.
(iii) On or before December 15, 1994 and thereafter on or before each
date which is the earlier of (w) each following September 25 or the (x) the date
upon which one hundred percent (100%) of the Grantee's Restricted Shares shall
have Vested, the Grantee shall submit to the Committee a certified statement,
executed by the Grantee, which (y) sets forth, in detail, the facts concerning
the acquisition of the Qualifying Shares, and (z) affirms that the Grantee has
not sold, transferred or otherwise disposed of Qualifying Shares previously
acquired by the Grantee and that the aggregate number ("Grantee Share Ownership
Account") of Shares owned by the Grantee (other than those
- 3 -
<PAGE>
described in this Section 2(b)(x) and (y)) since the Initial Date is not less
than the sum of (u) the number of Shares owned on the Initial Date (other than
those described in this Section 2(b)(x) and (y)) and (v) the total number of
Qualifying Shares acquired by the Grantee on or following the Initial Date. For
these purposes, the pledge of, or the granting of a security interest in,
Qualifying Shares in connection with a loan obtained by the Grantee to acquire,
carry or hold such shares shall not be treated as a sale, transfer or
disposition.
(iv) Within five (5) days following a Qualifying Transaction, the
Grantee shall notify the Committee in writing of such acquisition, including the
number of Qualifying Shares so acquired, and shall certify that the acquisition
is a Qualifying Transaction and the Grantee's Share Ownership Amount, determined
as of the date of such Qualifying Transaction, satisfies the requirements of
Section 2(b)(iii)(z). Upon receipt of such certificate, the Committee shall, as
soon as practicable, award the appropriate number of Restricted Shares to the
Grantee. For purposes of this Agreement, the Grant Date with respect to each
Restricted Share shall be the date upon which the Grantee engaged in a
Qualifying Transaction which resulted in the award of such Restricted Share.
(c) Subject to the terms hereof, including but not limited to the
attainment of the Performance Goal described in Section 2(d), twenty percent
(20%) of the Restricted Shares awarded on each Grant Date shall become vested in
the Grantee on the June 30 coincident with or following each of the first,
second, third, fourth and fifth anniversaries of the Grant Date; provided,
however, that if the Grantee purchases Qualifying Shares on or before December
15, 1994 or, if applicable, within the first 60 day period thereafter that a
Grantee may purchase Qualifying Shares without causing a violation of Federal or
State securities laws due to his or her status as an "insider," the anniversary
shall
- 4 -
<PAGE>
be deemed to occur on the later of June 30, 1995 or six (6) months and one (1)
day following the Grant.
(d) Subject to the provisions of Sections 2(c), 2(d)(i) and Paragraph 4 an
award of Restricted Shares made pursuant to Section 2(b) shall not vest in the
Grantee unless the Company shall have equalled or exceeded the Performance Goal;
provided, however, that if an to the extent that any Restricted Shares have not
vested on or before the September 15 occurring in the seventh calendar year
following the Grant Date because of the failure to satisfy the Performance Goal
with respect to such Restricted Shares, the Grantee shall forfeit all of his or
her rights to such Restricted Shares. For purposes of Grants awarded on or
prior to December 15, 1994 or, if applicable, within the first 60 day period
thereafter that the Grantee may purchase Qualifying Shares without causing a
violation of Federal or State securities laws due to his or her status as an
"insider," the Performance Goal shall mean that (x) the cumulative increase,
calculated on an annualized basis, in the Fair Market Value of the Shares during
fifteen (15) out of the twenty (20) consecutive trading days ("Test Days") (on
which the New York Stock Exchange is open) immediately preceding and including
each June 30 (beginning on June 30, 1995) over the Fair Market Value of the
Company's Shares on July 1, 1994 (each such period hereinafter is referred to as
the "Measuring Period") exceeds (y) the cumulative increase calculated on an
annualized basis in the Standard and Poor's 500 Index ("S&P Index") for the same
Measuring Period, by not less than one (1) percentage point. For purposes of
Grants awarded after December
- 5 -
<PAGE>
15, 1994, the Measuring Period shall commence on the applicable July 1st in
accordance with the following schedule:
Dates Grant of Commencement Initial
Restricted Shares Awarded of Measuring Period Vesting Date
------------------------- ------------------- ------------
December 16, 1994 - September 25, 1995 July 1, 1995 June 30, 1996
September 26, 1995 - September 25, 1996 July 1, 1996 June 30, 1997
September 26, 1996 - September 25, 1997 July 1, 1997 June 30, 1998
September 26, 1997 - September 25, 1998 July 1, 1998 June 30, 1999
The Performance Goal shall be calculated in accordance with the same methodology
set forth in this Section 2(d)(x) and (y) above.
(i) The Committee shall compare the increase (calculated on an
annualized basis) in the Fair Market Value of a Share during such Measuring
Period with the increase (calculated on annualized basis) in the S&P Index for
such Measuring Period for each Test Day occurring at the end of such Measuring
Period. In the event that, with respect to not less than fifteen (15) of the
twenty (20) Test Days the annualized increase in the Fair Market Value of the
Shares exceeds the annualized increase in the S&P Index by not less than one (1)
percentage point, the Company shall be deemed to have achieved the Performance
Goal for such Measuring Period. In the event the Performance Goal is not
achieved in any initial Measuring Period and the Performance Goal is achieved at
any time during a subsequent Measuring period (i.e., Test Days are any (20)
consecutive trading days during the subsequent Measuring Period, not just the 20
days ending on June 30), the Grantee shall vest in all Restricted Shares for
which he or she has satisfied the requirements
- 6 -
<PAGE>
of Section 2(b) with respect to any earlier Measuring Period in which the
Performance Goal was not achieved with Vesting to occur on the date the
Performance Goal is achieved. For the then current Measuring Period, the Test
Days will be those days immediately preceding and including the June 30th, which
shall be considered the Initial Vesting Date for that period.
(ii) In the event that on any June 30, the Shares are no longer listed
on the New York Stock Exchange or the S&P Index no longer is readily available,
the Committee shall select a readily available and appropriate stock index to
utilize in calculating the Performance Goal.
(e) Subject to the provisions of Section 5(a), upon the Vesting of the
Restricted Shares, the Grantee shall own the Restricted Shares free and clear of
all restrictions imposed by this Agreement, and the Grantee shall be free to
hold or dispose of such shares at will. The Qualifying Shares shall at all times
be owned by the Grantee free and clear of any restrictions or conditions related
to this Agreement, or the Restricted Shares awarded hereunder, and the Grantee
shall be free to sell, assign, transfer, pledge or otherwise dispose of the
Qualifying Shares, although such transaction may adversely affect his or her
rights hereunder.
(f) During the Restricted Period, the Restricted Shares may not be
transferred or encumbered by the Grantee by means of sale, assignment, mortgage,
transfer, exchange, pledge, or otherwise. The levy of any execution, attachment,
or similar process upon the Shares shall be null and void.
- 7 -
<PAGE>
3. STOCK CERTIFICATES
------------------
(a) Restricted Shares shall be evidenced by one or more stock
certificates registered in the name of the Grantee or a nominee or nominees
therefor. Prior to Vesting, the Company shall prepare and issue a certificate
for the Restricted Shares (the "Share Certificate"), which shall be registered
in the name of the Grantee and which shall bear the following restrictive
legend, in addition to such other legends (if any) as the Company may deem
necessary or desirable under any applicable law:
"Restricted Shares"
-----------------
The shares represented by this certificate
are subject to the restrictions and other conditions
contained in the Scott Paper Company 1994 Long
Term Incentive Plan and the Restricted Stock Agreement
dated September 16, 1994 between Scott Paper Company
and the person named on this certificate, including
restrictions on the sale, encumbrance or transfer of
the shares represented by this certificate.
(b) The Grantee shall execute and deliver to the Director, Corporate
Compensation & Benefits (the "Escrow Agent") a stock designating the Company as
the transferee of an unspecified number of Shares, which stock power may be
completed by the Escrow Agent as specified herein. The Grantee and the Company
each waive the requirement that the signature of the Grantee on the stock power
be guaranteed. Upon receipt of a copy of this Agreement and the stock power,
each signed by the Grantee, the Escrow Agent shall promptly notify the proper
officers of the Company who shall cause the Share Certificate to be deposited
with the Escrow Agent, to be held in accordance with the terms of this
Agreement.
- 8 -
<PAGE>
(c) Upon Vesting, the Company shall cause to be delivered to the Grantee
(i) a certificate for the Shares which have vested free and clear of restrictive
legends and (ii) any stock powers signed hereunder by the Grantee remaining in
its possession. In the event that the Grantee dies after Vesting and before
delivery of the certificate, such certificate shall be delivered to, and
registered in the name of, the Grantee's beneficiary or estate, as the case may
be. In lieu of any fractional share, the Company shall pay to the Grantee, the
Grantee's beneficiary or estate, as the case may be, in cash, an amount equal to
the Fair Market Value of such fractional share on the date of delivery of such
certificate.
(d) Except as otherwise provided in Section 2 and this Section 3, during
the Restricted Period and after the certificates for the Restricted Shares have
been issued, the Grantee shall be entitled to all rights of a stockholder of the
Company, including the right to vote and the right to receive dividends, with
respect to the Restricted Shares subject to this Agreement. Subject to
applicable withholding requirements, dividends on the Restricted Shares shall be
paid to the Grantee when earned.
(e) The Escrow Agent is hereby authorized by the Grantee to utilize the
stock power delivered by the Grantee to transfer all forfeited Shares to the
Company.
4. CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT
-----------------------------------------------
(a) In the event that a Change of Control shall occur during the
Restricted Period any Restricted Shares awarded more than six (6) months prior
to the date of such Change of Control shall automatically Vest and any
Restricted Shares awarded not earlier than six (6) months prior to such Change
of Control shall Vest upon the lapse of six months and one day following the
Grant Date with respect to such Restricted Shares.
- 9 -
<PAGE>
(b) Except as otherwise provided in subparagraph (a) of this paragraph 4,
in the event of the termination of the Grantee's active employment with the
Company (whether voluntarily or involuntarily through death, retirement,
disability, or otherwise) prior to the end of the Restricted Period, all of the
Grantee's rights in and to the Restricted Shares then credited to such Grantee's
account shall be forfeited as of the date of termination. Any reference herein
to active employment with the Company shall be deemed to include employment with
any subsidiary.
(c) The Grantee shall be the only person who may effectuate a Qualifying
Transaction, and the Grantee must effectuate the same while he or she is still
employed by the Company.
5. WITHHOLDING TAXES
-----------------
(a) In connection with the delivery of any stock certificates, or the
making of any payment in accordance with the provisions of this Agreement, the
Company shall withhold Shares or cash amounts (for fractional Shares) equal to
the taxes then required by applicable federal, state and local law to be so
withheld (taking into account any election made by the Grantee in accordance
with Section 5(b)).
(b) In the event that the Grantee shall elect to recognize income with
respect to Restricted Shares in accordance with Section 83(b) of the Internal
Revenue Code of 1986, as amended, the Grantee (i) shall furnish the Committee
with a copy of such election within ten days of its filing; and (ii) shall pay
to the Company the taxes which the Company is required to withhold as a result
of such election, in the amount and on such terms and conditions as the
Committee may determine.
- 10 -
<PAGE>
6. ADMINISTRATION
--------------
In addition to the administrative authority set forth in the Plan itself,
the Committee shall have full authority and sole discretion (subject only to
the express provisions of the Plan) to decide all matters relating to the
administration and interpretation of this Agreement. All such Committee
determinations shall be final, conclusive, and binding upon the Company, the
Grantee, the Grantee's Estate and any and all other interested parties. The
Grantee hereby acknowledges receipt of the Company's Prospectus which includes
the text of the Plan.
7. NO RIGHT TO CONTINUED EMPLOYMENT
--------------------------------
Nothing in the Plan or this Agreement shall confer on the Grantee any right
to continue as an employee of the Company or in any way affect the Company's or
any subsidiary's right to terminate the Grantee's employment at any time.
8. NON-COMPETITION
---------------
In consideration of the award of shares under the Plan, Grantee agrees as
follows:
(a) During Grantee's employment by the Company and for a period of 24
months following the termination of such employment for any reason, Grantee will
not, without the written consent of the Company, either as principal, agent,
consultant, employee, director, or otherwise, engage in any competitive work or
other competitive activity. For purposes of this Agreement, "competitive work or
other competitive activity" means engaging in the manufacture, development,
advertising, promotion, or sale of any product which is the same or similar to
or competitive with any products of the Company with respect to which Grantee's
work has been directly concerned at any time during the 24
- 11 -
<PAGE>
months preceding the termination of Grantee's employment or with respect to
which during the same time period Grantee acquired knowledge of trade secrets or
other confidential information. For purposes of this Agreement, the definition
of the term "Confidential Information" contained in the Employee's Agreement
signed by the Grantee is incorporated by reference. Grantee will consult with
the Company when considering entering into any activity which might violate this
paragraph. Grantee will refrain from the activity described in the paragraph
within such geographic area as is necessary to protect the interests of the
Company.
(b) Should the Company determine it is necessary to enforce restrictions
on Grantee's activities following the termination of Grantee's employment by the
Company, the Company may, in its sole discretion, elect to proceed under one or
more of this Agreement, the Employee's Agreement signed by the Grantee, or any
other agreement between the Company and Grantee containing such restrictions. To
the extent the Company elects not to proceed under the Employee's Agreement,
Grantee hereby surrenders Grantee's rights under the Employee's Agreement and
will not seek performance by the Company under the Employee's Agreement.
(c) In the event a court of competent jurisdiction finds that the
provisions of this paragraph are too burdensome on the Grantee as to length of
time or geographic location, the provisions of this paragraph shall not be
stricken from the Agreement but rather shall be modified to conform to the
findings of the court.
- 12 -
<PAGE>
9. NOTICE
------
Any notice to the Company hereunder shall be in writing addressed to:
Director, Corporate Compensation & Benefits
Scott Paper Company
Scott Plaza
Philadelphia, Pennsylvania 19113
Any notice to the Grantee hereunder shall be in writing addressed to:
____________________________
____________________________
____________________________
or such other address as the Grantee shall notify the Company in writing.
10. ENTIRE AGREEMENT; CONFLICT WITH PLAN
------------------------------------
(a) This Agreement contains the entire understanding of the parties and
shall not be modified or amended except in writing and duly signed by each of
the parties hereto. No waiver by either party of any default under this
Agreement shall be deemed a waiver of any later default thereof.
(b) The Restricted Shares awarded hereunder are awarded pursuant and
subject to the Plan. This Agreement is intended to supplement and carry out the
terms of the Plan. It is subject to all terms and provisions of the Plan and, in
the event of a direct conflict, the Plan shall prevail.
11. SHAREHOLDER APPROVAL; COMPENSATION LIMITATION
---------------------------------------------
The Grantee agrees that if, in the opinion of the Company's counsel, the
applicable provisions of Section 162(m) of the Code and Prop. Treas. Reg. (s)
1.162-27 (or any applicable final regulation) shall require the approval of the
Company's shareholder for all or any portion of this Agreement, this Agreement
shall terminate, and any Restricted
- 13 -
<PAGE>
Shares awarded hereunder shall be forfeited, unless the Company's shareholders
shall timely approve such matters as counsel shall determine are required under
the Code and Regulations. The Company hereby agrees that, if such shareholder
approval is deemed to be necessary, it shall seek such approval at the Company's
next annual meeting of its shareholders. The Grantee further agrees that the
Compensation Committee shall have the authority to defer Vesting in any
Restricted Shares awarded hereunder to the extent that the Compensation
Committee in its sole discretion determines that Vesting in Restricted Shares
would cause the maximum deductible compensation limitation set forth in Section
162(m) of the Code to be exceeded. The Compensation Committee shall designate
March 31 of the next calendar year as the deferred Vesting date. The Grantee
shall only vest in the Restricted Shares, as to which Vesting is deferred, if he
or she is still in the employ of the Company on the applicable March 31.
12. FORCE AND EFFECT
----------------
The various provisions of this Agreement are severable in their entirety.
Any determination of invalidity or unenforceability of any one provision shall
have no effect on the continuing force and effect of the remaining provisions.
13. PREVAILING LAWS
---------------
This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania applicable to contracts made, and to be enforced, within the
Commonwealth of Pennsylvania.
14. SUCCESSORS
----------
This Agreement shall be binding upon and inure to the benefits of the
successors, assigns and heirs of the respective parties.
- 14 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
_____________ ___, 1994, to be effective as of ______________ ___, 1994.
SCOTT PAPER COMPANY
By: _________________________
Title:
GRANTEE
_________________________
Name:
- 15 -
<PAGE>
Exhibit 10(c)
SCOTT PAPER COMPANY
DIRECTORS' RETIREMENT BENEFIT PLAN
Section 1. Definitions
-----------
The following words and terms shall have the indicated meanings wherever they
appear in the Plan:
1.1 "Board of Directors" shall mean the Board of Directors of the Company.
1.2 "Committee" shall mean the Nominating Committee of the Board of Directors.
1.3 "Company" shall mean Scott Paper Company.
1.4 "Director" shall mean a member of the Board of Directors on or after the
Effective Date but shall exclude any Director who has been a Company employee
and is eligible for pension benefits under any other Company retirement plan.
1.5 "Disability" shall mean any injury or illness which, in the opinion of a
duly licensed physician acceptable to the Company, renders it impossible for a
Director to continue to perform his or her duties as a member of the Board of
Directors and is expected to be of long, continued and indefinite duration.
1.6 "Effective Date" shall mean the date on which the Plan is adopted by the
Board of Directors.
1.7 "Period of Service" shall mean the period that begins on the date a
Director is elected to the Board of Directors and ends on the date of
termination of membership on the Board of Directors. There shall be excluded
from Period of Service any period during which a Director was concurrently an
employee of the Company. A Director may have one or more Periods of Service on
the Board of Directors in which case the aggregate of such Periods shall
constitute the Period of Service.
1.8 "Plan" shall mean the Scott Paper Company Directors' Retirement Benefit
Plan as set forth herein, or as it may be amended from time to time by the Board
of Directors.
1.9 "Retirement Benefit" means the annual benefit to which a Director may
become entitled pursuant to Section 3. Such benefit shall be payable in cash in
equal monthly payments for the lesser of (a) 15 years or (b) the Period of
Service (prorated for any period less than a month).
<PAGE>
1.10 "Secretary" shall mean the Secretary of the Company who shall have
responsibility for those functions assigned under the Plan.
1.11 "Vested Director" shall mean a Director whose Period of Service includes 5
years.
Section 2. Eligibility Requirements
------------------------
2.1 Each Director who, after the Effective Date, (a) retires from the Board of
Directors or becomes subject to a Disability and (b) is a Vested Director shall
be eligible to participate in the Plan. No Retirement Benefit shall be payable
to a Director who, after the termination of his or her services as such, shall
have rendered services as a director, employee, officer or consultant to a
company in a line of business in which the Company competed prior to the
termination of his or her services as a Director unless the Company has given
its written consent thereto.
Section 3. Benefits
--------
3.1 Each Director who meets the eligibility requirements of the Plan shall be
entitled to receive an annual Retirement Benefit equal to the annual retainer
paid to such Director (exclusive of any retainers paid for service on, or as
chairpersons of, Standing Committees of the Board of Directors) immediately
prior to his or her retirement from the Board of Directors or his or her
Disability. Such Retirement Benefit shall be paid, commencing on the later of
(a) the first day of the month following his or her sixtieth birthday or the
month in which the Director retires, whichever is later or (b) at the election
of the Director, on the first day of such other month and year following his or
her retirement as has been previously designated in writing by the Director . To
be effective, such an election must be delivered to the Secretary after the
Effective Date and a minimum of thirteen (13) months prior to the Director's
retirement. If an election has not been made or is ineffective, payment shall
commence as provided in (a) herein. Upon application, the Committee may approve
immediately commencing payment of any Retirement Benefit to a Director who
becomes subject to a Disability but is otherwise eligible to receive such
Retirement Benefit.
3.2 In the event a Director dies (a) after becoming a Vested Director but
having not yet received any Retirement Benefit or (b) after having received some
but not all of the Retirement Benefit to which he or she is entitled under the
Plan, the balance of the Retirement Benefit to which he or she is entitled
under the Plan shall be paid monthly to the beneficiary previously designated by
the Director in a notice delivered to the Secretary. If a beneficiary has not
been designated or predeceases the Director, the balance of the Retirement
Benefit shall be paid monthly to the Director's estate. Upon receipt of an
application therefor from
<PAGE>
the beneficiary or the duly appointed Administrator or Executor of such estate,
the Committee may, in its discretion, direct that the net present value (as
determined by the Committee) of any such balance be paid or delivered to the
beneficiary or the estate, as the case may be, in a lump sum at such time as is
specified by the Committee.
Section 4. Change of Control
-----------------
4.1 In the event of a Change of Control of the Company, the Company shall pay
all of the legal fees and expenses reasonably incurred by a Director or such
Director's beneficiary (or by any legal defense trust created by the Company) to
enforce his or her rights under the Plan, as in effect immediately before such
Change of Control. The Company shall pay such fees and expenses promptly after
bills therefor are submitted from time to time by attorneys representing the
claimant. However, the Company will not be obligated to pay such fees and
expenses if it proves in a court of law that the claim is not well grounded in
fact and warranted by existing law or a good faith argument for the extension,
modification or reversal of existing law. In any such proceeding, the
burden of proof shall be on the Company. Notwithstanding anything else contained
in the Plan, the rights of Directors and their beneficiaries under this section
shall survive amendment of this section, as well as termination of the plan,
after a Change of Control, regardless of whether such rights arise before or
after the date of the amendment or termination.
4.2 "Change of Control" shall mean the first to occur of the following events:
(a) Any person within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act"), other than the Company or
any entity controlled by the Company (including an employee plan
established primarily for the benefit of the Company employees or employees
of any entity controlled by the Company), acquires beneficial ownership of,
or, acting alone or in concert with others, acquires voting power over
voting shares of the Company that would entitle the holders thereof to cast
at least (i) 30% of the votes that all shareholders would be entitled to
cast in an election of Directors of the Company, or (ii) such lesser
percentage (but not less than 20%) of such votes as may at the time of such
acquisition be set forth in the definition of "controlling person or group"
contained in Section 910B(1) of the Pennsylvania Business Corporation Law,
as it may be amended from time to time, or any successor provision thereof;
or
(b) At any time within any period of two consecutive years, persons who (i)
at the beginning of such period constitute the Board of Directors, or (ii)
become Directors after the beginning of such period and whose election, or
nomination for election by the
<PAGE>
shareholders of the Company, was approved by a vote of at least two-thirds
of the persons who were Directors at the beginning of such period, cease
for any reason to constitute at least a minority of such Board of
Directors; provided that any person who ceases to be a Director by reason
of death or disability shall be excluded from the numerator and the
denominator of all calculations hereunder.
Section 5. General
-------
5.1 The right of any Director, beneficiary or estate to receive payment or
delivery of any unpaid balance of any Retirement Benefit shall be an unsecured
claim against the general assets of the Company.
5.2 During a Director's lifetime, any payment under the Plan shall be made only
to him or her. No sum or other interest under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt by a Director or any beneficiary under
the Plan to do so shall be void. No interest under the Plan shall in any
manner be liable for or subject to the debts, contracts, liabilities,
engagements or torts of a Director or beneficiary entitled thereto.
5.3 Except as otherwise provided herein, the Plan shall be administered by the
Committee which shall have authority, subject to the express provisions of the
Plan, to adopt, amend and rescind rules and regulations relating to the Plan,
and to interpret, construe and implement the provisions of the Plan.
5.4 The Plan may at any time or from time to time be amended, modified, or
terminated by the Board of Directors, provided that no amendment, modification
or termination shall adversely affect a Vested Director's Retirement Benefit
accrued as of the date of such action.
5.5 The terms of the Plan shall be governed, construed, administered and
regulated in accordance with the laws of the Commonwealth of Pennsylvania. In
the event any provision of this Plan shall be determined to be illegal or
invalid for any reason, the other provisions shall continue in full force and
effect as if such illegal or invalid provision had never been included herein.
5.6 The creation and maintenance of the Plan shall give no further rights to
any Director to continue as a member of the Board of Directors or otherwise
beyond those which are inherent in such Director's election as a member of the
Board of Directors.
5.7 There shall be no further accrual of benefits under the Plan after July 19,
1994 without, however, affecting any Vested Director's Retirement Benefit
accrued to such date.
<PAGE>
SCOTT PAPER COMPANY
DIRECTORS' RETIREMENT BENEFIT PLAN
Notice Form
-----------
1. I understand that, pursuant to the terms of the Scott Paper Company
Directors' Retirement Benefit Plan, the payment of any Retirement Benefit for
which I am eligible under the Plan would commence on the later of the first day
of the month following termination of my services as a Director or my
attainment of age 60. However, I would prefer an even later date and hereby
elect to have the payment of such Retirement Benefit commence on the first day
of in the year .
-------------- -----
2. I hereby designate the following as my beneficiary to whom payment is
to be made of the balance of my Retirement Benefit, if any, in the event I die
before receiving the entire balance:
---------------------------
Name
---------------------------
---------------------------
Address
I understand that my use of this Notice Form with respect to either or both
of the above items shall supersede any prior election I have made with respect
to such item or items, as the case may be. I also understand that my election
with respect to the first item may be ineffective if not made more than thirteen
(13) months prior to the termination of my services as a Director.
- ------------------ ----------------------------
Date Signature
----------------------------
Printed Name
Received by the Secretary of Scott Paper Company:
By:
--------------------------
Date:
--------------------------
<PAGE>
Exhibit 10(d)
-------------
SCOTT PAPER COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
(As Amended Effective July 19, 1994)
SECTION 1. DEFINITIONS
-----------
The following words and terms shall have the indicated meanings wherever they
appear in the Plan:
1.1. "BOARD OF DIRECTORS", "DIRECTORS" or "DIRECTOR" shall mean, respectively,
the Board of Directors, the Directors or a Director of the Company.
1.2. "COMMITTEE" shall mean the Compensation Committee of the Board of
Directors.
1.3. "COMPANY" shall mean Scott Paper Company.
1.4. "DEFERRED CASH ACCOUNT," "DEFERRED SHARES ACCOUNT" or "ACCOUNT" shall mean
the separate account established under the Plan for each Participant, as
described in Sections 3.2 or 3.3.
1.5. "MARKET PRICE" shall mean the closing sale price for Shares on a specified
date or, if Shares were not then traded, on the most recent prior date when
Shares were traded, all as is quoted in THE WALL STREET JOURNAL reports of New
-----------------------
York Stock Exchange - Composite Transactions.
1.6. "NOTICE FORM" shall mean the form attached hereto and marked as Exhibit A
or any other document which incorporates information substantially similar to
Exhibit A.
1.7. "PARTICIPANT" shall mean each Director of the Company who participates in
the Plan in accordance with its terms and conditions.
1.8. "PLAN" shall mean the Scott Paper Company Directors' Deferred Compensation
Plan as set forth herein, or as it may be amended from time to time by the Board
of Directors.
1.9. "RIGHTS AGREEMENT" shall mean the Rights Agreement dated as of July 15,
1986 between the Company and Morgan Guaranty Trust Company of New York.
1.10. "SECRETARY" shall mean the Secretary of the Company who shall have
responsibility for those functions assigned under the Plan.
1.11. "SECTION 16 DEFERRED SHARES SUB-ACCOUNT" for each Participant shall mean
the portion of such Participant's Deferred Shares Award Account consisting of
Shares credited for compensation earned after April 30, 1991, plus dividends
thereon, whether or not converted into Shares.
<PAGE>
1.12. "SHARES" shall mean Common Shares of the Company and shall include the
Rights (as defined in the Rights Agreement) distributed or issued pursuant to
the Rights Agreement with respect to all Shares credited to each Participant's
Deferred Shares Account pursuant to an election made under Section 3.1 prior to
the Distribution Date (as defined in the Rights Agreement), until such time as
the Rights expire in accordance with their terms or are redeemed by the Company.
SECTION 2. PARTICIPATION
-------------
2.1. Each Director is eligible to participate in the Plan except one who is an
employee of the Company or any of its subsidiaries or affiliates.
2.2. (a) A Director, or a nominee for that office, may elect to participate in
the Plan by giving a Notice Form to the Secretary. The effective date for
his or her participation in the Plan shall be either (i) the time of his or
her election to that office for the ensuing term or (ii) the first day of
the ensuing calendar year, whichever first occurs following the Secretary's
receipt of the Notice Form. Such election shall remain in effect until (x)
the termination of the Participant's services as a Director, or (y) he or
she provides a subsequent Notice Form to the Secretary requesting the
termination or the modification of such election.
(b) Except as provided in Sections 2.2(c), 2.2(d), 2.2(e), 2.2(f) and
2.2(g), an election to terminate or modify a prior election to defer
compensation shall operate only prospectively and must be made by the
Participant prior to the commencement of the term of office or the calendar
year to which such compensation pertains. Such termination or modification
may be elected only once in any 12-month period, and a Participant who so
terminates shall not be eligible to again participate in the Plan until 12
months after the effective date of the termination election.
(c) A Participant may change his or her beneficiary at any time by
providing a Notice Form to the Secretary. A Participant may change the
method or time of payment of compensation previously deferred at any time
by providing a Notice Form to the Secretary, provided that (i) such change
is made before the commencement of the calendar year when payment is to be
made or to commence in accordance with his or her prior election, and (ii)
no such change may be made with respect to a Participant's Section 16
Deferred Shares Sub-Account. Unless specifically directed to the contrary
in the Notice Form, changes made in accordance with this Section 2.2(c)
shall be deemed applicable to all compensation previously deferred and to
be deferred by the Participant under the Plan.
-2-
<PAGE>
(d) Each prior or current Participant in the Plan shall have a one-time
opportunity to elect to transfer all or any part of the balance in his or
her Deferred Cash Account to a Deferred Shares Account, effective January
1, 1985. Notice of such election must be in writing and must be received
by the Secretary on or before December 31, 1984.
(e) Each prior or current Participant in the Plan shall have a one-time
opportunity to elect to transfer all or any part of the balance in his or
her Deferred Shares Account to a Deferred Cash Account, effective April 30,
1991. Notice of such election must be in writing and must be made and
received by the Secretary no earlier than April 19, 1991 and no later than
April 29, 1991.
(f) Each Participant as of January 15, 1992 who has elected that the
payment of all or a specified portion of the compensation otherwise payable
to him or her in cash for services as a Director in 1992 be deferred in the
form of a Deferred Shares Account shall have a one-time opportunity to
change his or her election of a Deferred Shares Account to a Deferred Cash
Account, in whole or in part, for all such compensation earned after
February 29, 1992. Notice of such election must be in writing and must be
made and received by the Secretary no earlier than January 15, 1992 and no
later than February 17, 1992.
(g) The Board of Directors on July 19, 1994 approved the mandatory
participation of each active Director in the Plan and, in consideration for
his or her services, the crediting of shares on a monthly basis to an
existing or to-be-established Section 16 Deferred Shares Sub-Account
beginning on such date for the balance of the then current term of office.
The credit shall be 83 shares for each of the first six months and 84
shares for the last three months remaining in that term. This credit shall
be in lieu of all other fees and benefits which would have been payable for
the remainder of the term, except for expense reimbursement which shall be
continued but shall not be eligible for deferral.
SECTION 3. COMPENSATION DEFERRED
---------------------
3.1. A Participant may elect that the payment of all or a specified portion of
the compensation otherwise payable to him or her in cash for services as a
Director be deferred until the termination of such services. Such compensation
includes, but is not limited to, retainer fees for service on the Board and
Board committees, fees for attendance at Regular or Special Meetings of the
Board and Board committees and compensation in lieu of such fees, but does not
include travel expense allowances or other expense reimbursement. At the time
of making any such election, a Participant shall elect that such compensation be
deferred in the form of a Deferred Cash Account, a Deferred Shares Account, or
partially in either form, as follows.
-3-
<PAGE>
3.2. (a) An unfunded Deferred Cash Account shall be established for each
Participant who has elected such an Account to which shall be credited the
amount of compensation that he or she elects to defer under such option.
Each such credit shall be made to the Account as of the last day of the
month during or for which such compensation would have otherwise been
payable to the Participant in cash.
(b) Prior to January 1, 1988, compensation credited to this Account is
assumed to earn interest at the then effective rate of yield generally
provided by Philadelphia area savings banks and savings and loan
associations or certificates of deposit, money market funds, savings
accounts or other savings instruments, whichever is higher, as determined
for the Company's Management Incentive Plan at the end of the first fiscal
quarter (for use at the end of the second and third calendar quarters) and
the third fiscal quarter (for use at the end of the fourth and the ensuing
first calendar quarters) of each year. After December 31, 1987, such
interest for each period from January 1 through June 30 and from July 1
through December 31 shall equal one percent (1%) plus the rate shown for
U.S. Treasury Notes with an original maturity of not less than seven (7)
years and with a remaining maturity closest to seven (7) years, in the
"representative mid-afternoon over-the-counter quotations supplied by the
Federal Reserve Bank of New York City, based on transactions of $1 million
or more," as reported in THE WALL STREET JOURNAL published on the last
-----------------------
business day preceding the December 1 or the June 1 immediately preceding
each such period. Notwithstanding the foregoing, the Committee may at any
time or from time to time change or otherwise modify the basis or the
method of calculating and crediting such interest, provided that the change
or modification does not adversely affect the balance of any Participant's
Deferred Cash Account at the time of the change or modification.
3.3. (a) An unfunded Deferred Shares Account shall be established for each
Participant who has elected such an Account to which shall be credited: (1)
on the tenth day of each calendar quarter, the number of full Shares which
could have been purchased at the market price of Shares on such date with
(i) the total amount of the compensation which he or she elected to defer
during the preceding calendar quarter under such option, and (ii) any
excess resulting from the crediting procedure used on a dividend payment
date as provided under Section 3.3(b); if such amount is not evenly
divisible by such market price, the excess shall be carried over to the
dividend payment date next following such date and shall be treated (as
hereinafter provided) as a dividend then payable; and (2) on the third
Tuesday of the month, the number of shares as provided in Section 2.2(g).
(b) As of each dividend payment date thereafter, until payment in full with
respect to such Deferred Shares Account has been completed pursuant to
Section 4 below, there shall
-4-
<PAGE>
be credited to such Deferred Shares Account that additional number of full
Shares which could have been purchased at the market price of Shares on
such date with the dividends that would then have been payable to the
Participant if the number of Shares credited to the Deferred Shares Account
on the record date for such dividend payment had then been registered in
his or her name. If such amount is not evenly divisible by such market
price, the excess shall be carried over and treated as compensation to be
credited on the next subsequent date for crediting deferred compensation to
the Participant's Account.
(c) The Company shall not acquire any Shares in connection with Deferred
Shares Accounts under this Plan, and no participant shall have any right to
receive shares in any distribution from this Plan.
(d) Except as provided in Sections 3.3(e), (f), (g) and (h), in the event
of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering or any other
change in the corporate structure or Shares of the Company, the Committee
shall make such adjustment, if any, as it may deem appropriate in the
number and kinds of Shares credited to the Deferred Shares Account.
(e) Subject to Section 3.3(h), promptly after a Change of Control as
defined in Section 5.2, the Secretary shall give written notice to each
Participant having a Deferred Shares Account that such Deferred Shares
Account shall be converted to a Deferred Cash Account as of the date of the
Change of Control, unless the Participant gives written instruction to the
Secretary within thirty (30) days of receipt of such notice that his or her
Deferred Shares Account is not to be so converted. The valuation of a
Deferred Shares Account to be converted as herein provided shall utilize
(i) the minimum value specified in Section 2546 of the Pennsylvania
Business Corporation Law (the "BCL"), and (ii) if any adversarial
proceeding under BCL Section 2546 results in an incremental value being
determined, such incremental value.
(f) Subject to Section 3.3(h), as of the date of a "business combination"
with an "interested shareholder" as such terms are defined in BCL Section
2552 and which "business combination" is covered by BCL Sections 2553-2556,
each Deferred Shares Account shall be converted to a Deferred Cash Account.
The valuation of a Deferred Shares Account to be converted as herein
provided shall be made in accordance with the method of valuation provided
in BCL Section 2556.
(g) In any event described in Section 3.3(d) after which the Shares shall
no longer exist and if not covered by Sections 3.3(e) and (f) each Deferred
Shares Account shall be valued by a reputable investment banking firm which
shall have given due consideration to all relevant factors in rendering
such
-5-
<PAGE>
opinion. After the date of such event, each Deferred Shares Account shall
be credited with interest in the same manner as if it were a Deferred Cash
Account.
(h) In any event described in Section 3.3(e) or (f) after which the Shares
shall continue to exist, each Section 16 Deferred Shares Sub-Account shall
remain in such Deferred Shares Account.
3.4. Each Participant will receive a statement of the balance in his or her
Account or Accounts at the end of the second and fourth calendar quarters as
promptly as practicable thereafter.
SECTION 4. PAYMENT OF DEFERRED COMPENSATION
--------------------------------
4.1. Upon the termination of a Participant's services as a Director, the cash
credited to his or her Deferred Cash Account and the Shares credited to his or
her Deferred Shares Account shall be paid in accordance with the method and at
the time or times elected by the Participant on his or her most recent
applicable Notice Form or Forms, as provided in Section 4.2.
In the event a Triggering Event (as defined in the Rights Agreement)
occurs, the Deferred Shares Account of each Participant shall be credited on the
date (the "Crediting Date") thirty (30) days before the date the Rights expire,
with that additional number of full Shares (exclusive of Rights) which could
have been purchased at the market price of Shares (exclusive of Rights) on the
Crediting Date with an amount equal to the number of Rights included in such
Participant's Deferred Shares Account multiplied by the fair market value, as
determined by the Committee in good faith, of rights on the Crediting Date.
After the Crediting Date, the term "Shares" shall be deemed not to include
Rights.
4.2. Subject to Section 2.2 and this Section 4, a Participant may elect any of
the following methods and times of payment of the balance or balances in his or
her Account or Accounts, provided that the payment must be made or commenced, as
the case may be, no earlier than the January following the calendar year during
which his or her services as a Director terminate and no later than the January
of the calendar year following the later of his or her attainment of the age 70
or the termination of his or her services as a Director:
(a) As to a Deferred Cash Account, a lump sum payment or payments in cash
in installments at least annually and not more frequently than quarterly
for a period not to exceed 10 years; or
(b) As to a Deferred Shares Account,
(i) a lump sum payment in cash equal to the sum of (A) the value of
the Shares in such account based on the Market Price of such Shares on
the valuation date (see (c) herein) before such payment, and (B) the
amount of
-6-
<PAGE>
any dividend credit which it has not been possible to convert into
Shares in accordance with Section 3.3(b); or
(ii) payments in installments at least annually and not more
frequently than quarterly for a period not to exceed ten years, in
each case in cash equal to the value of the Shares in such Account
based on the Market Price of such Shares on the valuation date before
such payment, with the last such payment to include the amount of any
dividend credit which it has not been possible to convert into Shares
in accordance with Section 3.3(b); or
(iii) conversion of such Account, using the value of the Shares in
the Account based on the Market Price of such shares on the last day
of the month during which his or her services as a Director terminate,
into a Deferred Cash Account and thereafter payments to be made as
elected under (a) herein;
(c) Accounts shall be valued for any payments as of the tenth (10th)
business day prior to any such payment (the "valuation date"), and payments
shall be made on or about the last business day of the month for which a
payment is to be made.
4.3. Notwithstanding any other provisions of this Plan, if the Committee
determines, after consideration of a Participant's application, that he or she
has a financial need of such a substantial nature that a contemporaneous payment
of compensation deferred under this Plan is warranted, the Committee may in its
sole and absolute discretion direct that all or a portion of the balance of the
Participant's Deferred Cash Account and all or a portion of the Participant's
Deferred Shares Account (other than the Section 16 Deferred Shares Sub-Account)
be paid to the Participant. The payment shall be made in cash and in the manner
and at the time specified by the Committee. A Participant who is also a member
of the Committee shall in no way take part in any decision pertaining to a
request for payment made by him or her under this Section 4.3.
4.4. In the event of a Participant's death before the balance in his or her
Account or Accounts is fully paid out:
(a) Payment of such balance shall be made to the beneficiary or
beneficiaries designated by the Participant or, if the Participant has made
no such designation or no beneficiary survives, to the Participant's
estate. In either case, such payment shall be made in the same manner as
provided with respect to payments to the Participant.
(b) If the balance in any such Account is to be paid to the estate of the
Participant in installments, the Committee may, at its discretion and upon
receipt of an application therefor from the duly appointed administrator or
executor of such estate, direct that the balance in the Account other than
the
-7-
<PAGE>
Section 16 Deferred Shares Sub-Account be paid to the estate in a lump sum
at such time as is specified by the Committee.
SECTION 5. CHANGE OF CONTROL
-----------------
5.1. In the event of a Change of Control of the Company, the Company shall pay
all of the legal fees and expenses reasonably incurred by a Participant or such
Participant's beneficiary (or by any legal defense trust created by the Company)
to enforce his or her rights under the Plan, as in effect immediately before
such Change of Control. The Company shall pay such fees and expenses promptly
after bills therefor are submitted from time to time by attorneys representing
the claimant. However, the Company will not be obligated to pay such fees and
expenses if it proves in a court of law that the claim is not well grounded in
fact and warranted by existing law or a good faith argument for the extension,
modification or reversal of existing law. In any such proceeding, the burden of
proof shall be on the Company. Notwithstanding anything else contained in the
Plan, the rights of Participants and their beneficiaries under this paragraph
shall survive amendment of this paragraph, as well as termination of the Plan,
after a Change of Control, regardless of whether such rights arise before or
after the date of amendment or termination.
5.2. "Change of Control" shall mean the first to occur of the following events:
(a) Any person within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act"), other than the Company or
any entity controlled by the Company (including an employee plan
established primarily for the benefit of the Company employees or employees
of any entity controlled by the Company), acquires beneficial ownership of,
or, acting alone or in concert with others, acquires voting power over
voting shares of the Company that would entitle the holders thereof to cast
at least (i) 30% of the votes that all shareholders would be entitled to
cast in an election of Directors of the Company, or (ii) such lesser
percentage (but not less than 20%) of such votes as may at the time of such
acquisition be set forth in the definition of "controlling person or group"
contained in Section 2543 of the Pennsylvania Business Corporation Law, as
it may be amended from time to time, or any successor provisions thereof;
or
(b) At any time within any period of two consecutive years, persons who (i)
at the beginning of such period constitute the Board of Directors, or (ii)
become Directors after the beginning of such period and whose election, or
nomination for election by the shareholders of the Company, was approved by
a vote of at least two-thirds of the persons who were Directors at the
beginning of such period, cease for any reason to constitute at least a
majority of such Board of Directors; provided that any person who ceases to
be a Director by reason of death or disability shall be excluded
-8-
<PAGE>
from the numerator and the denominator in all calculations hereunder.
SECTION 6. GENERAL
-------
6.1. The right of any Participant, beneficiary or estate to receive payment of
any unpaid balance in any Account of the Participant shall be an unsecured claim
against the general assets of the Company.
6.2. During a Participant's lifetime, any payment under the Plan shall be made
only to him or her. No sum or other interest under the Plan shall be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt by a Participant or any beneficiary under
the Plan to do so shall be void. No interest under the Plan shall in any manner
be liable for or subject to the debts, contracts, liabilities, engagements or
torts of a Participant or beneficiary entitled thereto.
6.3. Except as otherwise provided herein, the Plan shall be administered by the
Committee which shall have the authority, subject to the express provisions of
the Plan, to adopt, amend and rescind rules and regulations relating to the
Plan, and to interpret, construe and implement the provisions of the Plan.
6.4. The Plan may at any time or from time to time be amended, modified, or
terminated by the Board of Directors, provided that no amendment, modification
or termination shall (a) adversely affect the balance in a Participant's
Deferred Cash or Shares Account without his or her consent or (b) permit payment
of such balance prior to the date specified pursuant to Section 4.2 (except for
payments provided in Section 4.3 and 4.4).
-9-
<PAGE>
SCOTT PAPER COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
Notice Form
-----------
1994 Special Payment Election
I hereby elect the following payment options, under the terms and
conditions of the Scott Paper Company Directors' Deferred Compensation Plan,
with respect to shares credited to my Section 16 Deferred Shares Sub-Account in
lieu of all compensation (except for expense reimbursement) for the period from
July 19, 1994, through the end of my current term of office, as set forth below:
CAUTION: UNDER CURRENT REGULATIONS, THE ELECTIONS MADE IN PARTS 1 AND 2 BELOW
MAY NOT BE REVOKED ONCE MADE.
1. Method of Payment from Deferred Shares Account:
a. _______ in cash in a lump sum; OR
b. _______ in cash installments (i) _______ annually or (ii) _______
quarterly over ________ years (not more than 10), each such
installment to equal the value of the Shares in the account based on
the market price of Shares on the valuation date before the payment;
OR
c. _______ in cash installments (i) _______ annually OR (ii) _______
quarterly over ________ years (not more than 10), based on a
conversion of the Deferred Shares Account into a Deferred Cash Account
effective with the last day of the month during which my services as a
Director terminate.
The actual payment may be reduced for any applicable withholding taxes.
2. Time of Payment: Make or begin payment in:
a. _______ January following the termination of my services as a
Director; OR
b. _______ January following the termination of my services as a
Director, or my attainment of age _______ (no later than 70),
whichever is later.
3. Designation of Beneficiary:
Beneficiary or Beneficiaries to whom payment is to be made (as above
specified) in the event of my death before receiving payment of the entire
balance in my Account(s):
________________________ ___________________________________________
Name Address
________________________ ___________________________________________
Name Address
I understand that the use of this form operates only as to the deferral
pursuant to this 1994 Special Payment Election unless I indicate expressly to
the contrary hereon. I understand that my election with respect to Items 1 and
2 is irrevocable by me.
________________ ___________________________________________
Date Name
Received by the Secretary's office of Scott Paper Company:
By: ______________________________
Date: ______________________________
-10-
<PAGE>
Directors' Deferred Compensation Plan
Payment Procedures
-------------------------------------
The following procedures are to be followed with respect to cash payments
under the Plan to Participants:
1. In addition to its regular semi-annual audits, Internal Audit will
audit, during the fourth quarter, all third quarter accounts for Plan
Participants who are scheduled to receive payments or deliveries in the
following January.
2. On January 11 or as soon as practicable thereafter, Financial
Accounting will provide account balances to Internal Audit for all such
Participants.
3. On or before January 18, Internal Audit will complete its audit of the
account balances and the amount of the payment to be made and deliver its
written report thereof to the Secretary.
4. When installment payments are to be made, the amount of the first
installment shall be determined by multiplying the balance in the appropriate
account by a fraction, the numerator of which is 1 and the denominator of which
is the total number of installment payments. For the second installment
payment, the denominator in the aforementioned fraction shall be one less than
the above denominator, and for each succeeding payment the denominator shall
continue to decrease by one. For example, where five installments are required,
in the first year the amount of the installment shall be 1/5 of the account
balance; the second year the amount of the installment shall be 1/4 of the then
current balance, and so forth.
5. Immediately upon receipt of the audit report, the Secretary will
request a check in accordance with normal procedures regarding payment of
Directors' compensation.
6. The valuation and payment dates are as specified in the Plan.
7. Copies of all correspondence will be given to the following:
Secretary, Financial Accounting, Tax and Internal Audit.
8. Where any computation of shares would result in a fractional share, if
the fraction is 1/2 or greater, a full share will be used in the computation
(except for the last installment); if the fraction is less than 1/2, the balance
will be carried forward until the next installment.
9. Upon retirement of a Director participating in the Plan, the Secretary
will make written notification to Internal Audit, Financial Accounting and Tax
of the Director's name and effective date of retirement. Financial Accounting
will then review the Director's election form and determine if any adjustments
are necessary to account for conversions on the date of retirement (i.e., stock
to cash).
-11-
<PAGE>
Exhibit 10(e)
-------------
August 11, 1994
Mr. J. Richard Leaman, Jr.
S. D. Warren Company
225 Franklin Street
Boston MA 02110
Dear Dick:
As you know, Scott Paper Company ("Scott") intends to enter into a
transaction involving the sale of S. D. Warren Company ("Warren"). Because you
are a key employee of Scott responsible for Warren and are therefore in a
position to materially assist in accomplishing the divestiture on terms which
are favorable to Scott, Scott hereby offers you the opportunity to qualify for
an Incentive Award. The conditions which must be met to qualify for the Award
and the amount of the award are set forth below:
1. You must remain in the employ of Scott until the completion of the sale
of Warren to qualify for the Incentive Award. The termination of your
employment for any reason prior to the sale of Warren, whether through
resignation, retirement, or involuntarily for good cause by Scott, will
disqualify you for the Incentive Award. In the event of the sale of Warren and
the satisfaction of the other conditions contained in this Agreement, the amount
of the Incentive Award will be $250,000. The amount of the Incentive Award may
be increased by up to $250,000 for a total of up to $500,000 if, in my exclusive
discretion or, if I am unavailable for any reason, the exclusive discretion of
my successor, your contribution to the sale deserves additional recognition.
2. You are eligible to receive the Incentive Award whether or not you are
employed by Warren after the sale.
3. The Incentive Award will be paid in a lump sum net of income taxes and
other required withholding within thirty (30) days after the closing date of the
sale of Warren. The Award will not be includable for purposes of computing your
pension benefits, if any, or variable compensation, if any.
4. This offer of an Incentive Award will expire, unless renewed in writing
by Scott, on December 31, 1994, and no Incentive Award will be earned or payable
except with regard to a sale of Warren which shall have closed by such time.
5. Scott agrees that, pending the final decision on a sale of Warren, to
continue to:
a. Pay for the lease on your Boston apartment until it expires and
then to reimburse you for reasonable and standard travel expenses when you
are in Boston; and
b. Reimburse you for the Massachusetts income tax liability arising
from your work in Boston.
6. At the time the sale is completed, Scott will waive the normal
actuarial reduction for retirement prior to age 62 for you, but no severance pay
or other enhanced retirement benefits will be made available to you except as
specifically provided herein. Scott agrees that the sale of Warren shall be
considered "for any other reason" for purpose of the exercise of your stock
options under Scott's Stock Option and Restricted Stock Plans, permitting you a
3-year period following the sale to exercise your options, subject to all terms
of the Plans and of the Agreements signed by you and Scott in connection with
those options.
7. You agree this letter sets forth the entire understanding concerning
the continuation of your employment with Scott and fully supersedes any and all
prior agreements or understandings, whether oral or in writing, between Warren
and you or Scott and you concerning the continuation of your employment, except
for your Employee's Agreement, a form of which is attached hereto as Exhibit
"A." Specifically, but without limitation, you hereby agree that the April 10,
1991 letter to you from P. E. Lippincott has expired and is of no further
effect.
8. Upon the payment to you of the Incentive Award, if any, under this
Agreement, you, on your own behalf, and on behalf of your heirs, executors and
administrators, release and forever discharge Scott, Warren and their
<PAGE>
subsidiaries and affiliates (the "Companies"), and the Companies' officers,
employees, directors, agents, successors and assigns from any and all claims,
liabilities, charges, obligations, promises, agreements, controversies, damages,
expenses, causes of action, debts, and demands of any nature, known or unknown,
which you or your heirs, executors or administrators may have against the
Companies or any of the above-listed persons or entities up to the date on which
you sign this Agreement. This Agreement includes, but without limitation, any
and all claims relating in any way to your employment by the Companies or the
termination of your employment with the Companies, including any claims under
any federal, state or local statutory or common laws relating to employment
discrimination or employment or providing any limitation upon the Companies'
right to terminate its employees, including any claims under Title VII of the
Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act,
as amended, and the Americans with Disabilities Act. You expressly acknowledge
that this Agreement is intended to include in its effect, without limitation,
all claims which have arisen and of which you know or do not know, should have
known, have reason to know, or suspect to exist at the time you sign this
Agreement, and that this Agreement contemplates the extinguishment of all such
claims. Without otherwise affecting the general nature of the provisions of
this paragraph, this Agreement does not operate to release or waive any claims
you may have with respect to (a) physical or mental injuries suffered by you
relating or arising out of your employment or the termination thereof that are
compensable under the workers' compensation laws or (b) retirement and welfare
benefits, if any, under plans sponsored by the Companies and applicable to you
and not otherwise addressed in this Agreement. As a condition to the actual
distribution of the Incentive Award, you agree that you will sign a Release
identical to that given in this paragraph but effective as of that date.
9. You are advised that:
(a) various state and federal laws prohibit employment discrimination
on the basis of age, sex, race, color, national origin, religion,
disability, or veterans status;
(b) You should discuss this Agreement with your attorney before
signing it;
(c) You have up to 21 days in which to decide whether to accept
Scott's offer and sign this Agreement;
(d) You have 7 days after you sign this Agreement to reconsider and
revoke your acceptance, and your acceptance of this Agreement will not
become final until the 7-day revocation period has expired. If you decide
to revoke this Agreement during the 7 days following the date on which you
sign it, you must do so by notifying the Company in writing.
Please indicate your acceptance of the terms of this Agreement and your
intention to be legally bound by signing and returning the copy provided.
Sincerely,
/s/ Albert J. Dunlap
Albert J. Dunlap
Chairman and Chief Executive Officer
Understood and Agreed:
/s/ J. Richard Leaman, Jr.
- ---- ----------------------
Date: September 8, 1994
-----------------
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> DEC-26-1993
<PERIOD-END> SEP-24-1994
<EXCHANGE-RATE> 1
<CASH> 106
<SECURITIES> 0
<RECEIVABLES> 516
<ALLOWANCES> 14
<INVENTORY> 498
<CURRENT-ASSETS> 1,499
<PP&E> 7,528
<DEPRECIATION> 3,448
<TOTAL-ASSETS> 6,596
<CURRENT-LIABILITIES> 1,357
<BONDS> 2,518
<COMMON> 472
0
7
<OTHER-SE> 1,237
<TOTAL-LIABILITY-AND-EQUITY> 6,596
<SALES> 3,449
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<CGS> 2,563
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<OTHER-EXPENSES> 1
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