SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
_________ OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - - --------- SECURITIES EXCHANGE ACT OF 1934
For the Transition period from_______ to________
Commission file number 1-12372
CYTEC INDUSTRIES INC.
_____________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 22-3268660
______________________________ __________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Five Garret Mountain Plaza
West Paterson, New Jersey 07424
_______________________________________
(Address of principal executive offices)
201-357-3100
___________________________________________________
(Registrant's telephone number, including area code)
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: 15,833,856 shares of Common
Stock, par value $.01 per share were outstanding at June 30, 1996.
Document contains 118 pages
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
INDEX
Page
Part I - Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-14
Part II - Other Information
Item 1. Legal Proceedings 15-17
Item 6. Exhibits and Reports on Form 8-K 18
2
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. - Consolidated Financial Statements
<TABLE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Millions of dollars, except share and per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
____ ____ ____ ____
<S> <C> <C> <C> <C>
Net sales $318.1 $333.1 $622.6 $643.8
Manufacturing cost of sales 226.4 245.8 444.0 469.6
Selling and technical services 35.0 34.3 69.9 68.0
Research and process development 9.7 11.2 20.0 22.1
Administrative and general 11.0 11.3 22.1 22.7
_____ _____ _____ _____
Earnings from operations 36.0 30.5 66.6 61.4
Interest and other income
and expense 1.9 1.6 3.8 4.0
Interest expense 1.2 0.0 2.3 0.0
_____ _____ _____ _____
Earnings before income taxes 36.7 32.1 68.1 65.4
Income tax provision 15.0 13.8 27.9 28.1
_____ _____ _____ _____
Earnings before earnings of
associated 21.7 18.3 40.2 37.3
Equity in net earnings of
associated companies 3.7 4.3 7.8 7.4
_____ _____ _____ _____
Net earnings 25.4 22.6 48.0 44.7
Dividends on preferred stock 0.0 3.7 0.0 7.4
Excess of repurchase price over
related book value of Series A
Stock and Series B Stock 0.0 0.0 0.0 0.0
_____ _____ _____ _____
Net earnings available for common
stockholders $25.4 $18.9 $48.0 $37.3
_____ _____ _____ _____
_____ _____ _____ _____
Earnings per common share
Primary $ .51 $ .47 $ .94 $ .92
Fully diluted $ .51 $ .36 $ .94 $ .71
See accompanying Notes to Consolidated Financial Statements.
3
</TABLE>
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
Assets
June 30, December 31,
1996 1995
_______ ___________
Current assets
Cash and cash equivalents $ 26.8 $ 12.0
Accounts receivable, less allowance for
doubtful accounts of $11.4 and $11.6
in 1996 and 1995, respectively 217.4 216.8
Inventories 98.1 88.1
Deferred income taxes 77.0 74.5
Other current assets 14.0 12.6
_______ _______
Total current assets 433.3 404.0
_______ _______
Equity in net assets of and advances
to associated companies 139.4 155.1
_______ _______
Plants, equipment and facilities, at cost 1,333.6 1,317.2
Less: accumulated depreciation (743.6) (711.5)
_______ _______
Net plant investment 590.0 605.7
_______ _______
Intangibles resulting from business acquisitions,
net of accumulated amortization 17.5 18.0
Deferred income taxes 103.8 107.1
Other assets 7.4 3.9
_______ _______
$1,291.4 $1,293.8
_______ _______
_______ _______
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 94.3 $ 98.3
Accrued expenses 221.1 218.3
Income taxes payable 24.6 1.1
_______ _______
Total current liabilities 340.0 317.7
_______ _______
Long-term debt 64.0 66.0
Other noncurrent liabilities 565.9 567.2
Put warrants 24.5 -
Stockholders' equity
Preferred stock (Series C), $.01 par value
per share, 20,000,000 shares authorized,
issued and outstanding - 4,000 shares
liquidation value of $25 per share .1 .1
Common stock, $.01 par value per share,
75,000,000 shares authorized, issued -
16,705,711 in 1996 and 16,684,881 in 1995 .2 .2
Additional paid-in capital 205.3 222.6
Retained earnings 165.8 117.8
Unearned compensation (3.8) (2.6)
Additional minimum pension liability (5.4) (5.4)
Accumulated translation adjustments 6.6 10.3
Treasury stock at cost, 871,855 shares in 1996
and 6,917 in 1995 (71.8) (.1)
_______ _______
Total stockholders' equity 297.0 342.9
_______ _______
$1,291.4 $1,293.8
_______ _______
_______ _______
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of dollars)
Six Months Ended
June 30,
1996 1995
____ ____
Cash flows provided by (used for) operating activities
Net earnings $ 48.0 $ 44.7
Non cash items included in net earnings:
Equity in undistributed net earnings of
associated companies (9.9) (10.6)
Depreciation 40.4 40.9
Amortization 2.3 2.0
Deferred income taxes 1.1 (7.5)
Changes in operating assets and liabilities
Accounts receivable (3.0) (28.6)
Inventories (11.0) ( 8.9)
Accounts payable (3.2) 6.4
Accrued expenses 5.7 5.3
Income taxes payable 25.9 9.9
Other assets (5.5) 7.1
Other liabilities (1.3) (.1)
______ ______
Net cash flows provided by operating activities 89.5 60.6
______ ______
Cash flows used for investing activities
Additions to plants, equipment and facilities (29.4) (59.2)
Proceeds received on sale of assets 2.0 -
Return of capital from associated companies 25.0 -
______ ______
Net cash used for investing activities (2.4) (59.2)
______ ______
Cash flows provided by (used for) financing
activities
Purchase of treasury stock (73.4) -
Change in long-term debt (2.0) 1.0
Proceeds from exercise of stock options 1.7 .6
Proceeds received on sale of put warrants 1.7 -
Dividend payments on preferred stock - (7.3)
______ ______
Net cash flows used for financing activities (72.0) (5.7)
______ ______
Effect of exchange rate changes on cash and cash
equivalents (.3) .5
______ ______
Increase (decrease) in cash and cash equivalents 14.8 (3.8)
Cash and cash equivalents, beginning of period 12.0 97.7
______ ______
Cash and cash equivalents, end of period $ 26.8 $ 93.9
______ ______
______ ______
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
(1) Basis of Presentation
The unaudited consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. The statements should be
read in conjunction with the consolidated financial statements and notes to
the consolidated financial statements contained in the Company's 1995
Annual Report on Form 10-K.
In the opinion of management, the consolidated financial statements included
herein reflect all adjustments necessary to a fair statement of the
information presented as of June 30, 1996 and for the three and six month
periods ended June 30, 1996 and 1995. Such adjustments are of a normal,
recurring nature. The statements of income for the three and six month
periods ended June 30, 1996 are not necessarily indicative of the results
to be expected for the full year.
Certain reclassifications have been made to the Statements of Income and
Cash Flows for the three and six month periods ended June 30, 1995 to
conform to the 1996 presentation.
(2)Earnings Per Share
In June, 1996 the Company announced a 3 for 1 stock split of the Company's
common stock payable in the form of a stock dividend. The stock dividend was
paid July 23, 1996 to stockholders of record as of the close of business
July 2, 1996. Earnings per share calculations for all periods presented were
restated to reflect the 3 for 1 stock split. Primary earnings per share for
each period are based on earnings after preferred stock dividend
requirements divided by the weighted average number of shares of common
stock outstanding adjusted for common stock equivalents.
Fully diluted earnings per share are computed as above except that for the
three and six month periods ended June 30, 1995 the Series B Preferred Stock
is assumed to be converted into common stock as of the beginning of the
period and the related dividend is added back to the primary earnings.
The decrease in the number of shares used in the fully diluted calculations
for the three and six months ended June 30, 1996 was due to the repurchase
of the Series B Preferred Stock in the fourth quarter of 1995 (offset in
part by the issuance of common stock in order to provide a portion of the
funds for the repurchase of the Series B preferred stock) and the effect
of the Company's stock repurchase program.
6
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
Weighted average shares of common stock outstanding restated to reflect the
3 for 1 stock split is presented below:
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average
shares outstanding-
Primary 50,259,000 40,569,000 51,009,000 40,515,000
Fully diluted 50,280,000 57,336,000 51,084,000 57,309,000
</TABLE>
(3)Inventories
Components of inventories at June 30, 1996 and December 31, 1995 were as
follows:
June 30, 1996 December 31, 1995
Finished goods $ 81.8 $ 77.4
Work in process 17.8 15.4
Raw materials & supplies 52.4 51.7
______ _____
152.0 144.5
Less reduction in LIFO cost (53.9) (56.4)
______ _____
$ 98.1 $ 88.1
______ _____
______ _____
(4)Equity in Earnings of Associated Companies
Summarized financial information for the Company's equity in earnings of
associated companies is as follows:
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales $ 158.6 $ 153.6 $ 301.8 $ 302.5
Gross profit 38.8 36.5 76.2 76.1
Net income 15.4 13.2 29.7 30.1
The Company's share of net
earnings less taxes
provided by the Company $ 3.7 $ 4.3 $ 7.8 $ 7.4
_____ _____ _____ _____
_____ _____ _____ _____
7
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except per share amounts)
(5)Contingent Liabilities
As partial consideration for the transfer to the Company of the assets of
American Cyanamid Company's (Cyanamid) chemicals businesses (the Chemicals
Businesses), the Company has assumed substantially all of the environmental
liabilities of the Chemicals Businesses of Cyanamid, other than the Bound
Brook facility remediation liabilities. Such assumed liabilities include
investigative, remediation and other costs associated with releases of
hazardous materials from facilities of the Chemicals Businesses prior to such
transfer on December 17, 1993 ("Effective Date") and from facilities of the
Chemicals Businesses which were disposed of or discontinued prior to the
Effective Date, as well as costs arising from treatment and/or disposal prior
to the Effective Date of hazardous materials from such facilities at sites
operated by third parties. Additionally, the Company is responsible for
Cyanamid's liability arising from certain pollution abatement and remediation
activities required by various consent orders as well as the remediation of
numerous Superfund sites, to the extent they arise from the Chemicals
Businesses, as well as similar proceedings involving environmental matters in
various states. In addition, from time to time in the ordinary course of its
business the Company is informed of, and receives inquiries with respect to,
new sites which may contain environmental contamination for which the Company
may be responsible. As such, the Company is subject to substantial costs
arising out of environmental laws and regulations, which include obligations
to remove or limit the effects on the environment of the disposal or release
of certain wastes or substances at various sites. Liability for
investigative, removal and remedial costs under certain federal and state
laws is retroactive, strict and joint and several. As of June 30, 1996 the
Company was a party to, or otherwise involved in, legal proceedings directed
at the cleanup of approximately 65 Superfund sites. These include certain
sites for which there is shared responsibility between the Company and
Cyanamid pursuant to agreements with Cyanamid (the Agreements). Since the
laws pertaining to these sites provide for joint and several liability, a
governmental plaintiff could seek to recover all remediation costs at a waste
disposal site from any one of the potentially responsible parties (PRP's) for
such site, including the Company, despite the involvement of other PRP's. In
some cases, the Company is one of several hundred identified PRP's, while in
others it is the only one or one of only a few. Generally, where there are a
number of financially solvent PRP's, liability has been apportioned or the
Company believes, based on its experience with such matters, that liability
will be apportioned based on the type and amount of waste disposed by each
PRP at such disposal site and the number of financially solvent PRP's. In
addition, the Company is conducting remediation at or is otherwise
responsible for a number of non-Superfund sites. Proceedings involving
environmental matters, such as alleged discharge of chemicals or waste
material into the air, water or soil, are pending against the Company in
various states. In many cases, future environmental related expenditures
cannot be quantified with a reasonable
8
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
(5)Contingent Liabilities, Continued
degree of accuracy.
It is the Company's policy to accrue and charge against earnings
environmental cleanup costs when it is probable that a liability has been
incurred and an amount is reasonably estimable. As assessments and cleanups
proceed, these accruals are reviewed periodically and adjusted, if necessary,
as additional information becomes available.
These accruals can change substantially due to such factors as additional
information on the nature or extent of contamination, methods of remediation
required, and other actions by governmental agencies or private parties.
Cash expenditures often lag behind the period in which an accrual is
recorded by a number of years.
In accordance with the above policies, as of June 30, 1996 and December 31,
1995, the aggregate environmental related accruals were approximately $194.9
and $199.3, respectively of which approximately $23.0 is included in accrued
expenses with the remainder included in other noncurrent liabilities.
Environmental remediation spending for the six months ended June 30, 1996
and 1995 was $7.7 and $7.2, respectively. Environmental expenses accrued
for the six month periods ending June 30, 1996 and 1995 were $3.3 and $3.7,
respectively. All accruals have been recorded without giving effect to any
possible future insurance proceeds. To the extent that insurance recoveries
are obtained, they are likely to be retained by Cyanamid rather than paid to
the Company. Various environmental matters are currently being litigated and
potential insurance recoveries are not known at this time.
While it is not feasible to predict the outcome of all pending environmental
suits and claims, it is reasonably possible that there will be a necessity
for future provisions for environmental costs which, in management's
opinion, will not have a material effect on the financial position of the
Company, but could be material to the results of operations of the Company
in any one accounting period. The Company cannot estimate any additional
amount of loss or range of loss in excess of the recorded amounts. Moreover,
environmental liabilities are paid over an extended period and the timing
of such payments cannot be predicted with any confidence.
The Company is also a party to various other claims and routine litigation
arising in the normal course of its business. Based on the advice of counsel
management believes that the resolution of such claims and litigation will
not have a material adverse effect on the financial position or results of
operations of the Company.
9
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
(6)Other Financial Information
Taxes paid for the six months ended June 30, 1996 and 1995 were approxi-
mately $17.9 and $22.2, respectively. Interest paid for the six months
ended June 30,1996 was approximately $2.2. There was no interest paid
for the six months ended June 30, 1995.
The Company's ratio of earnings to fixed charges for the three and six months
ended June 30, 1996 was 15.6 and 15.0, respectively. For purposes of
computing the ratio of earnings to fixed charges (a) earnings consist of
earnings before income taxes which include the Company's share of pre-tax
equity in earnings of associated companies, plus fixed charges less
capitalized interest and (b) fixed charges consist of interest on long-term
debt, plus the portion of rentals representative of an interest factor plus
the Company's share of such charges of associated companies.
In February, 1996 the Board of Directors approved a program to repurchase up
to 1,700,000 shares of the Company's common stock. Pursuant to this program,
for the six months ended June 30, 1996 the Company repurchased approximately
885,400 shares of its common stock on the open market at a cost of
approximately $73.4, leaving 814,600 shares (2,443,800 shares on a post
split basis) remaining authorized to be repurchased. Depending on the level,
price and timing of repurchases, borrowings may be required. The Company
wrote put warrants on 500,000 shares of its common stock for which it
received premiums of approximately $1.7 in cash. These put warrants entitle
the holders to sell shares of the Company's common stock to the Company on
certain dates at specified prices. During the three month period ended
June 30, 1996 200,000 warrants expired at no cost to the Company.
Approximately $15.6 was reclassified from put warrants to stockholders'
equity. At June 30, 1996, warrants on 300,000 shares were outstanding with
strike prices ranging between $79 1/4 and $85 1/2 per share on a pre split
basis. The warrants expire at various dates, are exercisable only at
maturity and are all settleable in cash at the Company's option. The maximum
potential repurchase obligation as of June 30, 1996, $24.5, has been
reclassified from stockholders' equity to put warrants.
As a result of the split the number of common shares outstanding increased
to approximately 47.5 million.
10
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
(Millions of Dollars, except share and per share amounts)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Results of Operations
Second Quarter of 1996 versus Second Quarter of 1995
____________________________________________________
Net sales for the second quarter of 1996 were $318.1, a decrease of 4.5% as
compared to the $333.1 in the second quarter of 1995 primarily due to lower
Building Block sales. International net sales were 39% of sales as compared to
39.6% in the second quarter of 1995.
Specialty Chemical net sales decreased $1.7 or 0.9%. Sales were down due to the
discontinuance of certain marginal products. The remainder of the product lines
overall were flat with Paper and Mining Chemicals showing the largest increases
due to sales of higher technology products. Coating Resin sales were down due
to lower sales volume to the automotive and coil coating industries. Second
half sales of coating resins are expected to improve as a result of expected
higher production volumes in the automotive industry.
Specialty Materials net sales were flat year to year although the Company is
encouraged by the outlook for its Aerospace Materials product line. Acrylic
Fiber selling volumes were up although much of the effect was offset by lower
export fiber selling prices.
Building Block net sales were down $13.2 million or 22% as a result of
decreased sales of acrylonitrile and methanol. Acrylonitrile sales decreased
as a result of lower selling prices as well as lower selling volumes due to
swap commitments from the prior quarter. Methanol sales were lower due to the
manufacturing plant being down for mechanical repairs most of the quarter.
Manufacturing cost of sales improved to 71.2% of net sales in the second
quarter of 1996 as compared to 73.8% in the like period of 1995. Product mix
improved as the Company continues to shift emphasis from lower margin products
and focus on higher technology products. Several cost reduction and plant
efficiency programs started late last year also favorably impacting
manufacturing cost of sales. Selling prices were lower in Building Blocks and
export Acrylic Fiber while all other product lines were flat or slightly
higher. Raw material costs were generally lower but the effect of this was
more than offset by the much higher costs for natural gas.
Research and product development decreased $1.5 million or 13% as the result
of planned overhead reductions at the Stamford research facility. Technical
R&D spending is on target for 1996.
Interest expense increased over the prior period due to higher levels of debt
outstanding principally from the Company's borrowings to repurchase its Series
A and B preferred stock.
11
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
(Millions of Dollars, except share and per share amounts)
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Equity in net earnings of associated companies decreased as a result of lower
earnings from Criterion Catalyst. Hydroprocessing catalyst selling prices are
well below the prior year period primarily due to the decline in metals pricing.
Raw material costs remained high due to previous commitments on certain metals
as well as the purchase of intermediate product from third parties due to
capacity constraints. Additionally, startup costs related to increased alumina
production hindered the second quarter results. As Criterion plans to start up
capacity expansions in each of the next two quarters, this trend will continue.
Partially offsetting the effect of reduced Criterion Catalyst earnings was
higher earnings from Cyro Industries. Cyro continues to benefit from the
methlymethacrylate and acrylic sheet line expansions completed last year.
First Half of 1996 versus First Half of 1995
Net sales for the first half 1996 were $622.6, a decrease of 3% as compared to
the $643.8 in the first half of 1995 with the decline primarily in Building
Blocks. International net sales were 38.3% of sales as compared to 36.3% in the
first half of 1995.
Specialty Chemical net sales decreased $6.3 or 1.7%. Sales were down due to the
discontinuance of certain marginal products and lower Coating Resin sales due to
lower selling prices and slightly lower volumes. The remainder of the product
lines overall were flat with Paper and Mining Chemicals showing the largest
increases due to sales of higher technology products. Second half sales of
coating resins are expected to improve as a result of higher production volumes
expected in the automotive industry.
Specialty Materials net sales were up $4.4 or 2.8%. Engineered Materials had
increased sales as aircraft build rates continue to increase. Acrylic Fiber
selling volumes were up although this was more than offset by lower export fiber
selling prices.
Building Block net sales were down $19 million or 17.2% as a result of decreased
acrylonitrile sales due to lower selling prices as well as lower selling
volumes. Methanol sales were lower due to the plant being brought down the
entire month of January as a result of low selling prices and high natural gas
costs. Natural gas is the key feedstock for producing methanol. In addition, the
methanol manufacturing plant was brought down in March for mechanical repairs to
the reactor and was down for most of the second quarter.
Manufacturing cost of sales improved to 71.3% of net sales in the first half of
1996 as compared to 72.9% in the like period of 1995. Product mix improved as
the Company focuses on higher technology products. The cost reduction and plant
efficiency programs mentioned in the second quarter analysis above also
favorably impacted manufacturing cost of sales. Selling prices were lower in
Building Blocks, export Acrylic Fiber and Coating Resins while all other product
lines were flat or slightly higher. Raw material costs were generally lower but
the
12
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
(Millions of Dollars, except share and per share amounts)
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations, Continued
--------------------------------
effect of this was more than offset by the much higher costs for natural gas.
Research and product development decreased $2.1 million or 9% as the result
of planned overhead reductions at the Stamford research facility. Technical
R&D spending is on target for the year.
Interest expense is higher than the prior period due to increased levels of
debt outstanding principally from the Company's borrowings to repurchase its
Series A and B preferred stock.
Equity in net earnings of associated companies increased 5%. Earnings improved
at Cyro Industries due to higher net sales as a result of product availability
due to the methylmethacrylate and acrylic sheet line expansions completed last
year. Criterion Catalyst earnings are down as hydroprocessing catalyst selling
prices are well below the prior year period primarily due to the decline in
metals pricing. Raw material costs remained high due to previous commitments on
certain metals as well as the purchase of intermediate product from third
parties due to capacity constraints. Additionally, startup costs in the second
quarter related to increased alumina production hindered the second quarter
results. As Criterion plans to start up capacity expansions in each of the next
two quarters, this trend will continue. The Mitsui Cytec joint venture also
showed higher earnings. Included in the first quarter earnings of 1995 for
Mitsui Cytec were expenses associated with the startup of a new resins
manufacturing facility and shutdown of an existing facility.
Liquidity and Financial Condition
At June 30, 1996, the Company's cash balance was $26.8, an increase of $14.8
from year end 1995.
Net cash flows from operating activities totaled $89.5 compared to $60.6 in the
same period of 1995. Cash was favorably impacted by a tax refund received in the
first quarter of 1996 and lower accounts receivable balances. Offsetting these
increases were higher inventory levels as a result of lower than anticipated net
sales, increased other assets due to prepaid expenses principally related to
prepaid insurance and prepaid pension, and a decrease in accounts payable.
Net cash flows used for investing activities totaled $2.4 compared to $59.2 for
the same period in 1995. Capital expenditures for the six months ended June 30,
1996 were lower than the prior year due to large expenditures in 1995 related to
the expansion of the acrylonitrile plant at the Company's Fortier facility.
Capital expenditures for 1996 are expected to be in the range of $70.0 to $80.0.
During the second quarter of 1996 the Company received $25.0 from its associated
company, Cyro Industries as a return of capital. Cyro financed the distribution
in part by bank borrowings of $40.0.
13
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
(Millions of Dollars, except share and per share amounts)
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations, Continued
--------------------------------
The Company believes that based on internal cash generation and current levels
of liquid assets, it will be able to fund operating cash requirements and
planned capital expenditures during 1996.
Net cash flows used for financing activities totaled $72.0 compared to $5.7 for
the same period in 1995. In February, 1996 the Board of Directors approved a
program to repurchase up to 1,700,000 shares of the Company's common stock.
Pursuant to this program, during the six months ended June 30, 1996 the Company
repurchased approximately 885,400 shares of its common stock on the open market
at a cost of approximately $73.4, leaving 814,600 shares (2,443,800 shares on
a post split basis) remaining authorized to be repurchased. Depending on the
level, price and timing of repurchases, borrowings may be required. In
connection with the Company's repurchasing program, the Company wrote put
warrants on 500,000 shares of its common stock for which it received premiums
of approximately $1.7 in cash. At June 30, 1996, warrants on 300,000 shares
were outstanding with strike prices between $79 1/4 and $85 1/2 per share. The
Company also received proceeds from the exercise of employee stock options of
approximately $1.7 and decreased bank borrowings by approximately $2.0.
The Company has a revolving credit facility (the "Credit Facility") with its
existing syndicate of banks to provide for unsecured revolving loans
("Revolving Loans") of up to $150.0. The Revolving Loans are available for
the general corporate purposes of the Company and its subsidiaries, including,
without limitation, for purposes of making acquisitions permitted under the
Credit Facility. Under the terms of the Credit Facility, the Company has an
additional $87.0 available for borrowing at June 30, 1996. The Credit Facility
which matures on June 1, 2000, contains covenants customary for such facilities.
The Company was in compliance with all material terms, covenants and conditions
of the Credit Facility at June 30, 1996.
The Company filed with the Securities and Exchange Commission on April 19, 1996
a shelf registration statement covering $300.0 of senior debt securities which
may be offered by the Company from time to time. Proceeds of any sale will be
used for general corporate purposes, which may include repayment of indebtedness
and other liabilities, share repurchases, additions to working capital, capital
expenditures and acquisitions.
During the second quarter of 1996 the Company announced its plan to explore
strategic options including the sale of its acrylic fiber and aluminum sulfate
business along with its Kaolin mining and calcining facility. The Company is
also pursuing other cost reduction initiatives that may be announced in the
fourth quarter.
<PAGE> 14
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
_________________
In connection with the Spin-off, the Company has assumed from Cyanamid
substantially all liabilities for legal proceedings relating to the Chemicals
Businesses, other than any legal proceedings related to remediation of
Cyanamid's Bound Brook facility. As a result, although Cyanamid is usually the
named defendant, the Company is the party in interest and is herein described
as the defendant.
The Company is a defendant in eight cases pending in state and federal courts in
Beaumont and Dallas, Texas in which many plaintiffs seek damages for injuries
allegedly due to exposure to benzene, butadiene, asbestos or other chemicals.
Four of the cases involve several hundred plaintiffs and more than fifty
defendants, while the remainder involve substantially fewer plaintiffs and
defendants. It is not known at this time how many of the plaintiffs will
eventually assert claims against the Company. The Company believes that its
involvement in all but two of these cases arises from its former 50% ownership
of Jefferson Chemical Company, which the Company disposed of in 1975.
The Company is one of many defendants in suits filed by approximately 26 former
employees of Boeing-Vertol in state and federal courts in Pennsylvania alleging
exposure to asbestos-containing products. Of these suits, 14 are inactive
because plaintiffs have not yet developed any symptoms and 12 are active. Most
of these suits are still in the discovery stages.
The Company is the defendant in a class action filed in Jefferson Parish Court,
Louisiana on behalf of persons residing in the city of Kenner, Louisiana
claiming damages allegedly caused by a sulfur dioxide emission on August 11,
1992 from the Fortier facility. Prior to consolidation and certification of the
class, the original 29 cases had been remanded to state court following a
federal court ruling that the plaintiffs did not individually assert damages in
excess of the federal jurisdictional amount of $50,000.
The Company is one of several defendants named in a lawsuit filed in New York
Supreme Court by The City of New York, the New York City Housing Authority and
the New York City Health and Hospitals Corporation, which seeks damages for the
cost of removing lead-based paints from New York City-owned buildings. The
Company is also a defendant in another case filed in New York Supreme Court on
behalf of two minor children, who seek damages for personal injuries allegedly
caused by ingestion of lead-based paints. In addition, the Company is one of
seven alleged processors of lead, lead pigments and/or lead-based paints who
have been added as defendants in a class action pending in the United States
District Court for the Southern District of New York. The intervening plaintiffs
(two minor children) who added the Company as a defendant seek injunctive
relief, consisting of orders requiring the defendants to contribute to
court-administered funds to (i) pay for medical monitoring of class members;
(ii) provide abatement of lead-based paint hazards in dwellings in the City of
New York where class members reside; and (iii) provide notification to class
members. A fourth case was brought in New York Supreme Court by a single
defendant who claims to have
15
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings, Continued
____________________________
been injured due to the presence of lead-based paints in buildings in which
he resided. In all four cases, the Company is named a defendant as the
alleged successor to the MacGregor Lead Company, from which the Company
purchased certain assets in 1971.
The EPA has brought an administrative action against the Company, alleging
certain violations of the boiler and industrial furnace regulations which apply
to the industrial furnace at the Company's Kalamazoo plant. The EPA's complaint
demands approximately $420,000 in penalties, primarily for paperwork violations.
The Company believes that a substantial portion of this demand is without merit.
In February 1996, in an action brought against the Louisiana Department of
Environmental Quality ("DEQ") by the Louisiana Environmental Action Network, the
Louisiana Court of Appeals vacated and set aside a decision (the "Decision") of
the DEQ granting the Company an exemption from Louisiana hazardous waste land
disposal restrictions in order to operate five waste disposal deep wells at the
Fortier facility. The Court ruled that the Decision was inadequate because it
did not contain basic and ultimate findings and articulate a rational connection
between those findings and the issuance of the exemption. The Court remanded the
action to the DEQ for the issuance of findings to support approval of the
exemption. The case is on appeal. While the Company anticipates that the DEQ
will reissue the Decision in accordance with the greater explanatory
requirements of the Court of Appeals judgment, if that judgment remains in
place, the litigation is expected to continue over allegations in the original
application for appeal including that the Decision was in violation of
constitutional, statutory and regulatory provisions and was arbitrary and
capricious and manifestly erroneous. Use of the deep wells is essential to
continued operation of the acrylonitrile plant at the Fortier facility. The
Company continues to operate the deep wells under the exemption granted by the
DEQ pending further judicial review of the decision of the Court of Appeals.
In the opinion of management of the Company, resolution of the foregoing cases
will not have a material adverse effect on the results of operations or
financial position of the Company.
In addition to liabilities with respect to the specific cases described
previously, because the production of certain chemicals involves the use,
handling, processing, storage and transportation of hazardous materials, and
because certain of the Company's products constitute or contain hazardous
materials, the Company has been subject to claims of injury from direct exposure
to such materials and from indirect exposure when such materials are
incorporated into other companies' products. There can be no assurance that as a
result of past or future operations, there will not be additional claims of
injury by employees or members of the public due to exposure, or alleged
exposure, to such materials. Furthermore, the Company also has exposure to
present future claims with respect to workplace exposure, workers' compensation
and other matters, arising from events both prior to and after the Spin-off.
There can be no
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<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings, Continued
____________________________
assurance as to the actual amount of these liabilities or the timing thereof.
17
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CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a). Exhibits
10.13(a) 1993 Stock Award and Incentive Plan, as amended
10.13(g) Executive Income Continuity Plan
10.13(h) Key Manager Income Continuity Plan
10.13(i) Employee Income Continuity Plan
10.13(k) Cytec Supplemental Employees Retirement Plan
10.13(l) Cytec Executive Supplemental Employees Retirement
Plan
10.13(n) Cytec Supplemental Savings and Profit Sharing Plan
11 (a) Earnings Per Share computations for the three months ended
June 30, 1996
11 (b) Earnings Per Share computations for the three months ended
June 30, 1995
11 (c) Earnings Per Share computations for the six months ended
June 30, 1996
11 (d) Earnings Per Share computations for the six months ended
June 30, 1995
12 Computation of Ratio of Earnings to Fixed Charges for the
three and six months ended June 30, 1996
27 Financial Data Schedule
(b). No reports on Form 8-K were filed for the quarter ended
June 30, 1996.
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.
CYTEC INDUSTRIES INC.
(Registrant)
By:/s/ James P. Cronin
___________________
James P. Cronin
Vice President and Chief Financial Officer
August 5, 1996
18
As Adopted 12/17/93
As Amended 12/21/95
As Amended 7/23/96
CYTEC INDUSTRIES INC.
1993 STOCK AWARD AND INCENTIVE PLAN
1. Purpose; Types of Awards; Construction.
The purpose of the 1993 Stock Award and Incentive Plan of Cytec Industries
Inc. (the "Plan") is to afford an incentive to selected employees, non-employee
Directors, independent contractors and (through December 31, 1993) certain
leased employees of Cytec Industries Inc., or any Subsidiary or Affiliate which
now exists or hereafter is organized or acquired, to acquire a proprietary
interest in the Company, to continue as employees, directors, independent
contractors, or leased employees, as the case may be, to increase their efforts
on behalf of the Company and to promote the success of the Company's business.
Pursuant to Section 6 of the Plan, there may be granted Stock Options (including
"incentive stock options" and "nonqualified stock options"), stock appreciation
rights and limited stock appreciation rights (either in connection with options
granted under the Plan or independently of options), restricted stock,
restricted stock units, dividend equivalents, deferred stock awards, and other
stock- or cash- based awards. The Plan is intended to satisfy the requirements
of Rule 16b-3 promulgated under Section 16 of the Exchange Act and shall be
interpreted in a manner consistent with the requirements thereof.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means any entity if, at the time of granting of an
Award, (i) the Company, directly or indirectly, owns at least 20% of the
combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity or (ii) such entity, directly
or; indirectly, owns at least 20% of the combined voting power of all
classes of stock of the Company.
(b) "Award" means any Option, SAR (including a Limited SAR),
Restricted Stock, Restricted Stock Unit, Dividend Equivalent, Deferred
Stock Award, Director's Restricted Stock, or Other Stock-Based Award or
other Cash-Based Award granted under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
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(d) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Grantee in his or her most recent written
beneficiary designation filed with the Company to receive the benefits
specified under the Plan upon his or her death, or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the
person, persons, trust or trusts entitled by will or the laws of descent
and distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means a change in control of the Company which
will be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than (1) the Company, (2) any trustee
or other fiduciary holding securities under an employee benefit plan
of the Company, or (3) any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of Stock), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
voting securities; or
(ii) during any period of two consecutive years, not including
any period prior to the distribution date for the Spinoff, individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described
in clause (i), (iii), or (iv) of this Section 2(f)) whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity)
50% or more of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding immediately
after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquired
50% or more of the combined voting power of the Company's then
outstanding securities; or
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<PAGE>
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (or
any transaction having a similar effect).
(g) "Change in Control Price" means the higher of (i) the highest price per
share paid in any transaction constituting a Change in Control or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding or following a Change in Control.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(i) "Committee" means the committee established by the Board to administer
the Plan from and after the consummation of the Spinoff, the composition of
which shall at all times satisfy the provisions of Rule 16b-3. With respect to
the period prior to consummation of the Spinoff, references to the "Committee"
shall be deemed to refer to the Board.
(j) "Common Stock Account" means the account established in the name of an
employee, as specified in Section 6(h).
(k) "Company" means Cytec Industries Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
(l) "Deferred Stock Award" means any award stock made pursuant to Section
6(h) which is to be credited to a Common Stock Account and paid in the future.
(m) "Dividend Equivalent" means a right, granted to a Grantee under Section
6(g), to receive cash, Stock, or other property equal in value to dividends paid
with respect to a specified number of shares of Stock. Dividend Equivalents may
be awarded on a free-standing basis or in connection with another Award, and may
be paid currently or on a deferred basis.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and as now or hereafter construed, interpreted and applied by
regulations, rulings and cases.
(o) "Fair Market Value" means, with respect to Stock or other property, the
fair market value of such Stock or other property determined by such methods or
procedures as shall be established (except as provided below) from time to time
by the Committee in its sole discretion. Unless otherwise determined by the
Committee, the per share Fair Market Value of Stock as of a particular date
shall mean (i) the closing sales price per share of Stock on the national
securities exchange on which the Stock is principally traded, for the last
preceding date on which there was a sale of such Stock on such exchange (or, if
there is no such preceding date, on the first succeeding date), or (ii) if the
21
<PAGE>
shares of Stock are then traded in an over-the-counter market, the average of
the closing bid and asked prices for the shares of Stock in such
over-the-counter market for the last preceding date on which there was a sale of
such Stock in such market, or (iii) if the shares of Stock are not then listed
on a national securities exchange or traded in an over-the counter market, such
value as the Committee, in its sole discretion, shall determine. For purposes of
Sections 8 and 9, only, of this Plan, the per share Fair Market Value of Stock
as of a particular date shall mean (i) the closing sales price per share of
Stock on the national securities exchange on which the Stock is principally
traded, for the last preceding date on which there was a sale of such Stock on
such exchange (or, if there is no such preceding date, on the first succeeding
date), or (ii) if the shares of Stock are then traded in an over-the-counter
market, the average of the closing bid and asked prices for the shares of Stock
in such over-the-counter market for the last preceding date on which there was a
sale of such Stock in such market (or, if there is no such preceding date, on
the first succeeding date); provided that with respect to the stock options
granted to Non-Employee Directors pursuant to Section 8 on or prior to the
twentieth trading day after the shares of stock first trade "regular way", Fair
Market Value on the date of grant shall be the average of the Current Market
Prices (as defined in the Company's Series B Convertible Preferred Stock) of the
Stock during the first twenty trading days beginning on the date the shares of
Stock first trade regular way.
(p) "Grantee" means a person who, (i) as an employee or independent
contractor of the Company, a Subsidiary or an Affiliate, or (ii) through
December 31, 1993, as an employee of American Cyanamid Company or a Subsidiary
thereof who is leased to the Company, or (iii) as a Non-Employee Director of the
Company, has been granted an Award under the Plan.
(q) "ISO" means any Option intended to be, and designated as, an incentive
stock option within the meaning of Section 422 of the Code.
(r) "Limited SAR" means a right granted pursuant to Section 6(c) which
shall, in general, be automatically exercised for cash upon a Change in Control.
(s) "Non-Employee Director" means a member of the Board of Directors who is
neither (i) an employee of the Company, a Subsidiary or Affiliate nor (ii) a
person elected to the Board of Directors by the holders of the Series A, B, or C
Preferred Stock.
(t) "NQSO" means any Option that is designated as a nonqualified stock
option.
(u) "Option" means a right, granted to a Grantee under Section 6(b) or
Section 8, to purchase shares of Stock. An Option may be either an ISO or an
NQSO, provided that an ISO may not be granted to independent contractors or
Non-Employee Directors.
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(v) "Other Cash-Based Award" means cash awarded under Section 6(i),
including cash awarded as a bonus or upon the attainment of specified
performance criteria or otherwise as permitted under the Plan.
(w) "Other Stock-Based Award" means a right or other interest granted to a
Grantee under Section 6(i) that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
including, but not limited to (1) unrestricted Stock awarded as a bonus or upon
the attainment of specified performance criteria or otherwise as permitted under
the Plan, and (2) a right granted to a Grantee to acquire Stock from the Company
for cash and/or a promissory note containing terms and conditions prescribed by
the Committee.
(x) "Plan" means this Cytec Industries Inc. 1993 Stock Award and Incentive
Plan, as amended from time to time.
(y) "Restricted Stock" means an Award of shares of Stock to a Grantee under
Section 6(d) that may be subject to certain restrictions and to a risk of
forfeiture.
(z) "Restricted Stock Unit" means a right granted to a Grantee under
Section 6(e) to receive Stock or cash at the end of a specified deferral period,
which right may be conditioned on the satisfaction of specified performance or
other criteria.
(aa) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act, including any successor to such Rule.
(bb) "Spinoff" shall mean the Spinoff of shares of Stock of the Company by
American Cyanamid Company.
(cc) "Stock" means shares of the common stock, par value $.01 per share, of
the Company.
(dd) "SAR" or "Stock Appreciation Right" means the right, granted to a
Grantee under Section 6(c), to be paid an amount measured by the appreciation in
the Fair Market Value of Stock from the date of grant to the date of exercise of
the right, with payment to be made in cash, Stock, or property as specified in
the Award or determined by the Committee.
(ee) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of an Award,
each of the corporations (other than the last corporation in the unbroken chain)
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
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<PAGE>
3. Administration.
The Plan shall be administered by the Committee; provided that such
administrative authority shall not extend to Section 8 ("Non-Employee Director
Options") or Section 9 ("Non-Employee Director Stock"), the intent being that,
as to the Awards made under those Sections, this Plan shall constitute a
formula plan. The Committee shall have the authority in its discretion,
subject to and not inconsistent with the express provisions of the Plan
(including the preceding sentence), to administer the Plan and to exercise
all the powers and authorities either specifically granted to it under the
Plan or necessary or advisable in the administration of the Plan, including,
without limitation, the authority to grant Awards; to determine the persons
to whom and the time or times at which Awards shall be granted; to determine
the type and number of Awards to be granted, the number of shares of Stock to
which an Award may relate and the terms, conditions, restrictions and
performance criteria relating to any Award; and to determine whether, to
what extent, and under what circumstances an Award may be settled, canceled,
forfeited, exchanged, or surrendered; to make adjustments in the terms and
conditions of, and the criteria and performance objectives (if any) included
in, Awards in recognition of unusual or non-recurring events affecting the
Company or any Subsidiary or Affiliate or the financial statements of the
Company or any Subsidiary or Affiliate, or in response to changes in applicable
laws, regulations, or accounting principles; to designate Affiliates; to
construe and interpret the Plan and any Award; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and
provisions of the Award Agreements (which need not be identical for each
Grantee); and to make all other determinations deemed necessary or advisable
for the administration of the Plan.
The Committee may appoint a chairman and a secretary and may make such
rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. All
decisions, determinations and interpretations of the Committee shall be final
and binding on all persons, including the Company, and any Subsidiary, Affiliate
or Grantee (or any person claiming any rights under the Plan from or through any
Grantee) and any stockholder. The Committee may delegate to one or more of its
members or to one or more agents such administrative duties as it may deem
advisable, and the Committee or any person to whom it has delegated duties as
aforesaid may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. The
Committee may, upon such terms and conditions and with such limitations as it
deems appropriate, delegate to the Chief Executive Officer or the Executive
Committee authority to make Awards (and determine the terms of such Awards) to
persons who are not officers of the Company (assistant officers not being
considered officers for such purpose); provided that the terms of
24
<PAGE>
all such Awards shall be reported to the Committee and shall be revoked unless
ratified by the Committee.
No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award granted
hereunder.
4. Eligibility.
Awards may be granted to selected employees and independent contractors of
the Company and its present or future Subsidiaries and Affiliates, and (through
December 31, 1993) to employees of American Cyanamid Company who are leased to
the Company, in the discretion of the Committee. In determining the persons to
whom Awards shall be granted and the type of any Award (including the number of
shares to be covered by such Award), the Committee shall take into account such
factors as the Committee shall deem relevant in connection with accomplishing
the purposes of the Plan. Awards to Non-Employee Directors shall be solely in
the form of NQSOs and Restricted Stock, which shall be subject to the provisions
of Section 8 and 9 of the Plan.
5. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant of Awards
under the Plan shall be four million three hundred thousand (4,300,000)* shares
of Stock, subject to adjustment as provided herein. [*The 4,300,000 figure was
adjusted by the Committee in its resolutions dated June 20, 1996, to prevent
dilution from the three-for-one stock split. Generally, under the Committee's
resolutions, the number of shares remaining available for Awards under the Plan
at July 23, 1996, is equal to triple the number of shares originally available
under the Plan, reduced by triple the amount of pre-split Awards.] Such shares
may, in whole or in part, be authorized but unissued shares or shares that
shall have been or may be reacquired by the Company in the open market, in
private transactions or otherwise. If any shares subject to an Award are
forfeited, canceled, exchanged or surrendered or if an Award otherwise
terminates or expires without a distribution of shares to the Grantee, the
shares of stock with respect to such Award shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration,
again be available for Awards under the Plan; provided that, in the case of
forfeiture, cancellation, exchange or surrender of shares of Restricted Stock
or Restricted Stock Units with respect to which dividends or Dividend
Equivalents have been paid or accrued, the number of shares with respect to
such Awards shall not be available for Awards hereunder unless, in the case
of shares with respect to which dividends or Dividend Equivalents were accrued
but unpaid, such dividends and Dividend Equivalents are also forfeited,
canceled, exchanged or surrendered. Upon the exercise of any Award granted in
tandem with any other Awards or awards, such related Award or awards shall be
canceled to the extent of the number of shares of Stock as to which the Award
is exercised and, notwithstanding the foregoing, such number of shares shall
no longer be available for Awards under the Plan.
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<PAGE>
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spinoff, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (i)
the number and kind of shares of Stock which may thereafter be issued in
connection with Awards, (ii) the number and kind of shares of Stock issued or
issuable in respect of outstanding Awards, and (iii) the exercise price, grant
price, or purchase price relating to any Award; provided that, with respect to
ISOs, such adjustment shall be made in accordance with Section 424(h) of the
Code.
6. Specific Terms of Awards.
(a) General. The term of each Award shall be for such period as may be
determined by the Committee. Subject to the terms of the Plan and any applicable
Award Agreement, payments to be made by the Company or a Subsidiary or Affiliate
upon the grant, maturation, or exercise of an Award may be made in such forms as
the Committee shall determine at the date of grant or thereafter, including,
without limitation, cash, Stock, or other property, and may be made in a single
payment or transfer, in installments, or on a deferred basis. The Committee may
make rules relating to installment or deferred payments with respect to Awards,
including the rate of interest to be credited with respect to such payments. In
addition to the foregoing, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter, such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine.
(b) Options. The Committee is authorized to grant Options to Grantees on
the following terms and conditions:
(i) Type of Award. The Award Agreement evidencing the grant of an
Option under the Plan shall designate the Option as an ISO or an NQSO.
(ii) Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be the Fair Market Value of a share on the date of
the grant of such Option; provided that in no event shall the exercise
price for the purchase of shares be less than par value. The exercise price
for Stock subject to an Option may be paid in cash or by an exchange of
Stock previously owned by the Grantee, or a combination of both, in an
amount having a combined value equal to such exercise price. A Grantee may
also elect to pay all or a portion of the aggregate exercise price by
having shares of Stock with a Fair Market Value on the date of exercise
equal to the aggregate exercise price withheld by the Company or sold by a
broker-dealer under
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circumstances meeting the requirements of 12 C.F.R. ss.220 or any successor
thereof.
(iii) Term and Exercisability of Options. The date on which the
Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted, unless the Committee
shall determine that the option shall be granted effective as of a
specified date in the future, in which case such specified future date
shall be considered the day on which such Option is granted. Options shall
be exercisable over the exercise period (which shall not exceed ten years
from the date of grant), at such times and upon such conditions as the
Committee may determine, as reflected in the Award Agreement; provided
that, the Committee shall have the authority to accelerate the
exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate; provided,
however, that an Option granted to a person who, on the date of grant of
such Option, is an officer of the Company (other than an assistant officer)
shall be exercisable as 33-1/3 percent of the Stock covered by the Option
on the first anniversary of the date the Option is granted; and as to an
additional 33-1/3 percent of the Stock covered by the Option on each of the
following two anniversaries of such date of grant, such vesting schedule to
be subject to earlier exercisability (i) as provided in Section 7 of this
Plan or (ii) as determined by the Committee in the case of termination of
employment (including but not limited to termination of employment by
reason of death, disability, or retirement or under other circumstances
deemed not contrary to the best interests of the Company). An Option may be
exercised to the extent of any or all full shares of Stock as to which the
Option has become exercisable, by giving written notice of such exercise to
the Committee or its designated agent.
(iv) Termination of Employment, etc. An Option may not be exercised
unless the Grantee is then in the employ of, or then maintains an
independent contractor relationship with, the Company or a Subsidiary or an
Affiliate (or a company or a parent or subsidiary company of such company
issuing or assuming the Option in a transaction to which Section 424(a) of
the Code applies), and unless the Grantee has remained continuously so
employed, or continuously maintained such relationship, since the date of
grant of the Option; provided that, the Award Agreement may contain
provisions extending the exercisability of Options, in the event of
specified terminations, to a date not later than the expiration date of
such Option.
(v) Maximum Number of Shares. Options may not be granted to any one
person in an amount greater than fifteen (15%) percent of the total number
of shares of Stock originally available for grant of Awards under this Plan
(i.e. not more than 15% of 12,900,000 after giving effect to the stock
split; and for purposes of calculating this 15% figure, Options granted to
any Grantee prior to July 23, 1996 shall be deemed to have been tripled).
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<PAGE>
(vi) Other Provisions. Options may be subject to such other conditions
including, but not limited to, restrictions on transferability of the
shares acquired upon exercise of such Options, as the Committee may
prescribe in its discretion.
(c) SARs and Limited SARs. The Committee is authorized to grant SARs and
Limited SARs to Grantees on the following terms and conditions:
(i) In General. Unless the Committee determines otherwise, an SAR or a
Limited SAR (1) granted in tandem with an NQSO may be granted at the time
of grant of the related NQSO or at any time thereafter or (2) granted in
tandem with an ISO may only be granted at the time of grant of the related
ISO. An SAR or Limited SAR granted in tandem with an Option shall be
exercisable only to the extent the underlying Option is exercisable.
(ii) SARs. An SAR shall confer on the Grantee a right to receive with
respect to each share subject thereto, upon exercise thereof, the excess of
(1) the Fair Market Value of one share of Stock on the date of exercise
over (2) the grant price of the SAR (which in the case of an SAR granted in
tandem with an Option shall be equal to the exercise price of the
underlying Option, and which in the case of any other SAR shall be such
price as the Committee may determine).
(iii) Limited SARs. A Limited SAR shall confer on the Grantee a right
to receive with respect to each share subject thereto, automatically upon
the occurrence of a Change in Control, an amount equal to the excess of (1)
the Change in Control Price (or in the case of a Limited SAR granted in
tandem with an ISO, the Fair Market Value of one share on the date of such
Change in Control) over (2) the grant price of the Limited SAR (which in
the case of a Limited SAR granted in tandem with an Option shall be equal
to the exercise price of the underlying Option, and which in the case of
any other Limited SAR shall be such price as the Committee determines);
provided that, in the case of a Limited SAR granted to a Grantee who is
subject to the reporting requirements of Section 16(a) of the Exchange Act
(a "Section 16 Individual"), such Section 16 Individual shall only be
entitled to receive such amount if such Limited SAR has been outstanding
for at least six (6) months as of the date of the Change in Control.
(d) Restricted Stock. The Committee is authorized to grant Restricted Stock
(which may be designated as "performance stock") to Grantees on the following
terms and conditions:
(i) Issuance and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, if any, as the
Committee may impose at the date of grant or thereafter, which restrictions
may lapse separately or in combination at such times, under such
circumstances, in such installments, or otherwise, as the Committee may
determine. Except
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to the extent restricted under the Award Agreement relating to the
Restricted Stock, a Grantee granted Restricted Stock shall have all of the
rights of a stockholder including, without limitation, the right to vote
Restricted Stock and the right to receive dividends thereon.
(ii) Forfeiture. Upon termination of employment or termination of the
independent contractor relationship during the applicable restriction
period, Restricted Stock and any accrued but unpaid dividends or Dividend
Equivalents that are at that time subject to restrictions shall be
forfeited; provided that, the Committee may provide, by rule or regulation
or in any Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole or in
part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Grantee, such certificates shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Restricted
Stock, and the Company shall retain physical possession of the certificate.
(iv) Dividends. Dividends paid on Restricted Stock shall be either
paid at the dividend payment date, or deferred for payment to such date as
determined by the Committee, in cash or in shares of unrestricted Stock
having a Fair Market Value equal to the amount of such dividends. Stock
distributed in connection with a stock split or stock dividend, and other
property distributed as a dividend, shall be subject to restrictions and a
risk of forfeiture to the same extent as the Restricted Stock with respect
to which such Stock or other property has been distributed.
(e) Restricted Stock Units. The Committee is authorized to grant Restricted
Stock Units to Grantees, subject to the following terms and conditions:
(i) Award and Restrictions. Delivery of Stock or cash, as determined
by the Committee, will occur upon expiration of the deferral period
specified for Restricted Stock Units by the Committee. In addition,
Restricted Stock Units shall be subject to such restrictions as the
Committee may impose, at the date of grant or thereafter, which
restrictions may lapse at the expiration of the deferral period or at
earlier or later specified times, separately or in combination, in
installments or otherwise, as the Committee may determine.
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<PAGE>
(ii) Forfeiture. Upon termination of employment or termination of the
independent contractor relationship during the applicable deferral period
or portion thereof to which forfeiture conditions apply, or upon failure to
satisfy any other conditions precedent to the delivery of Stock or cash to
which such Restricted Stock Units relate, all Restricted Stock Units that
are then subject to deferral or restriction shall be forfeited; provided
that, the Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock Units will be waived in
whole or in part in the event of termination resulting from specified
causes, and the Committee may in other cases waive in whole or in part the
forfeiture of Restricted Stock Units.
(f) Stock Awards in Lieu of Cash Awards. The Committee is authorized to
grant Stock as a bonus, or to grant other Awards, in lieu of Company commitments
to pay cash under other plans or compensatory arrangements. Stock or Awards
granted hereunder shall have such other terms as shall be determined by the
Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to Grantees. The Committee may provide, at the date of grant or
thereafter, that Dividend Equivalents shall be paid or distributed when accrued
or shall be deemed to have been reinvested in additional Stock, or other
investment vehicles as the Committee may specify, provided that Dividend
Equivalents (other than freestanding Dividend Equivalents) shall be subject to
all conditions and restrictions of the underlying Awards to which they relate.
(h) Deferred Stock Awards. The Committee is authorized to grant Deferred
Stock Awards, subject to the following terms and conditions:
(i) The Committee shall establish, in the name of each Grantee
receiving a Deferred Stock Award, a Common Stock Account to which the
Deferred Stock Award, and any Dividend Equivalents thereon (unless paid
currently in the discretion of the Committee), will be credited. The
Company shall not be under any obligation to acquire the Stock to pay a
Deferred Stock Award (or Dividend Equivalent) at any time prior to the date
on which such payment shall be due.
(ii) The number of equivalent shares of Stock credited to a Common
Stock Account shall accrue Dividend Equivalents on such shares, as if
actual shares of Stock had been issued, from the date the Deferred Stock is
credited to the Common Stock Account to and including the date on which the
amount credited to the Common Stock Account is deemed to have been paid.
Such Dividend Equivalents will be credited to the Common Stock Account as
additional equivalent shares of Stock. The number of equivalent shares
(including fractional shares) to be so credited will be determined by
dividing the Dividend Equivalents by the Fair
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Market Value of the Stock for the day on which the related dividend is
paid. If any dividend is paid on the Stock of the Company, other than in
cash or Stock, the Committee shall conclusively determine the Fair Market
Value in cash of such dividend.
(iii) Payments from Common Stock Accounts.
A. Except as provided below, payment of the total amount credited
an employee's Common Stock Account shall be made to him, or, in case
of his death prior to the commencement of payments on account of such
total amount, to his Beneficiary, in sixty (60) quarterly installments
commencing the first day of the calendar quarter, or as soon
thereafter as practicable, following the date on which he ceases, by
reason of death or otherwise, to be an employee. The amount of each
payment shall be the amount credited to his Common Stock Account
multiplied by a factor, the numerator of which is one (1) and the
denominator of which is the number of quarterly installments remaining
to be paid. If the aggregate number of shares credited to a Common
Stock Account shall not be divisible into whole shares by the
applicable number of installments, each installment except the last
shall consist of the nearest number of whole shares into which such
aggregate number of shares shall be divisible by the applicable number
of installments. The last installment shall consist of the total
amount of whole shares of remaining Deferred Stock credited to such
account and any fractional share shall be paid in cash.
B. In case of the death of an employee after the commencement of
payments to him in respect of his Common Stock Account, the then
remaining unpaid portion thereof shall continue to be paid in
installments, at such times and in such manner as if he were living,
to his Beneficiary.
C. With respect to the total amount in a Common Stock Account, or
the then remaining unpaid portion thereof, which shall be payable to
any person who shall no longer be an employee of the Company or one of
its Subsidiaries or affiliated companies or to the Beneficiary of any
such person, the Committee shall possess absolute discretion to
accelerate the time of payment of such total amount or remaining
unpaid portion, in whole or in part, as the case may be. In addition,
the Committee shall possess absolute discretion to accelerate to any
extent such total amount or remaining unpaid portion, even while a
person remains an employee, if there occurs financial hardship or any
other event which the Committee deems, in its absolute discretion, to
constitute an extraordinary circumstance.
D. Notwithstanding anything in the previous paragraphs of this
Section 6(h), no shares of Stock shall be transferred to any person
who is an officer or director at the time of transfer, less than six
months after such shares have been credited to the Common Stock
Account of such person.
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(i) Other Stock- or Cash-Based Awards. The Committee is
authorized to grant to Grantees Other Stock-Based Awards or Other
Cash-Based Awards as an element of or supplement to any other
Award under the Plan, as deemed by the Committee to be consistent
with the purposes of the Plan. Such Awards may be granted with
value and payment contingent upon performance of the Company or
any other factors designated by the Committee, or valued by
reference to the performance of specified Subsidiaries or
Affiliates. The Committee shall determine the terms and
conditions of such Awards at the date of grant or thereafter.
7. Change in Control Provisions. In the event of a Change of Control:
(a) any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested; and
(b) the restrictions, deferral limitations, payment conditions, and
forfeiture conditions applicable to any other Award granted under the Plan
shall lapse and such Awards shall be deemed fully vested, and any
performance conditions imposed with respect to Awards shall be deemed to be
fully achieved.
8. Non-Employee Director Options. Notwithstanding any of the other
provisions of the Plan to the contrary, the provisions of this Section 8 shall
apply only to grants of Options to Non- Employee Directors. Except as set forth
in this Section 8, the other provisions of the Plan shall apply to grants of
Options to Non-Employee Directors to the extent not inconsistent with this
Section.
(a) General. Non-Employee Directors shall receive NQSOs in accordance
with this Section 8 and may not be granted Stock Appreciation Rights or
Incentive Stock Options under this Plan. The purchase price per share of
Stock purchasable under Options granted to Non-Employee Directors shall be
the Fair Market Value of a Share on the date of grant. No Agreement with
any Non- Employee Director may alter the provisions of this Section and no
Option granted to a Non-Employee Director may be subject to a discretionary
acceleration of exercisability.
(b) Initial Grant. On the last day of the period consisting of the
first twenty trading days beginning on the date when the shares of Stock
first trade regular way, each Non-Employee Director as of such date shall
be granted automatically, without action by the Committee, an Option to
purchase 1,500 shares of Stock.
(c) Grants to New Non-Employee Directors. Each Non- Employee Director
who, after the twentieth day referred to in Subsection (b) of this Section,
is elected to the Board for the first time will, at the time such director
is elected and duly qualified, be granted automatically, without action by
the Committee, an Option to purchase (i) for Options granted prior to
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July 23, 1996, 1,500 shares of Stock and (ii) for Options granted on or
after July 23, 1996, 4,500 shares of stock.
(d) Grants to Continuing Directors. On the date of each annual meeting
of stockholders (in addition to any grant made under subsection (c) of this
Section on such date), each continuing Non-Employee Director will be
granted automatically, without action by the Committee, an Option to
purchase (i) for Options granted prior to July 23, 1996, 1,500 shares of
Stock and (ii) for Options granted on or after July 23, 1996, 4,500 shares
of stock.
(e) Vesting. Each Option shall be exercisable as to 33-1/3 percent of
the Stock covered by the Option on the first anniversary of the date the
Option is granted and as to an additional 33-1/3 percent of the Stock
covered by the Option on each of the following two anniversaries of such
date of grant; provided, however, that each Option shall be immediately
exercisable in full upon a Change in Control. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part, at
any time after becoming exercisable, but not later than the date the Option
expires. Section 6(b) hereof shall not apply to Options granted to
Non-Employee Directors.
(f) Duration. Subject to the immediately following sentence, each
Option granted to a Non-Employee Director shall be for a term of 10 years.
Upon the cessation of a Non-Employee Director's membership on the Board for
any reason, Options granted to such Non-Employee Director shall expire,
except that, as to any portion of an Option which shall be exercisable upon
the date of such cessation, such Option may be exercised as to such portion
until the earlier of (i) three (3) years from the date of such cessation of
Board membership or (ii) expiration of the term of Option. The Committee
may not provide for an extended exercise period beyond the periods set
forth in this Section 8(f).
9. Non-Employee Director Restricted Stock. Notwithstanding any of the other
provisions of the Plan to the contrary, the provisions of this Section 9 shall
apply only to grants of Restricted Stock to Non-Employee Directors ("Director's
Restricted Stock"). Except as set forth in this Section 9, the other provisions
of the Plan shall apply to grants of Director's Restricted Stock, to the extent
not inconsistent with this Section.
(a) General. Non-Employee Directors will receive Director's Restricted
Stock in accordance with this Section. No agreement with any Non-Employee
Director may alter the provisions of this Section and no Director's
Restricted Stock may be subject to a discretionary acceleration of vesting.
(b) Initial Grant. On the last day of the period consisting of the
first twenty trading days beginning on the date when the shares of Stock
first trade regular way, each Non-Employee Director as of such date shall
be granted automatically, without
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action by the Committee, 2,500 shares of Director's Restricted Stock,
subject to the restrictions set forth in this Section.
(c) Grants to New Non-Employee Directors. Each Non- Employee Director
who, after the twentieth day referred to in Subsection (b) of this Section
and prior to the 1994 Annual Meeting of Stockholders, is elected to the
Board for the first time, will, at the time such Director is duly elected
and qualified, be granted automatically, without action of the Committee,
2,500 shares of Director's Restricted Stock.
(d) Grants to Subsequent New Non-Employee Directors. Each new
Non-Employee Director who, on or after the 1994 Annual Meeting of
Stockholders, is elected to the Board for the first time, will, at the time
such Director is duly elected and qualified, be granted automatically,
without action by the Committee, a number of shares of Director's
Restricted Stock equal to the lesser of (i) 2,500 shares (7,500 shares on
or after July 23, 1996) or (ii) the nearest number of whole shares
determined by multiplying 2,500 (7,500 on or after July 23, 1996) by a
fraction, the numerator of which is the initial Fair Market Value of the
Stock determined under the formula utilized for initial grants of NQSQs to
Non-Employee Directors under Section 8(b)(such initial Fair Market Value
being $15.375 per share or, on or after July 23, 1996, $5.125 per share),
and the denominator of which is the Fair Market Value of the Stock on the
date on which such Director is duly elected and qualified.
(e) Vesting. (i) Each Award of Director's Restricted Stock shall
become non-forfeitable as to twenty percent of the Stock covered by the
Award on the first anniversary date of the Award and as to an additional
twenty percent of the Stock on each of the following four anniversary dates
of the Award; provided that each Award shall be immediately non-forfeitable
in full upon a Change in Control. If a Non-Employee Director's service on
the Board terminates prior to the Award becoming entirely non- forfeitable,
any portion of the Award which then remains forfeitable shall revert to the
Company, except that if the Non- Employee Director's service terminates by
reason of death or disability, any 20 percent installment with respect to
which such Non-Employee Director shall have begun (but not completed) the
requisite annual service shall become, as to such installment, also
entirely nonforfeitable. As used in the prior sentence, a "disability"
shall exist if, because of sickness or injury, the ability of the
Non-Employee Director to perform the duties of a member of the Board of
Directors becomes significantly impaired.
(ii) A Non-Employee Director may, on or prior to December 31, 1995 (or
in the case of a Non-Employee Director who first becomes a Director after
December 31, 1995, within thirty days after becoming a Director), as to his
forfeitable shares of Director's Restricted Stock elect that such shares
shall become nonforfeitable on January 1 following the year in which he
attains his 70th birthday, but not earlier than the date upon which such
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shares become nonforfeitable under subparagraph (i) of this paragraph (e)
or later than the date of a Change in Control. During such additional
period, if any, that such shares are forfeitable under this subparagraph
(ii), the shares shall be forfeited if such Non-Employee Director resigns
from the Board of Directors or refuses to stand for re-election to the
Board of Directors, unless:
A. Such resignation or refusal results from the disability (as
defined in subparagraph (i) above) or death of the Non-Employee
Director; or
B. Such Non-Employee Director furnishes to the Board of Directors
an opinion of counsel, reasonably satisfactory to a majority of the
remaining members, to the effect that continued membership on the
Board will result in such Non-Employee Director having a conflict of
interest or suffering some other significant legal liability; or
C. Such resignation or refusal is approved or requested by a
majority of the remaining members of the Board of Directors or by
stockholders owning a majority of the voting stock of the Company.
During such additional period, if any, that such shares are
forfeitable under this subparagraph (ii), if there occurs an event
described in clause A., B. or C. of this subparagraph, the shares
shall become nonforfeitable on the date that the Non-Employee Director
ceases to be a member of the Board of Directors.
Any such election to defer vesting shall be made in writing
addressed to the Secretary of the Committee, and shall be irrevocable
when received.
(f) Dividends; Voting. Except as set forth in this Section 9, a
Director granted Director's Restricted Stock shall have all of the rights
of a stockholder including, without limitation, the right to vote
Restricted Stock and the right to receive dividends thereon.
(g) The Director's Restricted Stock shall be subject to the following
provisions prior to becoming non-forfeitable:
(i) The Stock may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of; and neither the right to
receive Stock nor any interest therein under the Plan may be assigned,
and any attempted assignment shall be void.
(ii) The Stock certificates shall, at the option of the Company,
either (x) be held by the Company together with stock powers endorsed
by the Director in blank or (y) bear an appropriate restrictive legend
and be subject to appropriate "stop transfer" orders or (z) both.
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(iii) Any additional Stock or other securities or property (other
than cash dividends) that may be issued with respect to Director's
Stock as a result of any stock dividend, stock split, reorganization,
recapitalization, merger, consolidation, split-up, combination of
shares or other event, shall be subject to the restrictions and other
terms and conditions of the Plan.
10. General Provisions.
(a) Compliance with Local and Exchange Requirements. The Plan, the granting
and exercising of Awards, and the other obligations of the Company under the
Plan and any Award Agreement, promissory note or other agreement shall be
subject to all applicable federal, state and foreign laws, rules and
regulations, and to such approvals by any regulatory or governmental agency as
may be required. The Company, in its discretion, may postpone the issuance or
delivery of Stock under any Award until completion of such stock exchange
listing or registration or qualification of such Stock or other required action
under any state, federal or foreign law, rule or regulation as the Company may
consider appropriate, and may require any Grantee to make such representations
and furnish such information as it may consider appropriate in connection with
the issuance or delivery of Stock in compliance with applicable laws, rules and
regulations.
(b) Nontransferability. Awards shall not be transferable by a Grantee
except by will or the laws of descent and distribution or, if then permitted
under Rule 16b-3, pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder, and shall be exercisable during the
lifetime of a Grantee only by such Grantee or his guardian or legal
representative.
(c) No Right to Continued Employment, etc.. Nothing in the Plan or in any
Award granted or any Award Agreement, or other agreement entered into pursuant
hereto shall confer upon any Grantee the right to continue in the employ of or
to continue as an independent contractor, leased employee or director of the
Company, any subsidiary or any Affiliate or to be entitled to any remuneration
or benefits not set forth in the Plan or such Award Agreement, or other
agreement or to interfere with or limit in any way the right of the Company or
any such Subsidiary or Affiliate or the stockholders to terminate such Grantee's
employment, leased employee status, directorship or independent contractor
relationship.
(d) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any other payment to a Grantee,
amounts
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<PAGE>
of withholding and other taxes due in connection with any transaction involving
an Award, and to take such other actions as the Committee may deem advisable to
enable the Company and Grantees to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Award. This
authority shall include authority to withhold or receive Stock or other property
and to make cash payments in respect thereof in satisfaction of a Grantee's tax
obligations.
(e) Amendment and Termination of the Plan. The Board may at any time and
from time to time alter, amend, suspend, or terminate the Plan in whole or in
part; provided that, no amendment which requires stockholder approval in order
for the Plan to continue to comply with Rule 16b-3, shall be effective unless
the same shall be approved by the requisite vote of the stockholders of the
Company entitled to vote thereon and Sections 8 and 9 of this Plan shall not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act, or the rules thereunder.
Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any Grantee, without such Grantee's consent, under any Award
theretofore granted under the Plan.
(f) No Rights to Awards; No Stockholder Rights. No Grantee shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Grantees. Except as provided specifically herein, a
Grantee or a transferee of an Award shall have no rights as a stockholder with
respect to any shares covered by the Award until the date of the issuance of a
stock certificate to him for such shares.
(g) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Grantee pursuant to an Award, nothing contained in
the Plan or any Award shall give any such Grantee any rights that are greater
than those of a general creditor of the Company.
(h) No Fractional Shares. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(i) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware without
giving effect to the conflict of laws principles thereof.
(j) Effective Date; Plan Termination. The Plan shall take effect upon its
adoption by the Board (the "Effective Date"), but the Plan (and any grants of
Awards made prior to the
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stockholder approval mentioned herein), shall be subject to the approval of the
holder(s) of a majority of the issued and outstanding shares of voting
securities of the Company entitled to vote, which approval must occur within
twelve months of the date the Plan is adopted by the Board. In the absence of
such approval, such Awards shall be null and void.
(k) Spinoff. Awards, if any, granted under this Plan prior to the effective
date of the Spinoff shall be subject to the consummation of the spinoff.
38
CYTEC INDUSTRIES INC.
Executive Income Continuity Plan
As Revised October 21, 1994 and May 13, 1996
1. Purpose. The purpose of this Executive Income Continuity Plan (this
Plan) is to retain the services of executives in the senior management group of
Cytec Industries Inc. and its subsidiaries and to reinforce and encourage the
continuing attention, dedication and loyalty of these executives without the
distraction of concern over the possibility of involuntary or constructive
termination of employment resulting from unforeseen developments, by providing
income continuity for a limited period.
2. Definitions. Unless the context otherwise requires, the following terms
shall have the meanings respectively indicated:
(a) "Board of Directors" shall mean the board of directors of Cytec
Industries Inc.
(b) "Cause" shall mean (A) the willful and continued failure by a Plan
Member substantially to perform his duties with the Company (other than any
such failure resulting from his incapacity due to physical or mental
illness), after a demand for substantial performance is delivered to him by
the Company which specifically identifies the manner in which the Company
believes that he has not substantially performed his duties, or (B) the
willful engaging by him in conduct demonstrably injurious to the Company.
For purposes of this definition, no act, or failure to act, on the part of
a Plan Member shall be considered "willful" unless done, or omitted to be
done, by him without reasonable belief that his action or omission was in
the best interests of the Company and was lawful.
(c) A "Change in Control" shall be deemed to have occurred if: (i) any
"person", as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or
more (except as specifically provided below) of the combined voting power
of the Company's then outstanding securities; or (ii) there occurs any
transaction or action which results in
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the individuals who at the beginning of a period commencing 24
hours prior to the commencement of the transaction were members of the
Board of Directors, together with individuals subsequently elected to the
Board upon the recommendation of a majority of the continuing directors,
ceasing to constitute at least a majority thereof; or (iii) the
stockholders or the Board of Directors of the Company approve a definitive
agreement to merge or consolidate the Company with or into another
corporation (including any such transaction in which the Company is the
surviving corporation), or to sell or otherwise dispose of all or
substantially all of its assets, or to adopt a plan of liquidation of the
Company. Notwithstanding clause (i) above, beneficial ownership by a
financial institution of securities of the Company representing 20% or more
of the combined voting power of the Company's then outstanding securities
shall not constitute a Change in Control if, at the first Board of
Directors meeting occurring five days or more after the Company receives
written notice of such event, and prior to the occurrence of an event
described in clause (ii) above, the Board of Directors adopts a resolution
to the effect that such ownership does not constitute a Change in Control;
provided that (x) such a resolution shall not remain in effect for any
further five percent (5%) increase in such financial institution's
beneficial ownership, unless the Board of Directors so determines in
accordance with a further resolution adopted by the Board of Directors in
accordance with the procedures set forth in this sentence, (y) such
resolution may be revoked by the Board of Directors at any time; and (z)
the Board of Directors may place any additional or more stringent
conditions on its determination that such event does not constitute a
Change in Control.
(d) "Company" shall mean Cytec Industries Inc. and, except for the
purposes of paragraph (c) of this Section, shall include any of its
subsidiaries which employs members of this Plan.
(e) "Compensation Committee" shall mean the Compensation and
Management Development Committee as constituted from time to time of the
Board of Directors, or such other body as shall have similar authority and
responsibility.
(f) "Date of Termination" shall mean (A) if the employment of a Plan
Member is terminated by his death, the date of his death, (B) if such
employment is terminated by his Retirement, the date of such Retirement,
(C) if such employment is terminated for Disability, upon the expiration of
his continuous service credits as determined by the Company, (D) if his
employment is terminated by him for Good Reason, the date specified in the
Notice of Termination, and (E) if his employment is terminated for any
other reason, the date on which Notice of Termination is given; provided
that if within 30 days after any Notice of Termination is given the party
receiving such notice notifies the other party that a
40
<PAGE>
dispute exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order or decree
of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
(g) "Disability" shall mean inability of a Plan Member due to sickness
or injury to perform the duties pertaining to his occupation with the
Company, as determined in accordance with the Company's Long-Term
Disability Plan and personnel policies.
(h) "Good Reason" shall mean:
(A) a change in assignment resulting in the assignment to a Plan
Member of substantially reduced responsibilities compared with those
assigned to him prior to such change, or any change in his status,
authority or position which represents a demotion (actual or de facto)
from his status, authority or position immediately prior to such
change, except in connection with the termination of his employment
because of death or Retirement, by the Company for Disability or
Cause, or by him other than for a Good Reason enumerated in any of the
following subparagraphs of this Paragraph (h);
(B) the assignment to a Plan Member of duties inconsistent with
his responsibilities prior to such assignment, unless such new duties
are consistent with a position of equal or greater status, authority,
and position;
(C) a reduction in the base salary of a Plan Member as the same
may be increased from time to time;
(D) a failure to continue the I.C. Plan (or a plan providing
substantially similar benefits) as the same may be modified from time
to time but in a form not less favorable than as of the date of
adoption of this Plan, or a failure to continue a Plan Member as a
participant in the I.C. Plan on a basis consistent with the basis on
which the I.C. Plan is administered as of such date;
(E) a failure to pay a Plan Member any portion of his current or
deferred compensation within seven (7) days of the date such
compensation is due;
(F) the relocation of the principal executive offices of the
Company to a location more than 50 miles from the location of the
present executive offices or outside of New Jersey, or requiring a
Plan Member to be based anywhere other than the principal executive
offices (or, if a Plan Member is not based at such executive offices,
requiring such Plan Member to be based at
41
<PAGE>
another location not within 25 miles of such location) except for
required travel on business to an extent substantially consistent
with his duties and responsibilities, or in the event of consent
to any such relocation of the base location of a Plan Member the
failure to pay (or provide reimbursement for) all expenses of such
Plan Member incurred relating to a change of principal residence in
accordance with the applicable personnel policies of the Company in
effect as of the date of adoption of this Plan;
(G) the failure to continue in effect any benefit or compensation
plan (including but not limited to the Retirement Plan, the Long-Term
Disability Plan, the I.C. Plan, stock option and performance
stock/cash features of the 1993 Stock Award and Incentive Plan (or of
any subsequent and/or substitute plan)), the Employees Savings and
Profit Sharing Plan (including the Supplemental Savings and Profit
Sharing Plan), pension plan (including but not limited to, the
Supplemental, Executive Supplemental, and Excess Retirement Plans),
life insurance plan, health and accident plan, disability or vacation
plan in which a Plan Member is participating, or the taking of any
action which would adversely affect participation (including the Plan
Member's eligibility to participate, the amount of his benefits, and
the level of his participation relative to other participants) in or
materially reduce benefits under any of such plans, or the failure to
fund any "Rabbi Trust" created for the payment of any of the foregoing
benefits, when, and to the extent, required by the terms of any such
trust, unless such action is required pursuant to law or unless
substantially similar benefits are continued in the aggregate under
other plans, programs or arrangements;
H) the failure to obtain the assumption of or an agreement to
carry out the terms of this Plan by any successor as contemplated in
Section 10; or
(I) any purported termination of a Plan Member's employment which
is not effected pursuant to a Notice of Termination as herein defined.
(i) "I.C Plan" means the existing system of annual cash bonuses
payable to Company employees (including Plan Members), pursuant to which
annual target bonuses are established based upon job levels and payments of
bonuses as a percentage of such targets are made based upon Company,
business group and individual performance.
(j) "Notice of Termination" shall mean a notice which indicates the
specific basis for termination of employment relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide
such basis.
42
<PAGE>
(k) "Plan Member" shall mean a person who is employed by the Company
on a full-time basis and for a regular fixed compensation (other than on a
retainer or compensation for temporary employment) and who is included in
the membership of this Plan as provided in Section 3.
(l) "Officers" shall mean the chairman, any vice chairman, president,
and any vice president of Cytec Industries Inc. chosen by the Board of
Directors.
(m) "Retirement" shall mean termination of employment in accordance
with the provisions of the Retirement Plan; provided, however, that
termination of employment by a Plan Member before his Normal Retirement
Date (as defined in such Plan) for Good Reason shall not be deemed to be
Retirement for purposes of this Plan even though such Plan Member may be
eligible for and elect to receive retirement benefits thereunder.
(n) "Retirement Plan" means any qualified defined benefit pension plan
of the Company or its subsidiaries under which the Plan Member has accrued
a retirement benefit (whether or not vested).
(o) "Service", as used in Section 5 of this Plan, shall mean service
as a full time employee of the Company or one of its subsidiaries and, in
the case of any person who became such an employee on January 1, 1994,
shall include any period of service ending December 31, 1993 as a full time
employee of American Cyanamid Company or one of its subsidiaries.
(p) "Special Change in Control" shall have the same meaning as "Change
in Control" except that the reference to "20%" in clause (i) of the
definition of "Change in Control" shall be replaced with "50%".
The masculine pronoun wherever used herein shall include the feminine
except as the context specifically indicates.
3. Membership. All Officers shall be Plan Members. The Compensation
Committee may designate any other employee as a Plan Member. After an employee
becomes a Plan Member, his membership shall continue until his death or
Retirement, termination of his employment by the Company for Cause or
Disability, or termination of his employment by such Plan Member other than for
Good Reason.
4. Termination of Employment. Each Plan Member shall be entitled to receive
the income continuation payments provided for in Section 5 upon termination of
his employment, unless such termination is (a) because of his death, Disability
or Retirement, (b) by the Company for Cause, or (c) by such Plan Member other
than for Good Reason.
43
<PAGE>
5. Income Continuation. (a) Subject to the provisions of Section 7, upon
termination of the employment pursuant to Section 4 of a Plan Member who is an
Officer or who, on the Date of Termination, has at least one year of Service,
the Company shall pay to him the sum of his annual base salary at the rate in
effect at the time Notice of Termination is given plus his Annual Bonus
(excluding Performance Stock/Cash Awards) under the I.C. Plan based on such
rate, in equal monthly installments over a period of 12 months following the
Date of Termination, on the first day of each month commencing with the first
day of the first month after such date; provided that in the case of Notice of
Termination given after a Change in Control, the payments shall consist of twice
his annual base salary plus twice his Annual Bonus, payable over a 24 month
period; and provided further that in the case of Notice of Termination given
after a Special Change in Control, the payments shall consist of twice his
annual base salary plus twice his Annual Bonus, payable in a single lump sum
payment at the time of the Notice of Termination. As used in this Section 5,
"Annual Bonus" means the greater of (i) the annual target bonus under the I.C.
Plan attributable to the Plan Member or (ii) said annual target bonus times a
fraction equivalent to the average percentage of said annual target bonus paid
to said Plan Member for each of the two preceding fiscal years of the Company
(or for such lesser period of time as such Plan Member participated in the I.C.
Plan).
(b) Subject to the provisions of Section 7, upon termination of the
employment pursuant to Section 4 of any other Plan Member, the Company shall pay
to him the sum of his annual base salary at the rate in effect at the time
Notice of Termination is given plus his Annual Bonus (excluding Performance
Stock/Cash Awards) under the I.C. Plan based on such rate, in equal monthly
installments over a period of 12 months following the Date of Termination, on
the first day of each month commencing with the first day of the first month
after such date; provided that in the case of Notice of Termination given after
a Special Change in Control, the payments shall be payable in a single lump sum
payment at the time of the Notice of Termination.
(c) Except for the lump sum payments, which shall be paid immediately as
provided above, all payments under paragraphs (a) and (b) shall be made on the
first day of each month commencing with the first day of the first month after
such date. Notwithstanding the foregoing, (i) no payment shall be made with
respect to any period beyond the date of a Plan Member's 65th birthday, (ii) no
payment shall be made with respect to any period beyond the date of a Plan
Member's 60th birthday, or such earlier date as such Plan Member retires under
the Executive Supplemental Employees' Retirement Plan, if such Plan Member is a
full member of such plan and is entitled to retire on such date without having
his benefits thereunder reduced by an early retirement discount, and (iii) there
shall be deducted from any payments required hereunder (x) any payments made
with respect to any required notice period under any employment agreement
between a Plan Member and the Company or one of its subsidiaries and (y) by any
payments received by the Plan Member under the Company's Long Term Disability
Plan or
44
<PAGE>
under any short term disability plan or program of the Company during the period
with respect to which income continuation is computed hereunder.
6. Other Payments. Subject to the provisions of Section 7, upon termination
of the employment of a Plan Member pursuant to Section 4, the Company shall, in
addition to the payments provided for in Section 5, pay to him:
(a) all relocation payments described in Section 2(h)(F) and all legal
fees and expenses incurred by him as a result of such termination
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any right
or benefit provided by this Plan or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of
the Internal Revenue Code of 1986, as amended, to any payment or benefit
provided hereunder); and
(b) during the period of two years following the Date of Termination,
all reasonable expenses incurred by him in seeking comparable employment
with another employer to the extent not otherwise reimbursed to him,
including, without limitation, the fees and expenses of a reputable out
placement organization, and reasonable travel, telephone and office
expenses.
7. Competitive Employment. The Company, at its option, may discontinue any
payments being made to any Plan Member pursuant to Section 5 or Section 6 if
such Plan Member engages in the operation or management of any business in the
United States of America, whether as owner, stockholder, partner, officer,
consultant, employee or otherwise, which at such time is in competition with any
business of the Company in any field with which such Plan Member was involved
during the last two years of his employment by the Company. Ownership by such
Plan Member of five percent or less of the shares of stock of any company listed
on a national securities exchange or having at least 100 stockholders shall not
make such Plan Member a "stockholder" within the meaning of that term as used in
this Section.
8. Maintenance of Other Benefit Plans. The Company shall maintain in full
force and effect, for the continued benefit of each Plan Member entitled to
receive payments pursuant to Section 5, for two years following his Date of
Termination, all employee benefit plans and programs or arrangements (including
Comprehensive Medical and Dental Insurance, Group Life Insurance, and Financial
Planning and Tax Preparation and Counseling Services, but not including
disability) in which he was entitled to participate at the time the Notice of
Termination was given, provided that if his continued participation is not
permitted under the general terms and provisions of such plans and programs, the
Company shall provide equivalent benefits.
45
<PAGE>
9. No Mitigation. No Plan Member shall be required to mitigate the amount
of any payment provided for under this Plan by seeking other employment or
otherwise, nor shall the amount of any payment so provided for be reduced by any
compensation earned by any Plan Member as the result of employment by another
employer, by retirement benefits or by offset against any amount claimed to be
owed by him to the Company.
10. Successors. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and assets of the Company, by a written
agreement, to expressly assume and agree to carry out the provisions of this
Plan in the same manner and to the same extent that the Company would be
required to carry them out if no such succession had occurred.
11. Notice. Any notice expressly provided for under this Plan shall be in
writing, shall be given either manually or by mail, telegram, telex, telefax or
cable, and shall be deemed sufficiently given, if and when received by the
Company at its offices at 5 Garret Mountain Plaza, West Paterson, New Jersey
07424 Attention: Secretary, or by any Plan Member at his address on the records
of the Company, or if an when mailed by registered mail, postage prepaid, return
receipt requested, addressed to the Company or the Plan Member to be notified at
such address. Either the Company or any Plan Member may, by notice to the other,
change its address for receiving notices.
12. Funding. All payments provided for under this Plan for Plan Members
(including those who have retired) shall not be funded or secured, and no trust
shall be created hereunder. Payments under the Plan shall become fully vested
and nonforfeitable upon the termination of a Plan Member's employment except for
termination where a Plan Member would not be entitled to income continuation
payments as provided in Section 4 and except as provided in Section 7.
13. Amendment and Termination. The Board of Directors may at any time or
from time to time amend or terminate this Plan; provided, however, that no such
amendment or termination may adversely affect any vested benefits hereunder;
and, provided further, that after a Change in Control, this Plan may not be
amended or terminated without the consent of all persons who were Plan Members
as of the date of such Change in Control (including those who have retired).
14. Governing Law. This Plan, and the rights and obligations of the Company
and the Plan Members hereunder, shall be construed and governed in accordance
with the law of the State of New Jersey.
15. Partial Invalidity. If any provision of this Plan is determined to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the remaining provisions of this Plan, which shall remain in effect in
accordance with its terms.
46
CYTEC INDUSTRIES INC.
Key Manager Income Continuity Plan
As Revised October 21, 1994 and May 13, 1996
1. Purpose. The purpose of this Key Manager Income Continuity Plan
(this Plan) is to retain the services of executives in the senior management
group of Cytec Industries Inc. and its subsidiaries and to reinforce and
encourage the continuing attention, dedication and loyalty of these executives
without the distraction of concern over the possibility of involuntary or
constructive termination of employment resulting from unforeseen developments,
by providing income continuity for a limited period.
2. Definitions. Unless the context otherwise requires, the following
terms shall have the meanings respectively indicated:
(a) "Board of Directors" shall mean the board of directors of Cytec
Industries Inc.
(b) "Cause" shall mean (A) the willful and continued failure by a
Plan Member substantially to perform his duties with the Company (other than
any such failure resulting from his incapacity due to physical or mental
illness), after a demand for substantial performance is delivered to him by
the Company which specifically identifies the manner in which the Company
believes that he has not substantially performed his duties, or (B) the
willful engaging by him in conduct demonstrably injurious to the Company.
For purposes of this definition, no act, or failure to act, on the part of
a Plan Member shall be considered "willful" unless done, or omitted to be
done, by him without reasonable belief that his action or omission was in the
best interests of the Company and was lawful.
(c) A "Change in Control" shall be deemed to have occurred if: (i)
any "person", as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than
the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or more
(except as specifically provided below) of the combined voting power
of the Company's then outstanding securities; or (ii) there occurs any
transaction or action which results in the individuals who at the beginning of
a period commencing 24 hours prior to the commencement of the transaction were
members of the Board of Directors, together with individuals
47
<PAGE>
subsequently elected to the Board upon the recommendation of a majority of
the continuing directors, ceasing to constitute at least a majority thereof;
or (iii) the stockholders or the Board of Directors of the Company approve
a definitive agreement to merge or consolidate the Company with or into another
corporation (including any such transaction in which the Company is the
surviving corporation), or to sell or otherwise dispose of all or substantially
all of its assets, or to adopt a plan of liquidation of the Company.
Notwithstanding clause (i) above, beneficial ownership by a financial
institution of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities shall not
constitute a Change in Control if, at the first Board of Directors meeting
occurring five days or more after the Company receives written notice of such
event, and prior to the occurrence of an event described in clause (ii) above,
the Board of Directors adopts a resolution to the effect that such ownership
does not constitute a Change in Control; provided that (x) such a resolution
shall not remain in effect for any further five percent (5%) increase in such
financial institution's beneficial ownership, unless the Board of Directors so
determines in accordance with a further resolution adopted by the Board of
Directors in accordance with the procedures set forth in this sentence, (y)
such resolution may be revoked by the Board of Directors at any time; and (z)
the Board of Directors may place any additional or more stringent conditions on
its determination that such event does not constitute a Change in Control.
(d) "Company" shall mean Cytec Industries Inc. and, except for the
purposes of paragraph (c) of this Section, shall include any of its
subsidiaries which employs members of this Plan.
(e) "Compensation Committee" shall mean the Compensation and
Management Development Committee as constituted from time to time of the Board
of Directors, or such other body as shall have similar authority and
responsibility.
(f) "Date of Termination" shall mean (A) if the employment of a Plan
Member is terminated by his death, the date of his death, (B) if such
employment is terminated by his Retirement, the date of such Retirement, (C)
if such employment is terminated for Disability, upon the expiration of his
continuous service credits as determined by the Company, (D) if his
employment is terminated by him for Good Reason, the date specified in
the Notice of Termination, and (E) if his employment is terminated for any
other reason, the date on which Notice of Termination is given; provided that
if within 30 days after any Notice of Termination is given the party receiving
such notice notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally resolved, either by mutual written agreement of the parties or by
a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected).
48
<PAGE>
(g) "Disability" shall mean inability of a Plan Member due to
sickness or injury to perform the duties pertaining to his occupation with the
Company, as determined in accordance with the Company's Long-Term Disability
Plan and personnel policies.
(h) "Executive Committee" shall mean the Executive Committee of Cytec
Industries Inc. as elected from time to time by the Board of Directors, or such
other body as shall have similar authority and responsibility.
(i) "Good Reason" shall mean:
(A) a change in assignment resulting in the assignment to a Plan
Member of substantially reduced responsibilities compared with those
assigned to him prior to such change, or any change in his status,
authority or position which represents a demotion (actual or
de facto) from his status, authority or position immediately prior
to such change, except in connection with the termination of his
employment because of death or Retirement, by the Company for
Disability or Cause, or by him other than for a Good Reason
enumerated in any of the following subparagraphs of this
Paragraph (I);
(B) the assignment to a Plan Member of duties inconsistent with his
responsibilities prior to such assignment, unless such new duties are
consistent with a position of equal or greater status, authority,
and position;
(C) a reduction in the base salary of a Plan Member as the same may
be increased from time to time;
(D) a failure to continue the I.C. Plan (or a plan providing
substantially similar benefits) as the same may be modified from
time to time but in a form not less favorable than as of the date
of adoption of this Plan, or a failure to continue a Plan Member
as a participant in the I.C. Plan on a basis consistent with
the basis on which the I.C. Plan is administered as of such date;
(E) a failure to pay a Plan Member any portion of his current or
deferred compensation within seven (7) days of the date such
compensation is due;
(F) the relocation of the principal executive offices of the
Company to a location more than 50 miles from the location of the
present executive offices or outside of New Jersey, or requiring a
Plan Member to be based anywhere other than the principal executive
offices (or, if a Plan Member is not based at such executive offices,
requiring such Plan Member to be based at another location not
within 50 miles of such location) except for required travel on
business to an extent substantially consistent with his duties and
responsibilities, or in
49
<PAGE>
the event of consent to any such relocation of the base location of
a Plan Member the failure to pay (or provide reimbursement for) all
expenses of such Plan Member incurred relating to a change of
principal residence in accordance with the applicable personnel
policies of the Company in effect as of the date of adoption of
this Plan;
(G) the failure to continue in effect any benefit or compensation
plan (including but not limited to the Retirement Plan, the Long-Term
Disability Plan, the I.C. Plan, stock option and performance
stock/cash features of the 1993 Stock Award and Incentive Plan (or
of any subsequent and/or substitute plan)), the Employees Savings
and Profit Sharing Plan (including the Supplemental Savings and
Profit Sharing Plan), pension plan (including but not limited to,
the Supplemental, Executive Supplemental, and Excess Retirement
Plans), life insurance plan, health and accident plan, disability or
vacation plan in which a Plan Member is participating, or the taking
of any action which would adversely affect participation (including
the Plan Member's eligibility to participate, the amount of his
benefits, and the level of his participation relative to other
participants) in or materially reduce benefits under any of such
plans, or the failure to fund any "Rabbi Trust" created for the
payment of any of the foregoing benefits, when,
and to the extent, required by the terms of any such trust, unless
such action is required pursuant to law or unless substantially
similar benefits are continued in the aggregate under other plans,
programs or arrangements;
(H) the failure to obtain the assumption of or an agreement to carry
out the terms of this Plan by any successor as contemplated in
Section 10; or
(I) any purported termination of a Plan Member's employment which is
not effected pursuant to a Notice of Termination as herein defined.
(j) "I.C Plan" means the existing system of annual cash bonuses
payable to Company employees (including Plan Members), pursuant to
which annual target bonuses are established based upon job levels
and payments of bonuses as a percentage of such targets are made
based upon Company, business group and individual performance.
(k) "Notice of Termination" shall mean a notice which indicates the
specific basis for termination of employment relied upon and shall
set forth in reasonable detail the facts and circumstances claimed
to provide such basis.
50
<PAGE>
(l) "Plan Member" shall mean a person who is employed by the Company
on a full-time basis and for a regular fixed compensation (other
than on a retainer or compensation for temporary employment) and who
is included in the membership of this Plan as provided in Section
3.
(m) "Retirement" shall mean termination of employment in accordance
with the provisions of the Retirement Plan; provided, however, that
termination of employment by a Plan Member before his Normal
Retirement Date (as defined in such Plan) for Good Reason shall not
be deemed to be Retirement for purposes of this Plan even though
such Plan Member may be eligible for and elect to receive retirement
benefits thereunder.
(n) "Retirement Plan" means any qualified defined benefit pension
plan of the Company or its subsidiaries under which the Plan Member
has accrued a retirement benefit (whether or not vested).
(o) "Service", as used in Section 5 of this Plan, shall mean service
as a full time employee of the Company or one of its subsidiaries
and, in the case of any person who became such an employee on
January 1, 1994, shall include any period of service ending December
31, 1993 as a full time employee of American Cyanamid Company or one
of its subsidiaries.
(p) "Special Change in Control" shall have the same meaning as
"Change in Control" except that the reference to "20%" in clause (i)
of the definition of "Change in Control" shall be replaced with
"50%".
The masculine pronoun wherever used herein shall include the feminine
except as the context specifically indicates.
3. Membership. The Executive Committee may designate any employee who
is not a member of the Executive Income Continuity Plan and who is grade 15
or above as a Plan Member. Any such designation may be revoked at any time
prior to a Change in Control in the absolute discretion of the Executive
Committee, but may not be revoked thereafter for any reason. Subject to the
foregoing, after an employee becomes a Plan Member, his membership shall
continue until his death or Retirement, termination of his employment by
the Company for Causeor Disability, termination of his employment by such
Plan Member other than for Good Reason, or until such time, if any, as he
becomes a member of the Executive Income Continuity Plan.
4. Termination of Employment. Each Plan Member shall be entitled to
receive the income continuation payments provided for in Section 5 upon
termination of his employment, unless such termination is (a) because of his
death, Disability or Retirement, (b) by the Company for Cause, or (c) by such
Plan Member other than for Good Reason.
51
<PAGE>
5. Income Continuation. (a) Subject to the provisions of Section 6
and paragraph (c), upon termination of the employment pursuant to Section 4
of a Plan Member who is age 50 or over and has at least 10 years of Service,
the Company shall pay to him the sum of twice his annual base salary at the
rate in effect at the time Notice of Termination is given plus twice his
Annual Bonus (excluding Performance Stock/Cash Awards) under the I.C. Plan
based on such rate, in equal monthly installments over a period of 24 months
following the Date of Termination, on the first day of each month commencing
with the first day of the first month after such date.
(b) Subject to the provisions of Section 6 and paragraph (c), upon
termination of the employment pursuant to Section 4 of any other Plan Member
who has at least 10 years of Service with the Company and is at least age 40
but less than age 50, the Company shall pay to him (A) in equal monthly
installments over a period of 12 months following the Date of Termination,
his Annual Bonus (excluding Performance Stock/Cash Awards) under the I.C.
Plan based on the rate in effect at the time Notice of Termination is given,
plus (B) in equal monthly installments over the number of months set forth
below his monthly base salary at such rate;
Age Months
40 12
41 13
42 14
43 15
44 16
45 17
46 18
47 19
48 20
49 22
(c) Notwithstanding paragraphs (a) and (b) of this Section 5, in the case
of Notice of Termination given prior to a Change in Control, payments under
this paragraph 5 shall be capped such that a person shall not receive more
than his annual base salary plus his Annual Bonus, payable over a twelve-month
period and (y) in the case of Notice of Termination given after a Special
Change in Control, the payments to a Plan Member provided for in paragraphs
(a) or (b), as applicable, shall be payable in a single lump sum payment at
the time of the Notice of Termination. As used in this Section 5, "Annual
Bonus" means the greater of (i) the annual target bonus under the I.C. Plan
attributable to the Plan Member or (ii) said annual target bonus times a
fraction equivalent to the average percentage of said annual target bonus paid
to said Plan Member for each of the two preceding fiscal years of the Company
(or for such lesser period of time as such Plan Member participated in the
I.C. Plan).
(d) Except for the lump sum payments, which shall be paid immediately as
provided above, all payments under paragraphs (a) and (b) shall be made on
the first day of each month commencing
52
<PAGE>
with the first day of the first month after such date. Notwithstanding the
foregoing, (i) no payment shall be made with respect to any period beyond the
date of a Plan Member's 65th birthday, (ii) no payment shall be made with
respect to any period beyond the date of a Plan Member's 60th birthday, or
such earlier date as such Plan Member retires under the Executive Supplemental
Employees' Retirement Plan, if such Plan Member is a full member of such plan
and is entitled to retire on such date without having his benefits thereunder
reduced by an early retirement discount, and (iii) there shall be deducted
from any payments required hereunder (x) any payments made with respect to
any required notice period under any employment agreement between a Plan
Member and the Company or one of its subsidiaries and (y) by any payments
received by the Plan Member under the Company's Long Term Disability Plan
or under any short term disability plan or program of the Company during the
period with respect to which income continuation is computed hereunder.
6. Competitive Employment. The Company, at its option, may discontinue
any payments being made to any Plan Member pursuant to Section 5 if such Plan
Member engages in the operation or management of any business in the United
States of America, whether as owner, stockholder, partner, officer,
consultant, employee or otherwise, which at such time is in competition with
any business of the Company in any field with which such Plan Member was
involved during the last two years of his employment by the Company.
Ownership by such Plan Member of five percent or less of the shares of stock
of any company listed on a national securities exchange or having at least
100 stockholders shall not make such Plan Member a "stockholder" within the
meaning of that term as used in this Section.
7. Maintenance of Other Benefit Plans. The Company shall maintain in
full force and effect, for the continued benefit of each Plan Member entitled
to receive payments pursuant to Section 5, for one year following his Date of
Termination, all employee benefit plans and programs or arrangements
(including Comprehensive Medical and Dental Insurance, Group Life Insurance,
and Financial Planning and Tax Preparation and Counseling Services, but not
including disability) in which he was entitled to participate at the time the
Notice of Termination was given, provided that if his continued participation
is not permitted under the general terms and provisions of such plans and
programs, the Company shall provide equivalent benefits.
8. Outplacement. Subject to Section 6, upon termination of a Plan
Member pursuant to Section 4, the Company shall, in addition to the payments
provided for in Section 5, provide, during the twelve months following the
Date of Termination, the services of a reputable outplacement organization,
including telephone and office expenses incurred in seeking new employment.
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<PAGE>
<PAGE>
9. No Mitigation. No Plan Member shall be required to mitigate the
amount of any payment provided for under this Plan by seeking other employment
or otherwise, nor shall the amount of any payment so provided for be reduced
by any compensation earned by any Plan Member as the result of employment by
another employer, by retirement benefits or by offset against any amount
claimed to be owed by him to the Company.
10. Successors. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and assets of the Company, by a written
agreement, to expressly assume and agree to carry out the provisions of this
Plan in the same manner and to the same extent that the Company would be
required to carry them out if no such succession had occurred.
11. Notice. Any notice expressly provided for under this Plan shall be
in writing, shall be given either manually or by mail, telegram, telex,
telefax or cable, and shall be deemed sufficiently given, if and when received
by the Company at its offices at 5 Garret Mountain Plaza, West Paterson, New
Jersey 07424 Attention: Secretary, or by any Plan Member at his address on
the records of the Company, or if an when mailed by registered mail, postage
prepaid, return receipt requested, addressed to the Company or the Plan Member
to be notified at such address. Either the Company or any Plan Member may,
by notice to the other, change its address for receiving notices.
12. Funding. All payments provided for under this Plan for Plan Members
(including those who have retired) shall not be funded or secured, and no
trust shall be created hereunder. Payments under the Plan shall become fully
vested and nonforfeitable upon the termination of a Plan Member's employment
within two years after a Change in Control, except for a termination where the
Plan Member would not be entitled to income continuation payments as provided
in Section 4.
13. Amendment and Termination. The Board of Directors may at any time
or from time to time amend or terminate this Plan, including but not limited
to the reduction or termination after the termination of a Plan Member's
employment of any non-vested benefit hereunder; provided, however, that no
such amendment or termination may adversely affect any vested benefits
hereunder; and, provided further, that after a Change in Control, this Plan
may not be amended without the consent of all persons who were Plan Members
as of the date of such Change in Control (including those who have retired).
14. Governing Law. This Plan, and the rights and obligations of the
Company and the Plan Members hereunder, shall be construed and governed in
accordance with the law of the State of New Jersey.
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<PAGE>
15. Partial Invalidity. If any provision of this Plan is determined
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect the remaining provisions of this Plan, which shall remain in effect
in accordance with its terms.
55
CYTEC INDUSTRIES INC.
Employee Income Continuity Plan
Effective Date October 21, 1994
(as amended February 16, 1995 and May 13, 1996)
1. Purpose. The purpose of this Employee Income Continuity Plan (this Plan)
is to (i) aid in the recruiting and retention of employees, particularly during
periods of uncertainty, and (ii) build and reinforce the loyalty, and enhance
the morale, of employees by demonstrating that the Company has made provision
for continuing their income for a limited period of time if they lose their
employment within a certain period after a Change in Control, thereby
contributing to the overall success of the Company.
2. Definitions. Unless the context otherwise requires, the following terms
shall have the meanings respectively indicated:
(a) "Base Monthly Compensation" means, (i) in the case of a Plan
Member who is compensated on an hourly basis, the amount determined by (x)
multiplying such person's base hourly rate (i.e. excluding overtime, shift
differential and the like) by (y) One Hundred Seventy-Three and One-Third
(i.e. equivalent to Forty hours times Fifty-two weeks, divided by Twelve
months), and (ii) in the case of other Plan Members, the base monthly
compensation actually paid to such employee plus (x) in the case of a Plan
Member who is eligible to participate in the I.C. Plan, one-twelfth of the
Annual Bonus applicable to such Plan Member, based on his job level and
annual compensation, or (y) in the case of a salesman who is regularly
compensated through a sales incentive program, one-twelfth of his Annual
Sales Incentives. As used in this paragraph "Annual Bonus" means the
greater of (i) the annual target bonus under the I.C. Plan attributable to
the Plan Member or (ii) said annual target bonus times a fraction
equivalent to the average percentage of said annual target bonus paid to
said Plan Member for each of the two preceding fiscal years of the Company
(or for such lesser period of time as such Plan Member participated in the
I.C. Plan); and "Annual Sales Incentive" means the greater of (i) the
annual cash sales incentives such Plan Member would earn by meeting "base
or target" sales results or (ii) said annual cash sales incentives times a
fraction equivalent to the average percentage of said annual cash sales
incentives paid to said Plan Member for each of the two preceding fiscal
years of the Company.
(b) "Board of Directors" shall mean the board of directors of Cytec
Industries Inc.
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<PAGE>
(c) "Cause" shall mean (A) the willful and continued failure by a Plan
Member substantially to perform his duties with the Company (other than any
such failure resulting from his incapacity due to physical or mental
illness) after a demand for substantial performance is delivered to him by
the Company which specifically identifies the manner in which the Company
believes that he has not substantially performed his duties, or (B) the
willful engaging by him in conduct demonstrably injurious to the Company.
For purposes of this definition, no act, or failure to act,on the part of a
Plan Member shall be considered "willful" unless done, or omitted to be
done, by him without reasonable belief that his action or omission was in
the best interests of the Company and was lawful.
(d) A "Change in Control" shall be deemed to have occurred if: (i) any
"person", as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or
more (except as specifically provided below) of the combined voting power
of the Company's then outstanding securities; or (ii) there occurs any
transaction or action which results in the individuals who at the beginning
of a period commencing 24 hours prior to the commencement of the
transaction were members of the Board of Directors, together with
individuals subsequently elected to the Board upon the recommendation of a
majority of the continuing directors, ceasing to constitute at least a
majority thereof; or (iii) the stockholders or the Board of Directors of
the Company approve a definitive agreement to merge or consolidate the
Company with or into another corporation (including any such transaction in
which the Company is the surviving corporation), or to sell or otherwise
dispose of all or substantially all of its assets, or to adopt a plan of
liquidation of the Company. Notwithstanding clause (i) above, beneficial
ownership by a financial institution of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities shall not constitute a Change in Control if, at the
first Board of Directors meeting occurring five days or more after the
Company receives written notice of such event, and prior to the occurrence
of an event described in clause (ii)above, the Board of Directors adopts a
resolution to the effect that such ownership does not constitute a Change
in Control; provided that (x) such a resolution shall not remain in effect
for any further five percent (5%) increase in such financial institution's
beneficial ownership, unless the Board of Directors so determines in
accordance with a further resolution adopted by
57
<PAGE>
the Board of Directors in accordance with the procedures set forth in this
sentence, (y) such resolution may be revoked by the Board of Directors at
any time; and (z) the Board of Directors may place any additional or more
stringent conditions on its determination that such event does not
constitute a Change in Control.
(e) "Company" shall mean Cytec Industries Inc. and, except for the
purposes of paragraph (d) of this Section, shall include any of its
subsidiaries which employs members of this Plan.
(f) "Compensation Committee" shall mean the Compensation and
Management Development Committee as constituted from time to time of the
Board of Directors, or such other body as shall have similar authority and
responsibility.
(g) "Date of Termination" shall mean (A) if the employment of a Plan
Member is terminated by his death, the date of his death, (B) if such
employment is terminated by his Retirement, the date of such Retirement,
(C)if such employment is terminated for Disability, upon the expiration of
his continuous service credits as determined by the Company, (D) if his
employment is terminated by him for Good Reason, the date specified in the
Notice of Termination, and (E) if his employment is terminated for any
other reason, the date on which Notice of Termination is given; provided
that if within 30 days after any Notice of Termination is given the party
receiving such notice notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement
of the parties or by a final judgment, order or decree of a court of
competent jurisdiction(the time for appeal therefrom having expired and no
appeal having been perfected).
(h) "Disability" shall mean inability of a Plan Member due to sickness
or injury to perform the duties pertaining to his occupation with the
Company, as determined in accordance with the Company's Long-Term
Disability Plan and personnel policies.
(i) "Executive Committee" shall mean the Executive Committee of Cytec
Industries Inc. as elected from time to time by the Board of Directors, or
such other body as shall have similar authority and responsibility.
(j) "Good Reason" shall mean:
(A) a reduction in the base salary of such Plan Member as the
same may be increased from time to time;
(B) in the case of individuals who, at the time of a Change in
Control are eligible to participate in the I.C. Plan, a failure to
continue the I.C. Plan (or a plan
58
<PAGE>
<PAGE>
providing substantially similar benefits) as the same may be modified
from time to time but in a form not less favorable than as of the date
of adoption of this Plan, or a failure to continue a Plan Member as a
participant in the I.C. Plan on a basis consistent with the basis on
which the I.C. Plan is administered as of such date.
(C) a failure to pay to a Plan Member any portion of his current
or deferred compensation within seven days after the date such
compensation is due;
(D) requiring such Plan Member to be based at another location
not within 25 miles of such location where he was regularly employed
immediately prior to the Change in Control except for required travel
on business to an extent substantially consistent with his duties and
responsibilities, or in the event of consent to any such relocation of
the base location of a Plan Member the failure to pay (or provide
reimbursement for) all expenses of such Plan Member incurred relating
to a change of principal residence in accordance with the applicable
personnel policies of the Company in effect as of the date of adoption
of this Plan;
(E) the failure to continue in effect any benefit or compensation
plan (including but not limited to the Retirement Plan, the Long-Term
Disability Plan, the I.C. Plan, any sales incentive plan, stock option
and performance stock/cash features of the 1993 Stock Award and
Incentive Plan (or of any subsequent and/or substitute plan)), the
Employees Savings and Profit Sharing Plan, pension plan (including but
not limited to any Supplemental or ERISA Excess Retirement Plan), life
insurance plan, health and accident plan, disability or vacation plan
in which such Plan Member is participating or the taking of any action
which would adversely affect such Plan Member's participation in, or
materially reduce his benefits under, any of such plans, unless such
action is required pursuant to law or unless substantially similar
benefits are continued in the aggregate under other plans, programs or
arrangements;
(F) the failure to obtain the assumption of or an agreement to
carry out the terms of this Plan by any successor as contemplated in
Section 7; or
(G) Any purported termination of a Plan Member's employment which
is not effected pursuant to a Notice of Termination.
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<PAGE>
(k) "I.C. Plan" means the existing system of annual cash bonuses
payable to Company employees (including Plan Members), pursuant to which
annual target bonuses are established based upon job levels and payments
of bonuses as a percentage of such targets are made based upon
Company, business group and individual performance.
(l) "Notice of Termination" shall mean a notice which indicates the
specific basis for termination of employment relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide
such basis.
(m) "Plan Member" shall mean a person who is included in the
membership of this Plan as provided in Section 3.
(n) "Retirement" shall mean termination of employment in accordance
with the provisions of the Retirement Plan.
(o) "Retirement Plan" means any qualified defined benefit pension plan
of the Company or its subsidiaries under which the Plan Member has accrued
a retirement benefit (whether or not vested).
(p) "Service", as used in Section 5 of this Plan, shallmean service as
a full time employee of the Company or one of its subsidiaries and, in the
case of any person who became such an employee on January 1, 1994, shall
include any period of service ending December 31, 1993 as a full time
employee of American Cyanamid Company or one of its subsidiaries.
(q) "Special Change in Control" shall have the same meaning as "Change
in Control" except that each reference to "20%" in clause (i) of the
definition of "Change in Control" shall be replaced with "50%".
The masculine pronoun wherever used herein shall include the feminine
except as the context specifically indicates.
3. Membership. Each person who is employed by the Company or a subsidiary
thereof on a full-time basis in the United States of America, or outside the
United States as provided in the last sentence of this section, for a regular
fixed compensation (other than on a retainer or compensation for temporary
employment) or on an hourly basis where the employee regularly works at least
thirty (30) hours per week shall be a Plan Member; provided that (i)persons who
are Plan Members of either the Key Manager Income Continuity Plan or the
Executive Income Continuity Plan shall not be Plan Members of this Plan and
(ii) a person who is a member of a collective bargaining unit which
has not negotiated to participate in this Plan shall be excluded from
participation. Subject to the prior sentence, employees in job levels
10 and above (or equivalent thereto) outside of the United States shall
also be Plan Members.
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<PAGE>
4. Termination of Employment. Each Plan Member shall be entitled to receive
the income continuation payments provided for in Section 5 upon termination of
his employment within two years after a Change in Control, unless such
termination is (a) because of his death, Disability or Retirement, (b) by the
Company for Cause, or (c) by such Plan Member other than for Good Reason.
5. Income Continuation. (a) Subject to the provisions of Sections 4 and 6,
upon termination of the employment within the two-year period following a
Change in Control, a Plan Member shall be paid the greater of the amount
determined under clause (i) or (ii) of the following formula:
(i) a Plan Member shall be paid one fourth of a month's Base Monthly
Compensation for each full year of service (calculated by including the
Notice Period in the length of service) to a maximum of six months' Base
Monthly Compensation; plus
If age and service Additional
Equals Severance
------------------- ----------------------
60 but less than 63 1 month's Base Monthly
Compensation
63 but less than 66 2 months' Base Monthly
Compensation
66 but less than 69 3 months' Base Monthly
Compensation
69 but less than 72 4 months' Base Monthly
Compensation
72 but less than 75 5 months' Base Monthly
Compensation
75 but less than 78 6 months' Base Monthly
Compensation
78 but less than 81 7 months' Base Monthly
Compensation
81 but less than 84 8 months' Base Monthly
Compensation
84 but less than 87 9 months' Base Monthly
Compensation
87 but less than 90 10 months' Base Monthly
Compensation
90 or more 11 months' Base Monthly
Compensation; or
(ii) A Plan Member classified as "non-exempt" under the wage and hour
provisions of the Fair Labor Standards Act, shall be paid two months Base
Monthly Compensation, and a Plan Member classified as "exempt" under such
Act and within the job levels set forth below, shall be paid the months of
Base Monthly Compensation set forth opposite such Plan Member's job level
on the following table:
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Job Level Severance
--------- ---------
1 - 2 Two months' Base Monthly Compensation
3 - 8 Three months' Base Monthly Compensation
9 - 13 Six months' Base Monthly Compensation
14 and above Nine months' Base Monthly Compensation
In addition to the severance payments provided for under clause(i) or (ii)
above, if the Plan Member's age plus Service equals or exceeds 75 (minimum
age 50 and minimum Service 20 years), a monthly payment of $500 per month
will be made commencing with the month following the final severance
payment under clause (i) or (ii), as the case may be, and continuing until
the earlier of the seventh anniversary of the date of termination or age
62.
(b) All payments under paragraph (a) shall be made on the first day of each
month commencing with the first day of the first month after such date.
Notwithstanding the foregoing, (i) no payment shall be made with respect to any
period beyond the date of a Plan Member's 65th birthday, (ii) no payment shall
be made with respect to any period beyond the date of a Plan Member's 60th
birthday, or such earlier date of Retirement as shall have been determined by
the Compensation Committee or the Executive Committee under the Executive
Supplemental Employees Retirement Plan if such Plan Member is also, at the date
of termination of his employment, a member of the Executive Supplemental
Employees Retirement Plan, and (iii) there shall be deducted from any payments
required hereunder (w) any payments made with respect to any required notice
period under any employment agreement between a Plan Member and the Company or
one of its subsidiaries,(x) any payments required to be made in accordance with
applicable law on account of such termination,including any payments in lieu of
notice under the Worker Adjustment and Retaining Act, (y) any payments made to
the Plan Member under any severance plan or program of the Company or one of its
subsidiaries, including Personal Policy Memorandum No. 8 (and any successor
thereto) and (z) any payments received by the Plan Member under the Company's
Long Term Disability Plan or under any short term disability plan or program of
the Company during the period with respect to which income continuation is
computed.
(c) With respect to payments hereunder to Plan Members who are employees of
subsidiaries, the Company will cause the respective subsidiaries to make the
payments.
6. Other Benefits. (a) The Company shall maintain in full force and effect,
for the continued benefit of each Plan Member entitled to receive payments
pursuant to Section 5, for the period of income continuation following his Date
of Termination, participation in the Company's medical plan, on the same basis
as such Plan Member participated immediately prior to the Date of Termination;
provided that if the Plan Member's continued participation is not permitted
under the general terms of such plan, the Company will provide equivalent
benefits.
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(b) Upon termination of a Plan Member pursuant to Paragraph 4 following a
Special Change in Control the Company shall, in addition to the payments
provided for in Section 5, provide outplacement services commensurate with the
Plan Member's position and responsibilities.
7. No Mitigation. No Plan Member shall be required to mitigate the amount
of any payment provided for under this Plan by seeking other employment or
otherwise, nor shall the amount of any payment so provided for be reduced by any
compensation earned by any Plan Member as the result of employment by another
employer, by retirement benefits or by offset against any amount claimed to be
owed by him to the Company.
8. Successors. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and assets of the Company, by a written
agreement, to expressly assume and agree to carry out the provisions of this
Plan in the same manner and to the same extent that the Company would be
required to carry them out if no such succession had occurred.
9. Notice. Any notice expressly provided for under this Plan shall be in
writing, shall be given either manually or by mail, telegram, telex, telefax or
cable, and shall be deemed sufficiently given, if and when received by the
Company at its offices at 5 Garret Mountain Plaza, West Paterson, New Jersey
07424 Attention: Secretary, or by any Plan Member at his address on the records
of the Company, or if and when mailed by registered mail, postage prepaid,
return receipt requested, addressed to the Company or the Plan Member to be
notified at such address. Either the Company or any Plan Member may, by notice
to the other, change its address for receiving notices.
10. Funding. All payments provided for under this Plan for Plan Members
(including those who have retired) shall not be funded or secured, and no trust
shall be created hereunder. Payments under the Plan shall become fully vested
and nonforfeitable upon the termination of a Plan Member's employment within
two years after a Change in Control, except for a termination where the Plan
Member would not be entitled to income continuation payments as provided in
Section 4. Rights hereunder shall not vest prior to a Change in Control.
11. Amendment and Termination. The Board of Directors may at any time or
from time to time amend or terminate this Plan; provided, however, that no such
amendment or termination may adversely affect any vested benefits hereunder;
and, provided further, that after a Change in Control, this Plan may not be
amended without the consent of all persons who were Plan Members as of the
date of such Change in Control (including those who have retired).
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12. Governing Law. This Plan, and the rights and obligations of the Company
and the Plan Members hereunder, shall be construed and governed in accordance
with the law of the State of New Jersey, to the extent not pre-empted by
federal law.
13. Partial Invalidity. If any provision of this Plan is determined to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the remaining provisions of this Plan, which shall remain in effect in
accordance with its terms.
14. Administration
(a) The Vice President, Employee Resources of the Company from time to time
is hereby designated Administrator as defined in the Employee Retirement Income
Security Act (the "Act"), and shall have the powers and duties of such specified
in the Act. The Board of Directors, by resolution, may revoke such designations
at any time, and appoint a replacement Administrator. The Administrator of the
Plan from time to time is also hereby designated Named Fiduciary with respect to
the Plan, with full authority to control and manage the operation and
administration of the Plan. The Administrator may serve and act in more than one
fiduciary capacity with respect to the Plan.
(b) Subject to Section 14(a), the Administrator shall have primary
authority and responsibility for the operation of the Plan and supervision of
those persons designated as hereinafter specified to perform duties with respect
to its administration and operation. The duties of the Administrator as Named
Fiduciary shall include, by way of illustration and not by way of limitation,
the following:
(i) He shall establish, communicate to all interested parties, review
and modify as appropriate, funding objectives consistent with the
requirements of the Plan and the Act [delete since not funded?];
(ii) He shall maintain such records in such form and detail as he
shall deem advisable which shall be necessary or appropriate for the
efficient management and operation of the Plan in accordance with the
requirements of the Act;
(iii) He shall make and enforce such rules and regulations as he shall
deem necessary or proper for the efficient operation and administration of
the Plan;
(iv) He shall interpret the Plan and decide any and all matters
arising hereunder, including, without limitation, determination of
eligibility and benefits, and shall have the right to remedy possible
ambiguities, inconsistencies or omissions herein, and his decision or
action in respect thereof shall be conclusive and binding upon all persons,
provided, however, that all such interpretations and decisions shall be
applied in a uniform manner to all persons similarly situated;
64
<PAGE>
(v) He shall employ such advisors (including but not limited to
attorneys, independent public accountants and actuaries) and such technical
and clerical personnel as may be required in his discretion for the proper
operation and administration of the Plan, including the development, review
and, as necessary, modification of the funding objectives of the Plan
[delete since not funded?]; and (vi) He may designate, in his discretion,
other fiduciaries (who may be individuals or committees) with respect to
the Plan, and allocate to such fiduciaries such of the Administrator's
powers (including the appointment of advisors) and responsibilities (other
than responsibilities of the Administrator pursuant to paragraphs (g) and
(h) of this Section) with respect to the operation and administration of
the Plan as he shall deem appropriate.
(c) In carrying out his powers, duties and responsibilities under this
Section, the Administrator and every other person charged with responsibilities
with respect to the Plan will be entitled to rely conclusively upon all tables,
valuations, certificates, opinions and reports which will be furnished by any
actuary, accountant, counsel or other advisor.
(d) All decisions, directions and actions of the Administrator or any
designated fiduciary in the exercise of their respective fiduciary
responsibilities and powers hereunder shall be communicated or published, to the
extent necessary, in writing by the Administrator or by a person designated by
him, except as otherwise specified in the Plan, and any person shall be entitled
to rely on any communication of any person so designated as having been
authorized by the Administrator or the designated fiduciary (if any) to whom
responsibility with respect thereto has been given. Any person dealing with the
Administrator or with any agent or representative thereof shall be entitled to
rely upon a certificate of the Administrator as to the identity and authority
of any such designated fiduciary.
(e) Any persons, including any person claiming benefits under the Plan,
desiring to communicate with the Administrator or any fiduciary shall direct
such communication or claim to the Administrator in care of the Employee
Benefits Department of his employer.
(f) Written notice of claim must be given to the Administrator within the
time periods established by the Administrator. Notice given by or on behalf of
the Plan Member to the Administrator and directed to the Administrator in care
of the Employee Benefits Department of his Employer,with information sufficient
to identify the Plan Member, shall be deemed notice to the Administrator. The
Administrator, upon receipt of a notice of claim, will furnish to the claimant
such forms as are usually furnished by the Administrator for filing claims. If
such forms are not furnished within fifteen days after the giving of such
notice, the claimant shall be deemed to have complied with the requirements of
the Plan as to claims upon submitting, within the time fixed in the filing
65
<PAGE>
proofs of claim, written evidence covering the occurrence,the character and the
extent of the event for which claims is made. Written proof of claim covered by
the Plan must be furnished to the Administrator within the time period
established by the Administrator. Failure to furnish such proof within the time
required shall not invalidate or reduce any claim if it was not reasonably
possible to give proof within such time, provided such proof is furnished as
soon as reasonably possible.
(g) If any claim for benefits is denied in whole or in part, the
Administrator shall notify the claimant thereof in writing within 90 days after
submission of such claim. Such 90-day period may be extended for a further 90
days by written notice to the claimant from the Administrator prior to the end
of the initial 90-day period indicating the special circumstances requiring an
extension of time and the date by which the Administrator expects to render a
decision. A written notice denying a claim shall contain:
(i) the specific reason or reasons for the denial;
(ii) a specific reference to the provisions of the Plan or other
relevant records or papers on which such denial is based and information
as to where such documents may be inspected;
(iii) a description of any additional material or information
necessary for such person to perfect such claim, and an explanation of why
such material or information is necessary; and
(iv) an explanation of the Plan's claims appeal procedure as
hereinafter set forth.
(h) Every claimant whose claim has been denied in whole or in part, and any
authorized representative of such person, may request to see any of the
documents pertinent to such denial and, within 60 days after receipt by such
claimant of the written notice denying such claim, may request,in writing, that
the Administrator review the denial and submit written issues and comments to
the Administrator for consideration as part of such review. No claimant or
representative shall have any right to appear personally before the
Administrator, nor shall the Administrator be obligated to hold any meetings
with any claimant or representative, or hold any hearings, as part of such
review. The Administrator shall conduct such review as expeditiously as
reasonably possible, and shall give due consideration to all written issues and
comments submitted by or on behalf of such claimant. A decision on such review
shall be made not later than 60 days after the request for such review, or, in
special circumstances, and upon written notice to the claimant, not later than
120 days after receipt of such request. Such decision shall be in writing and
shall include specific reasons for the decision, written in a manner calculated
to be understood by the claimant, and shall also include specific references to
the pertinent Plan provisions on which the decision is based.
66
CYTEC SUPPLEMENTAL EMPLOYEES' RETIREMENT PLAN
(As amended May 13, 1996)
Effective as of January 1, 1994, Cytec Industries Inc. (the "Company")
hereby establishes the Cytec Supplemental Employees' Retirement Plan (the
"Plan"). The Plan is intended to constitute an unfunded pension plan maintained
primarily for a select group of management or highly compensated employees which
is exempt from Parts 2, 3, and 4 of Title I of the Employee Retirement Income
Security Act of 1974, as amended. The Plan makes up the amount of the accrued
benefits which cannot be provided under the Cytec Past Service Retirement Plan
and the Cytec Salaried and Nonbargaining Employees' Retirement Plan as a result
of the limitation on the amount of compensation which can be taken into account
under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the
"Code") and includes in the calculation of compensation all such income in the
year in which it would have otherwise been credited for purposes of determining
benefits, even if receipt is deferred until a subsequent year. The Plan is not a
qualified plan under the Code and benefits are paid by or on behalf of the
Employer.
The Plan is intended to replace that portion of the American Cyanamid
Company and Subsidiaries ERISA Excess Retirement Plan (the Cyanamid Excess
Plan") which provided benefits in excess of the limits imposed by Section
401(a)(17) of the Code. Pursuant to the Transfer and Distribution Agreement
dated December 17, 1993 between
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American Cyanamid Company and Cytec Industries Inc., the Plan assumes such
excess liabilities attributable to employees of the Company and certain
subsidiaries of the Company covered by the Cyanamid Excess Plan on December 31,
1993 who became employees of an Employer on January 1, 1994.
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ARTICLE I
Definitions
1.1 "Actuarial Equivalent" means an amount or benefit of equal value based
on the interest rate used by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of lump sum distributions on plan
terminations, as the same is in effect from time to time, and the 1971 TPF&C
Forecast Mortality Table (or, at the discretion of the Pension Administration
Committee, the most recent version of such table) with employee ages set back
one year and beneficiary ages set back five years.
1.2 "Board of Directors" means the Board of Directors of Cytec Industries
Inc.
1.3 "Compensation Committee" means the Compensation and Management
Development Committee of the Board of Directors, and any successor thereto.
1.4 "Eligible Employee" means any person employed by the Employer who is a
participant in the Employees' Retirement Plan and/or the Past Service Plan and
whose vested benefits payable under either or both of the Retirement Plans are
subject to the Section 401(a)(17) Limitation in any Plan Year.
1.5 "Employees' Retirement Plan" means the Cytec Salaried and
Nonbargaining Employees' Retirement Plan, as amended from time to time.
1.6 "Employer" shall mean the Company, D Aircraft Products, Inc., Cytec
Engineered Materials Inc., any successor thereto, and
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any of the Company's subsidiaries which adopts the Plan with the
consent of the Board of Directors.
1.7 "Member" means an Eligible Employee who becomes a Member pursuant to
Article II.
1.8 "Normal Retirement Date" means the Normal Retirement Date as defined in
the Employees' Retirement Plan.
1.9 "Past Service Plan" means the Cytec Past Service Retirement Plan.
1.10 "Pension Administration Committee" means the Pension Administration
Committee created by the Board of Directors, and any successor thereto.
1.11 "Pension Plan Benefit" means the aggregate annual retirement benefit
payable to or on account of a Member from the Retirement Plans.
1.12 "Plan" means this Cytec Supplemental Employees' Retirement Plan, as
set forth herein, as amended from time to time.
1.13 "Plan Year" means each twelve (12) consecutive month period commencing
each January 1 and ending on the following December 31.
1.14 "Retirement Plans" means the Past Service Plan and the Employees'
Retirement Plan.
1.15 "Section 401(a)(17) Limitation" means the limit on the amount of
compensation which can be taken into account under Section 401(a)(17) of the
Code, as adjusted from time to time by
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the Secretary of Treasury, for purposes of computing the accrued benefits
which can be paid from the Retirement Plans.
1.16 "Section 415 Limitation" means the limitation under Section 415 of the
Code on annual benefits payable from the Retirement Plans.
1.17 "SERP Benefit" shall mean the annual retirement benefit payable
pursuant to the terms of this Plan.
1.18 "Special Change in Control" means "Change in Control" as defined in
the Employees' Retirement Plan, except that the reference to "20%" in
subsection (i) of the definition in such plan shall be replaced with "50%".
1.19 "Years of Service" means Years of Service as defined under the
Employees' Retirement Plan, which includes Years of Service credited for
purposes of the Past Service Plan.
1.20 For purposes of this Plan, unless the context requires otherwise, the
masculine includes the feminine, the singular the plural, and vice-versa. Any
reference to a "Section" or "Article" shall mean the indicated section or
article of this Plan unless otherwise specified.
ARTICLE II
Participation
An Eligible Employee shall become a Member upon appointment by the
Compensation Committee.
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ARTICLE III
SERP Benefit
3.1 Amount of SERP Benefit
Each Member who qualifies for a normal, early or deferred Pension Plan
Benefit under the Retirement Plans shall be entitled to a SERP Benefit provided
that he is credited with at least five Years of Service on the date of his
retirement. The amount of a Member's SERP Benefit shall be equal (a) minus (b)
as follows:
(a) the Member's Pension Plan Benefit, expressed as a
straight life annuity with no ancillary benefits, which
would have been payable to the Member under the
Retirement Plans absent the Section 401(a)(17)
Limitation and the Section 415 Limitation with respect
to compensation in excess of the Section 401(a)(17)
Limitation, and including in the definition of
compensation under the Retirement Plans all
compensation when it would have otherwise been credited
for purposes of determining benefits, even if receipt
is deferred to a subsequent year; provided, however,
that deferred compensation paid in a subsequent year
shall not again be included as compensation for
purposes of computing the SERP Benefit hereunder; minus
(b) the sum of the Member's Pension Plan Benefit,
expressed as a straight life annuity with no ancillary
benefits, and the Member's annual benefit under the
Cytec Excess Retirement Plan, if any.
3.2 Benefits Upon Reemployment
If a Member is rehired after he is entitled to a SERP Benefit his SERP
Benefit shall not be paid during such period of reemployment prior to Normal
Retirement Date, but shall commence or resume not sooner than the first day
of the month following his subsequent retirement or separation. The SERP
Benefit payable
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after his subsequent retirement or separation shall be the benefits earlier
applicable, plus any additional benefits computed in accordance with Section
3.1 insofar as additional employment entitled him to additional benefits.
ARTICLE IV
Vesting
A Member shall become vested in his SERP Benefit in accordance with the
same schedule and rules as are applicable in determining when he becomes
vested in his Pension Plan Benefit.
ARTICLE V
Death Benefits
A surviving spouse shall be entitled to the same survivor annuity as
provided for under the Employees' Retirement Plan. No other pension death
benefit shall be payable under this Plan if a Member dies while eligible to
retire under Article II and at such time, the Member has a preretirement
survivor annuity in effect under the Employees' Retirement Plan. The Member's
surviving spouse or contingent annuitant entitled to receive the preretirement
survivor annuity under the Employees' Retirement Plan shall receive a benefit
calculated pursuant to Section 3.1 hereof and adjusted in accordance with the
option elected by the Member. A SERP Benefit payable to a beneficiary under
this Plan upon the death of a Member will cease at the same time the
survivor benefit is terminated under the Employees' Retirement Plan. If a
Member
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has waived preretirement survivor annuity coverage under the Employees'
Retirement Plan, no death benefit shall be payable hereunder.
ARTICLE VI
Form of Payment
6.1 Form and Time
Except as provided in Section 6.2, a Member's SERP Benefit payable under
Article III of this Plan will be paid the same form and beginning at the same
time as the Member's Pension Plan Benefit under the Employees' Retirement Plan.
A Member's designation of a joint annuitant and/or beneficiary under the
Employees' Retirement Plan will also apply to SERP Benefits under this Plan.
6.2 Special Change in Control
If there occurs a Special Change in Control, then notwithstanding any
election hereunder or under the Employees' Retirement Plan, the Company shall
pay forthwith to the Member (unless such amounts are paid under the Executive
Supplemental Employees' Retirement Plan) in a single lump sum an amount equal
to the full amount of the Actuarial Equivalent as of the date of such
payment of such Member's (i) SERP Benefit hereunder and (ii) Excess Benefit
under the Excess Retirement Benefit Plan, such payment under clause (ii)
being made in consideration of the relinquishment by the Member of the
related benefit under the Excess Retirement Benefit Plan. Notwithstanding
Section 1.1 of this Plan or of the Excess Retirement Benefit Plan, as the
case may be, "Actuarial
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Equivalent," for purposes of this Section 6.2 shall be based on a single
life using (A) an interest rate (on the day preceding the Member's last day of
employment) equal to sixty (60%) percent of the average of (i) the 10-year
Treasury Bond yield plus eight- tenths of one percent per annum, and (ii) the
30-year Treasury Bond yield plus 1.5% per annum; and (B) the mortality table
(including the set back of ages) specified in Section 1.1.
ARTICLE VII
Administration
7.1 Pension Administration Committee
The Pension Administration Committee shall supervise the daily management
and administration of the Plan. The members of the Pension Administration
Committee shall serve without compensation.
7.2 Responsibilities and Powers of the Pension Administration Committee
The Pension Administration Committee shall have the responsibility:
(a) To administer the Plan in accordance with the terms hereof, and to
exercise all powers specifically conferred upon the Pension Administration
Committee hereby or necessary to carry out the provisions thereof.
(b) To construe this Plan, which construction shall be conclusive, correct
any defects, supply omissions, and reconcile inconsistencies to the extent
necessary to effectuate the Plan.
(c) To keep all records relating to Members of the Plan and such other
records as are necessary for proper operation of the Plan.
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7.3 Operation of the Pension Administration Committee
In carrying out the Pension Administration Committee's functions
hereunder:
(a) The Pension Administration Committee may adopt rules and regulations
necessary for the administration of the Plan and which are consistent with the
provisions hereof.
(b) All acts and decisions of the Pension Administration Committee shall
be approved by a majority of the members of the Pension Administration
Committee and shall apply uniformly to all Members in like circumstances.
Written records shall be kept of all acts and decisions.
(c) The Pension Administration Committee may authorize one or more of its
members to act on its behalf. The Pension Administration Committee may also
delegate, in writing,any of its responsibilities and powers to an individual(s)
who is not a Pension Administration Committee member.
(d) The Pension Administration Committee shall have the right to hire, at
the expense of the Employer,such professional assistants and consultants as it,
in its sole discretion,deems necessary or advisable, including, but not limited
to, accountants, actuaries, consultants,counsel and such clerical assistance as
is necessary for proper discharge of its duties.
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7.4 Indemnification
In addition to any other indemnification that a fiduciary, including but
not limited to a member of the Pension Administration Committee or Compensation
Committee, is entitled to, the Employer shall indemnify such fiduciary from all
claims for liability, loss or damage (including payment of expenses in
connection with defense against such claim) arising from any act or failure to
act which constitutes a breach of such individual's fiduciary responsibilities
with respect to this Plan under any aspects of the law.
ARTICLE VIII
Miscellaneous
8.1 Benefits Payable by the Employer
All benefits payable under this Plan constitute an unfunded obligation of
the Employer. Payments shall be made, as due, from the general funds of the
Employer. The Employer, at its option, may maintain one or more bookkeeping
reserve accounts to reflect its obligations under the Plan and may make such
investments as it may deems desirable to assist it in meeting with obligations.
Nothing contained in this Section 8.1 shall limit the ability of the Employer
to pay benefits hereunder through a Rabbi Trust. Any such investments shall be
assets of the Employer subject to claims of its general creditors. No person
eligible for a benefit under this Plan shall have any right, title to interest
in any such investments.
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8.2 Amendment or Termination
(a) The Board of Directors reserves the right to amend, modify, or restate
or terminate the Plan; provided, however, that no such action by the Board of
Directors shall reduce a Member's SERP Benefit accrued as of the time thereof.
The provisions of this Section prohibiting an action by the Board of Directors
which would reduce a Member's accrued SERP Benefit cannot be amended without
the consent of all Members (including those who have retired). Any amendment
to the Plan shall be made in writing by the Board of Directors, with or without
a meeting, or shall be made in writing by the Pension Administration Committee
or Compensation Committee, to the extent that Board of Directors has
specifically delegated the authority to make such amendment to the Plan the
Pension Administration Committee or Compensation Committee.
(b) If the Plan is terminated, a determination shall be made of each
Member's SERP Benefit as of the Plan termination date (determined in accordance
with Section 8.2(a)).The amount of such benefits shall be payable to the Member
at the time it would have been payable under Article VI if the Plan had not
been terminated. No interest shall be credited on a SERP Benefit.
8.3 Status of Employment
Nothing herein contained shall be construed as conferring any rights upon
any Member or any person for a continuation of employment, nor shall it be
construed as limiting in any way the right of the Employer to discharge any
Member or to treat him
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without regard to the effect which such treatment might have upon him as a
Member of the Plan.
8.4 Payments to Minors and Incompetents
If a Member or beneficiary entitled to receive any benefit hereunder is a
minor or is deemed by the Pension Administration Committee or is adjudged to be
legally incapable of giving valid receipt and discharge for such benefits, they
will be paid to the duly appointed guardian of such minor or incompetent or to
such other legally appointed person as the Pension Administration Committee
might designate. Such payment shall, to the extent made, be deemed a complete
discharge of any liability for such payment under the Plan.
8.5 Inalienability of Benefits
The right of any person to any benefit or payment under the Plan shall not
be subject to voluntary or involuntary transfer, alienation or assignment, and,
to the fullest extent permitted by law, shall not be subject to attachment,
execution, garnishment, sequestration or other legal or equitable process. In
the event a person who is receiving or is entitled to receive benefits under
the Plan attempts to assign, transfer or dispose of such right, or if an
attempt is made to subject said right to such process, such assignment,
transfer or disposition shall be null and void.
8.6 Governing Law
Except to the extent pre-empted by federal law, the provisions of the Plan
will be construed according to the laws of the State of New Jersey.
79
CYTEC EXECUTIVE SUPPLEMENTAL EMPLOYEES' RETIREMENT PLAN
(As amended May 13, 1996)
Effective as of January 1, 1994, Cytec Industries Inc. (the "Company")
hereby establishes the Cytec Executive Supplemental Employees' Retirement Plan
(the "Plan"). The Plan is intended to constitute an unfunded pension plan
maintained primarily for a select group of management or highly compensated
employees which is exempt from Parts 2, 3, and 4 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. The Plan is not a qualified
plan under the Code and benefits are paid by or on behalf of the Company.
The Plan replaces the American Cyanamid Company and Subsidiaries
Supplemental Employees Retirement Plan (the"Cyanamid SERP") for those employees
of the Company who were covered by the Cyanamid SERP on December 31, 1993.
Pursuant to the Transfer and Distribution Agreement dated December 17, 1993
between American Cyanamid Company and Cytec Industries Inc., the Plan assumes
the liabilities such attributable to employees of the Company covered by the
Cyanamid SERP on December 31, 1993 who became employees the Company on January
1, 1994.
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ARTICLE I
Definitions
1.1 "Actuarial Equivalent" means an amount or benefit of equal value based
on the interest rate used by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of lump sum distributions on plan
terminations, as the same is in effect from time to time, and the 1971 TPF&C
Forecast Mortality Table (or, at the discretion of the Pension Administration
Committee, the most recent version of such table) with employee ages set back
one year and beneficiary ages set back five years.
1.2 "Company" means Cytec Industries Inc.
1.3 "Board of Directors" means the Board of Directors of Cytec Industries
Inc.
1.4 "Cause" means (a) the willful and continued failure by a Member
substantially to perform his duties with the Employer (other than any such
failure resulting from his incapacity due to physical or mental illness) after a
demand for substantial performance is delivered to him by the Employer which
specifically identifies the manner in which the Employer believes that he has
not substantially performed his duties, or (b) the willful engaging by him in
conduct demonstrably injurious to the Employer.For purposes of this definition,
no act, or failure to act, on the part of the Member shall be considered
"willful" unless done, or omitted to be done, by him without reasonable belief
that his action or omission was in the best interests of the Employer and was
lawful.
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1.5 "Change in Control" has the same meaning as under the Employees'
Retirement Plan.
1.6 "Compensation Committee" means the Compensation and Management
Development Committee of the Board of Directors.
1.7 "Compensation" means base compensation as defined in the Employees'
Retirement Plan plus actual cash bonuses paid to a Member pursuant the IC Plan
up to 1/3 of base Compensation, except to the extent Section 3.1 requires use of
Target ICP, without consideration of the limit on compensation under Section
401(a)(17) of the Internal Revenue Code of 1986, as amended, and including all
Compensation which would have otherwise been paid but for the fact that receipt
is deferred to a subsequent year; provided, however, that deferred Compensation
paid in a subsequent year shall not again be included as Compensation for
purposes of computing benefits hereunder and; provided further that for purposes
of determining Compensation for the year of a Member's termination of employment
and for any projected Years of Service, reference to a Member's "salary or
wages" (in Section 1.14 of the Employees' Retirement Plan) at September 1 or at
the "prior September 1" shall be deemed to refer, instead, to a Member's final
salary rate immediately prior to termination of employment.
1.8 "Cyanamid Excess Plan" means the American Cyanamid Company and
Subsidiaries ERISA Excess Retirement Plan as in effect on December 31, 1993.
1.9 "Cyanamid SERP" means the American Cyanamid Company and Subsidiaries
Supplemental Employees Retirement Plan as in effect on December 31, 1993.
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1.10 "Eligible Employee" means any officer or other key employee employed
by an Employer who is a participant in the Employees' Retirement Plan and has
at least ten Years of Service.
1.11 "Employees' Retirement Plan" means the Cytec Salaried and
Nonbargaining Employees' Retirement Plan, as amended from time to time.
1.12 "Employer" means the Company, D Aircraft Products, Inc., Cytec
Engineered Materials Inc., any successor thereto, and any of the Company's
subsidiaries which adopts the Plan with the consent of the Board of Directors.
1.13 "Excess Plan" means the Cytec Excess Retirement Benefit Plan.
1.14 "Executive Committee" means the Executive Committee of the Company as
provided for in the resolutions adopted by the Board of Directors.
1.15 "Good Reason" has the same meaning as under the Executive Income
Continuity Plan.
1.16 "Grandfathered Participant" means an Eligible Employee included on the
Grandfathered Participant Schedule adopted by the Compensation Committee who (a)
had an accrued benefit under the Cyanamid SERP on December 31, 1993, or (b) the
Compensation Committee elects to grandfather status and grants an accrued
benefit under this Plan equal to the benefit the Eligible Employee would have
had under the Cyanamid SERP on December 31, 1993 if the Eligible Employee had
been a member of the Cyanamid SERP on such date.
1.17 "IC Plan" means the existing system of annual cash bonuses payable to
Company employees pursuant to which annual
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target bonuses are established based upon job levels and payments of bonuses
as a percentage of such targets are made based upon Company, business group
and individual performance.
1.18 "Member" means an Eligible Employee who becomes a Member pursuant to
Article II.
1.19 "Normal Retirement Date" means the Normal Retirement Date as defined
in the Employees' Retirement Plan.
1.20 "Officer" means the Chairman, any Vice Chairman, President, and any
Vice President, Treasurer and Controller of Cytec Industries Inc. chosen by its
Board of Directors.
1.21 "Past Service Plan" means the Cytec Past Service Retirement Plan.
1.22 "Pension Administration Committee" means the Pension Administration
Committee created by the Board of Directors, and any successor thereto.
1.23 "Pension Plan Benefit" means the aggregate annual retirement benefit
payable to or on account of a Member from the Retirement Plans.
1.24 "Plan" means this Cytec Executive Supplemental Employees' Retirement
Plan, as set forth herein, as amended from time to time.
1.25 "Plan Benefit" means the amount of a Member's annual retirement
benefit computed in accordance with the terms of this Plan.
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1.26 "Plan Year" means each twelve (12) consecutive month period
commencing each January 1 and ending on the following December 31.
1.27 "Retirement Plans" means the Past Service Plan and the Employees'
Retirement Plan.
1.28 "SERP" means the Cytec Supplemental Employees' Retirement Plan.
1.29 "Special Change in Control" shall have the same meaning as "Change in
Control", except that the reference to "20%" in subsection (i) of the definition
of "Change in Control" in the Employees' Retirement Plan shall be replaced with
"50%".
1.30 "Target ICP" shall mean target incentive compensation under the IC
Plan applicable to the job level of such Member as of the date the Member
retires, irrespective of the amount, if any, of such compensation actually
received by the Member.
1.31 "Years of Service" means Years of Service as defined under the
Employees' Retirement Plan, which includes Years of Service credited for
purposes of the Past Service Plan.
1.32 For purposes of this Plan, unless the context requires otherwise, the
masculine includes the feminine, the singular the plural, and vice-versa. Any
reference to a "Section" or "Article" shall mean the indicated section or
article of this Plan unless otherwise specified.
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ARTICLE II
Participation
2.1 Election
An Eligible Employee will become a Member effective as of the date the
Compensation Committee approves the election of the Eligible Employee to
participate in the Plan. A Grandfathered Participant will become a Member
effective as of the date the Compensation Committee approves his election to
Grandfathered Participant status; provided, however, a Grandfathered Participant
willnot accrue any benefits under this Plan in excess of those set forth on the
Grandfathered Participant Schedule. If the Compensation Committee approves the
election of a Grandfathered Participant to participate in the Plan as a full
Member, the Grandfathered Participant shall cease to be a Grandfathered
Participant and shall not be entitled to the benefit set forth on the
Grandfathered Participant Schedule, but shall instead accrue benefits in
accordance with the formula set forth in Section 3.1 for Members who are not
Grandfathered Participants.
2.2 Change in Control
Upon the occurrence of a Change in Control, each Officer (including an
Officer who has not yet completed ten (10) Years of Service) shall become,
automatically, a full Member, and any Officer who was previously a Grandfathered
Participant shall cease to be a Grandfathered Participant and shall be entitled
to the Plan Benefit paid under Section 3.1 to Members who are not Grandfathered
Participants.
2.3 Continuance of Participation
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After an individual becomes a Member of this Plan, his membership shall
continue until his death, the termination by the Member of his employment other
than by retirement hereunder, the termination by the Company of his employment
for Cause, or the date his Employer ceases to be a member of the controlled
group of corporations which includes the Company; provided that after a Change
in Control his membership shall continue until his death or until the
termination of his employment for Cause.
ARTICLE III
Plan Benefit
3.1 Amount of Plan Benefit
The amount of a Member's Plan Benefit shall be equal to A plus B plus C,
except that a Member who is only a Grandfathered Participant shall be entitled
only to the Plan Benefit specified in D, as follows:
A. 1.33% x the Member's Compensation for each Year of Service after
December 31, 1993, including Target ICP for those years that Target
ICP exceeded 1/3 base Compensation and which is in excess of the
amount payable under Section 3.1(b)(2) of the Employees' Retirement
Plan and under the provisions of the Excess Plan and the SERP which
provide for the related excess and supplemental benefits; plus
B. 1.33% x the number of projected Years of Service to age 65 (not to
exceed 5) x the Member's final year of Compensation, including Target
ICP; plus
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C. 1.67% x years of service credited under the American Cyanamid Compan y
Employees' Retirement Plan as of December 31, 1993 x final average
Compensation inclu ding Target ICP, where final average Compensation
equals the Member's aver age annual Compensation including Target ICP
based on the three calendar years out of the last ten calendar years
prior to January 1, 2004 which yields the highest average; minus the
sum of the Member's accrued benefits under the Past Service Plan and
under the "roll-up" formula of Section 3.1(b)(1) of the Employees'
Retirement Plan (including any portion of such "roll-up" benefit which
is payable under the Excess Plan and/or the SERP), before Social
Security offset; or
D. In the case of a Member who is only a Grandfathered Participant, the
Grandfathered Participant's accrued benefit, if any, as reflected on
the Grandfathered Participant Schedule.
There is no reduction under paragraphs A, B, C or D above for early
commencement for benefits commencing on or after a Member's attainment of age 60
or commencing at any earlier date if a Member's employment is terminated within
two years after a "Change in Control" as defined in the Employees' Retirement
Plan; provided that such Member's employment is terminated either (i) by
the Employer or (ii) by the Member for Good Reason. The amounts payable
pursuant to paragraphs A, B, C or D are subject to reduction for commencement
prior to age 60 in accordance with the
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terms of the Employees' Retirement Plan, except as provided in the
prior sentence in the case of a Change in Control, or unless the Committee,
in its discretion, decides not to apply the early retirement reduction factors
to all or any component of the Member's benefit.
For purposes of preventing a reduction for early commencement of benefits
when and as provided above, there shall be added to the amounts payable to a
Member (other than a Grandfathered Participant) under paragraph A, B, or C
above, or to the amounts payable to a Grandfathered Participant under Paragraph
D, above, respectively, the amount of any reduction for early commencement in
such Member's benefits under the related provisions of the Past Service Plan,
the Employees' Retirement Plan, the Excess Plan and the SERP, as the case may
be, which occurs at an age where such a reduction does not occur under this
Section 3.1.
For purposes of Paragraphs A, B and C above, a Member shall have five
projected Years of Service (except that service shall not be projected beyond
age 65), except that prior to a "Change in Control", in the case of a Member who
is an executive officer of the Company at the time of his retirement, the
Compensation Committee may, in its discretion, decrease the number of projected
Years of Service to be taken into account, and in the case of any other Member,
the Executive Committee may, in its discretion, decrease the number of projected
Years of Service to be taken into account.
In no event shall the sum of the benefits payable under this Plan, the
SERP, the Excess Plan and the Retirement Plans be greater than the sum of the
benefits payable under the Cyanamid SERP, the
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Cyanamid Excess Plan and the American Cyanamid Company Employees' Retirement
Plan based on the terms of those plans in effect on December 31, 1993 and
assuming the Member had instead continued in service with American
Cyanamid Company until his retirement based on his Compensation and
additional Years of Service (including projected service) with an
Employer.
3.2 Benefits Upon Reemployment
If a Member is rehired after he is entitled to an Plan Benefit, his Plan
Benefit shall not be paid during such period of reemployment prior to Normal
Retirement Date, but shall commence or resume not sooner than the first day of
the month following his subsequent retirement or separation and the Plan Benefit
payable after his subsequent retirement or separation shall be the benefits
earlier applicable, plus any additional benefits computed in accordance with
Section 3.1 insofar as additional employment entitled him to additional
benefits.
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ARTICLE IV
Vesting
A Member's Plan Benefit shall be fully vested at all times; provided,
however, that Plan Benefits hereunder are subject to divestment and shall be
forfeited if the Member's employment with the Employer is terminated for Cause.
ARTICLE V
Death Benefits
5.1 Standard Death Benefit
A Member may elect any preretirement survivor annuity option pursuant to
Article VII of the Employees' Retirement Plan. If a Member does not make a
separate preretirement annuity election under this Plan, the preretirement
survivor annuity election of the Member under the Employees' Retirement Plan
shall determine how the Plan Benefit hereunder is paid in the event of the
Member's death prior to retirement.
If a Member dies prior to retiring and at such time has a preretirement
survivor annuity election in effect under this Plan, (or under the Employees'
Retirement Plan if no election is made under this Plan), the Member's surviving
spouse or contingent annuitant as designated in the preretirement survivor
annuity election shall receive a benefit calculated pursuant to Section 3.1
adjusted in accordance with the option elected by the Member, as if such Member
had retired on the date of his death (irrespective of whether such Member was
eligible to retire on such date) and had survived to the first day of the
month immediately following his
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60th birthday (if such date is subsequent to his actual date of death).
5.2 Special Death Benefit
If a Grandfathered Participant or an Eligible Employee designated by the
Compensation Committee or the Executive Committee as eligible for benefits
pursuant to this Section dies, and if, on the date of the death of such
Employee, (i) the sum of his age and Years of Service under the Employees'
Retirement Plan equal 65, (ii) there is in effect with respect to such Employee
a payment option under the Employees' Retirement Plan pursuant to which payments
are to be made, on account of the death of such Employee while an Employee, to
the surviving spouse of such Employee, and (iii) such spouse survives such
Employee, there shall be payable to such surviving spouse a benefit calculated
in accordance with Section 3.1 as if the Employee had elected a joint and 50%
survivor annuity option under the Employees' Retirement Plan, had retired on the
date of his death (irrespective of whether such Employee was eligible to retire
on such date) and had survived to the first day of the month immediately
following his 60th birthday (if such date is subsequent to his actual date of
death).
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ARTICLE VI
Form and Time of Payment
6.1 Time of Payment
A Member's Plan Benefit payable under Article III of this Plan will be paid
beginning at the same time as the Member's Pension Plan Benefit under the
Employees' Retirement Plan, except as provided in Section 6.3. A Member may
retire under this Plan on the first day of any month following the date he
becomes a Member, provided that his employment with the Employer has been
terminated for other than Cause. Except as provided in Section 6.3, payment of
the Member's Plan Benefit shall commence on the later of (i) the date of his
retirement, or (ii) the first day of the month following his 60th birthday (55th
birthday if the Member's employment is terminated within two years after a
Change in Control, either by the Member for Good Reason or by the Employer) or
such earlier date (but not prior to attainment of age 55) as shall have been
approved by the Compensation Committee for any Member who is an executive
officer of the Company at any time during the calendar year in which he retires
or by the Executive Committee for any other Member.
6.2 Form of Payment
Except as provided in Section 6.3, a Member may elect to have his Plan
Benefit paid in any of the optional forms offered under Article VI of the
Employees' Retirement Plan. For such purpose, the Member may designate a
different form of payment, joint annuitant and/or beneficiary under this Plan
then under the Employees' Retirement Plan. The amount of the Plan Benefit
shall
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be adjusted and determined in accordance with those provisions of the
Employees' Retirement Plan governing optional forms.
6.3 Special Change in Control
If there occurs a Special Change in Control, then notwithstanding any
election hereunder or under the Employees' Retirement Plan, the Company shall
pay forthwith to the Member in a single lump sum an amount equal to the full
amount of the Actuarial Equivalent as of the date of such payment of such
Member's (i) Plan Benefit hereunder, (ii) SERP Benefit under the SERP, and (iii)
Excess Benefit under the Excess Plan, such payments under clause (ii) and (iii)
being made in consideration of the relinquishment by the Member of the related
benefits under the SERP and the Excess Plan. Notwithstanding Section 1.1 of this
Plan, or of the SERP or of the Excess Plan, as the case may be, "Actuarial
Equivalent," for purposes of this Section 6.3 shall be based on a single life
using (A) an interest rate (on the day preceding the Member's last day of
employment) equal to sixty (60%) percent of the average of (i) the 10-year
Treasury Bond yield plus eight-tenths of one percent per annum, and (ii) the
30-year Treasury Bond yield plus 1.5% per annum; and (B) the mortality table
(including the set back of ages) specified in Section 1.1.
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ARTICLE VII
Administration
7.1 Pension Administration Committee
The Pension Administration Committee shall supervise the daily management
and administration of the Plan. The members of the Pension Administration
Committee shall serve without compensation.
7.2 Responsibilities and Powers of the Pension Administration Committee and
Compensation Committee
(a) The Pension Administration Committee shall have the responsibility:
(i) To administer the Plan in accordance with the terms hereof, and to
exercise all powers specifically conferred upon the Pension Administration
Committee hereby or necessary to carry out the provisions thereof; and
(ii) To keep all records relating to Members of the Plan and such
other records as are necessary for proper operation of the Plan.
(b) The Compensation Committee shall be responsible for construing this
Plan, which construction shall be conclusive, correcting any defects, supplying
omissions, and reconciling inconsistencies to the extent necessary to effectuate
the Plan.
7.3 Operation of the Pension Administration Committee
In carrying out the Pension Administration Committee's functions hereunder:
(a) The Pension Administration Committee may adopt rules and regulations
necessary for the administration of the Plan and which are consistent with the
provisions hereof.
(b) All acts and decisions of the Pension Administration
Committee shall be approved by a majority of the members of the
Pension Administration Committee and shall apply uniformly to all
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Members in like circumstances. Written records shall be kept of all acts
and decisions.
(c) The Pension Administration Committee may authorize one or more of its
members to act on its behalf. The Pension Administration Committee may also
delegate, in writing, any of its responsibilities and powers to an individual(s)
who is not a Pension Administration Committee member.
(d) The Pension Administration Committee shall have the right to hire, at
the expense of the Employer, such professional assistants and consultants as it,
in its sole discretion, deems necessary or advisable, including, but not limited
to, accountants, actuaries, consultants, counsel and such clerical assistance as
is necessary for proper discharge of its duties.
7.4 Indemnification
In addition to any other indemnification that a fiduciary, including but
not limited to a member of the Pension Administration Committee, the
Compensation Committee or the Executive Committee, is entitled to, the Employer
shall indemnify such fiduciary from all claims for liability, loss or damage
(including payment of expenses in connection with defense against such claim)
arising from any act or failure to act which constitutes a breach of such
individual's fiduciary responsibilities with respect to this Plan under any
aspects of the law.
ARTICLE VIII
Miscellaneous
8.1 Benefits Payable by the Employer
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All benefits payable under this Plan constitute an unfunded obligation of
the Employer. Payments shall be made, as due, from the general funds of the
Employer. The Employer, at its option, may maintain one or more bookkeeping
reserve accounts to reflect its obligations under the Plan and may make such
investments as it may deems desirable to assist it in meeting with obligations.
Nothing contained in this Section 8.1 shall limit the ability of the Employer to
pay benefits hereunder through a Rabbi Trust. Any such investments shall be
assets of the Employer subject to claims of its general creditors. No person
eligible for a benefit under this Plan shall have any right, title to interest
in any such investments.
8.2 Amendment or Termination
(a) The Board of Directors reserves the right to amend, modify, or restate
or terminate the Plan; provided, however, that no such action by the Board of
Directors shall reduce a Member's Plan Benefit accrued as of the time thereof.
The provisions of this Section prohibiting an action by the Board of Directors
which would reduce a Member's accrued Plan Benefit cannot be amended without the
consent of all Members (including those who have retired). Any amendment to the
Plan shall be made in writing by the Board of Directors, with or without a
meeting, or shall be made in writing by the Pension Administration Committee,
the Compensation Committee or the Executive Committee, to the extent that Board
of Directors has specifically delegated the authority to make such
amendment to the Plan the Pension Administration Committee, the
Compensation Committee or the Executive Committee.
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(b) If the Plan is terminated, a determination shall be made of each
Member's Plan Benefit as of the Plan termination date (determined in accordance
with Section 8.2(a)). The amount of such benefits shall be payable to the Member
at the time it would have been payable under Article VI if the Plan had not been
terminated. No interest shall be credited on a Plan Benefit.
8.3 Status of Employment
Nothing herein contained shall be construed as conferring any rights upon
any Member or any person for a continuation of employment, nor shall it be
construed as limiting in any way the right of the Employer to discharge any
Member or to treat him without regard to the effect which such treatment might
have upon him as a Member of the Plan.
8.4 Payments to Minors and Incompetents
If a Member or beneficiary entitled to receive any benefits hereunder is a
minor or is deemed by the Pension Administration Committee or is adjudged to be
legally incapable of giving valid receipt and discharge for such benefits, they
will be paid to the duly appointed guardian of such minor or incompetent or to
such other legally appointed person as the Pension Administration Committee
might designate. Such payment shall, to the extent made, be deemed a complete
discharge of any liability for such payment under the Plan.
8.5 Authorized Payments
The Pension Administration Committee may at any time and from time to time
require, as a condition precedent to making or authorizing the payment of any
benefit hereunder, evidence of the prospective payee's right to receive such
payment. Without
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limiting the generality of the foregoing, the Pension
Administration Committee may require evidence of the date of birth of any
Member, contingent annuitant or beneficiary, or of survival of a contingent
annuitant or beneficiary.
8.6 Inalienability of Benefits
The right of any person to any benefit or payment under the Plan shall not
be subject to voluntary or involuntary transfer, alienation or assignment, and,
to the fullest extent permitted by law, shall not be subject to attachment,
execution, garnishment, sequestration or other legal or equitable process. In
the event a person who is receiving or is entitled to receive benefits under the
Plan attempts to assign, transfer or dispose of such right, or if an attempt is
made to subject said right to such process, such assignment, transfer or
disposition shall be null and void.
8.7 Adjustment of Benefits
If the date of birth or other data deemed by the Pension Administration
Committee to be vital, with respect to any Member, contingent annuitant or
beneficiary shall be misstated, the Pension Administration Committee may limit
the amount and date of payment of benefits to any such person, his contingent
annuitant and/or other beneficiary (whether or not such person shall have
theretofore retired in accordance with the Plan) to the reduced benefits which
would be payable in accordance with the correct information. In such case,
payments of benefits made subsequent to the date of discovery of any such
misstatement shall be adjusted for any excess or deficiency (based upon the
correct facts) in the amount of benefits theretofore paid to such person, his
contingent annuitant and/or other beneficiary.
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8.8 Commuting of Benefits
Notwithstanding any other provision of the Plan, the Pension Administration
Committee may, in its sole discretion, commute into one or more payments the
Plan Benefit of any Member (i) the present value of which, calculated by using
the interest rate then used by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of the lump sum distribution on plan
terminations, is not more than $3,500, or (ii) to any Member's contingent
annuitant or other beneficiary upon the request of and the showing of need by
such contingent annuitant or other beneficiary.
8.9 Governing Law
Except to the extent pre-empted by federal law, the provisions of the Plan
will be construed according to the laws of the State of New Jersey.
100
CYTEC SUPPLEMENTAL SAVINGS AND PROFIT SHARING PLAN
(As amended May 13, 1996)
Effective as of November 1, 1994, Cytec Industries Inc. (the "Company")
hereby establishes the Cytec Supplemental Savings and Profit Sharing Plan. The
Cytec Supplemental Savings and Profit Sharing Plan is intended to constitute an
unfunded pension plan maintained primarily for a select group of management or
highly compensated employees which is exempt from Parts 2, 3, and 4 of Title I
of the Employee Retirement Income Security Act of 1974, as amended. The purpose
of the Cytec Supplemental Savings and Profit Sharing Plan is to provide certain
participants in the Cytec Employees' Savings and Profit Sharing Plan whose
compensation exceeds the limit of Section 401(a)(17) of the Internal Revenue
Code of 1986, as amended, with the ability to receive the full employer matching
contribution and profit sharing contribution which is otherwise limited by
applicable law. The Cytec Supplemental Savings and Profit Sharing Plan is not a
qualified plan under the Code and benefits are paid by or on behalf of the
Company.
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ARTICLE I
Definitions
1.1 "Account Balance" means the sum of the Member's salary deferrals,
matching contributions, profit sharing contributions and interest credited
thereon in accordance with the terms of this Plan.
1.2 "Administrator" means the Vice President of Employee Resources of the
Company, or any other person or committee selected from time to time by the
Board of Directors.
1.3 "Board of Directors" means the Board of Directors of Cytec Industries
Inc.
1.4 "Change in Control" has the same meaning as under the Employees'
Retirement Plan.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Company" means Cytec Industries Inc.
1.7 "Compensation" means compensation as defined in the Savings Plan
without consideration of the limit on compensation under Section 401(a)(17) of
the Code.
1.8 "Eligible Employee" means any person employed by the Employer who is a
participant in the Savings Plan and whose Compensation exceeded the limit on
compensation under Section 401(a)(17) of the Code during the calendar year.
1.9 "Employees' Retirement Plan" means the Cytec Salaried and Nonbargaining
Employees' Retirement Plan, as amended from time to time.
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1.10 "Employer" means the Company, D Aircraft Products, Inc., Cytec
Engineered Materials Inc., any successor thereto, and any of
the Company's subsidiaries which adopts the Plan with the consent of the Board
of Directors.
1.11 "Member" means an Eligible Employee who becomes a Member pursuant to
Article II.
1.12 "Plan" means this Cytec Supplemental Savings and Profit Sharing Plan,
as set forth herein, as amended from time to time.
1.13 "Plan Year" means each twelve (12) consecutive month period commencing
each January 1 and ending on the following December 31.
1.14 "Savings Plan" means the Cytec Employees' Savings and Profit Sharing
Plan, as amended from time to time.
1.15 "Special Change in Control" shall have the same meaning as "Change in
Control" except that the reference to "20%" in subsection (i) of the definition
of "Change in Control" in the Employees' Retirement Plan shall be replaced with
"50%."
1.16 "Years of Service" means Years of Service as defined under the Savings
Plan.
1.17 For purposes of this Plan, unless the context requires otherwise, the
masculine includes the feminine, the singular the plural, and vice-versa. Any
reference to a "Section" or "Article" shall mean the indicated section or
article of this Plan unless otherwise specified.
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<PAGE>
ARTICLE II
Participation
2.1 Election
An Eligible Employee will become a Member effective as of the date a profit
sharing contribution is credited to his account pursuant to Article IV or he
elects to defer a portion of his Compensation to this Plan pursuant to Article
III.
2.2 Continuance of Participation
After an Eligible Employee becomes a Member of this Plan, his membership
shall continue until his death, the termination of his employment, or the date
his Employer ceases to be a member of the controlled group of corporations which
include the Company; provided that termination of membership shall not affect
the Eligible Employee's right to be credited with any matching and profit
sharing contributions to be made with respect to his period of employment.
ARTICLE III
Savings Contributions
3.1 Deferral Election
During the sixty day period prior to the commencement of each Plan Year or
during the period designated by the Administrator prior to November 1, 1994, a
Member may elect to defer up to 4% of his Compensation less the first 4% of the
Member's contributions to the Savings Plan for that Plan Year whether made on a
before-tax or
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after-tax basis. A Member may not modify his deferral election during the Plan
Year other than to revoke his election for the balance of the Plan Year. A
Member's initial deferral election shall be deemed to apply to all succeeding
calendar years until changed by the Member during a subsequent election period.
3.2 Matching Contribution
With respect to any Member who makes a deferral election pursuant to
Section 3.1, the Company shall credit to his account a matching contribution
equal to 75% of the amount contributed by the Member pursuant to Section 3.1.
Matching contributions under this Section shall be credited at the same time the
monthly matching contributions are contributed to the Savings Plan.
ARTICLE IV
Profit Sharing Contributions
Each Eligible Employee who has not made a deferral election pursuant to
Section 3.1 and each Member shall receive a Profit Sharing Contribution equal to
the amount of the profit sharing contribution that would have been made on the
Member's behalf under the Savings Plan without respect to the limitations
imposed by the Code for that Plan Year, minus the amount actually contributed on
his behalf under the Savings Plan for that Plan Year.
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ARTICLE V
Interest Credits
Any amounts credited to a Participant's Account Balance under Articles III
and IV shall be credited with interest from the date the amount is credited to
the Participant's account to the date the Member receives a final distribution
of his Account Balance. Interest shall be computed on Account Balances as of the
last day of each calendar quarter and shall be credited as of such dates based
upon the average daily balance during the quarter and the 10 year Treasury Note
rate in effect on the last business day of the quarter, plus 1%.
ARTICLE VI
Vesting
A Member's Account Balance attributable to matching and profit sharing
contributions shall vest in accordance with the rules of the Savings Plan;
provided, however, that in the event of a Change in Control a Member shall
immediately become fully vested in his Account Balances. Account Balances
attributable to a Member's salary deferrals under Section 3.1 shall be fully
vested at all times.
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ARTICLE VII
Death Benefits
Upon the death of the Member, his entire Account Balance shall become fully
vested and shall be paid to his designated beneficiary. If the Member fails to
designate a beneficiary, the Account Balance shall be distributed to the
Member's estate.
ARTICLE VIII
Form and Time of Payment
8.1 Time of Payment
The Member's Account Balance shall be distributed in sixty quarterly
installments following retirement, on the final day of each calendar quarter.
Each payment shall equal the Member's Account Balance as of the end of the
applicable quarter divided by the number of installment payments remaining in
the sixty quarter period, less any applicable withholding, provided that a
shorter installment period will be utilized in order to assure that no
installment, other than the final installment, will be less than $1000. A Member
may, by written request to the Administrator, request acceleration of all
remaining installments at any time after retirement and prior to receipt of the
last installment.
8.2 Special Change in Control
Notwithstanding Section 8.1, if there occurs a Special Change in Control,
the Member's Account Balance as of the date of such Special Change in Control
(or, if later, as of the date of distribution) will be distributed
immediately in a single lump sum.
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Such distribution will include interest, computed at the rate set forth in
Article V based on the actual proportion of the calendar quarter completed
as of the date of distribution and as if the date of distribution were the
last business day of such calendar quarter. Such distribution shall not
affect the Member's continuing membership in this Plan under Section 2.2.
ARTICLE IX
Administration
9.1 Administrator
The Administrator shall supervise the daily management and administration
of the Plan. The Administrator shall serve without compensation.
9.2 Responsibilities and Powers of the Administrator and Compensation
Committee The Administrator shall have the responsibility:
(a) To administer the Plan in accordance with the terms hereof, and
to exercise all powers specifically conferred upon the Administrator
hereby or necessary to carry out the provisions thereof;
(b) To keep all records relating to Members of the Plan and such
other records as are necessary for proper operation of the Plan; and
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(c) To construe this Plan, which construction shall be conclusive,
correct any defects, supply omissions, and reconcile inconsistencies to the
extent necessary to effectuate the Plan.
9.3 Operation of the Administrator
In carrying out the Administrator's functions hereunder:
(a) The Administrator may adopt rules and regulations necessary for the
administration of the Plan and which are consistent with the provisions hereof;
(b) Written records shall be kept of all acts and decisions;
(c) The Administrator may also delegate, in writing, any of its
responsibilities and powers to an individual(s) who is not a fiduciary; and
(d) The Administrator shall have the right to hire, at the expense of the
Employer, such professional assistants and consultants as he, in his sole
discretion, deems necessary or advisable, including, but not limited to,
accountants, actuaries, consultants, counsel and such clerical assistance as is
necessary for proper discharge of his duties.
9.4 Indemnification
In addition to any other indemnification that a fiduciary, including but
not limited to the Administrator, is entitled to, the Employer shall indemnify
such fiduciary from all claims for liability, loss or damage (including payment
of expenses in connection with defense against such claim) arising from any act
or failure to act which constitutes a breach of such individual's
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fiduciary responsibilities with respect to this Plan under any aspects of the
law.
ARTICLE X
Miscellaneous
10.1 Benefits Payable by the Employer
All benefits payable under this Plan constitute an unfunded obligation of
the Employer. Payments shall be made, as due, from the general funds of the
Employer or, if applicable, from a grantor trust established by the Employer.
The Employer, at its option, may maintain one or more bookkeeping reserve
accounts to reflect its obligations under the Plan and may make such invest-
ments as it may deem desirable to assist it in meeting with obligations. Any
such investments shall be assets of the Employer subject to claims of its
general creditors. No person eligible for a benefit under this Plan shall
have any right, title to interest in any such investments.
10.2 Amendment or Termination
(a) The Board of Directors reserves the right to amend, modify, or restate
or terminate the Plan; provided, however, that no such action by the Board of
Directors shall reduce a Member's Account Balance as of the time thereof. The
provisions of this Section prohibiting an action by the Board of Directors which
would reduce a Member's Account Balance cannot be amended without the consent of
all Members (including those who have retired). Any amendment to the Plan shall
be made in writing by the Board of
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Directors, with or without a meeting, or shall be made in writing by the
Administrator, to the extent that Board of Directors has specifically delegated
the authority to make such amendment to the Administrator.
(b) If the Plan is terminated, a determination shall be made of each
Member's Account Balance as of the Plan termination date (determined in
accordance with Section 10.2(a)). The amount of such benefits shall be
immediately payable to the Member.
10.3 Status of Employment
Nothing herein contained shall be construed as conferring any rights upon
any Member or any person for a continuation of employment, nor shall it be
construed as limiting in any way the right of the Employer to discharge any
Member or to treat him without regard to the effect which such treatment might
have upon him as a Member of the Plan.
10.4 Payments to Minors and Incompetents
If a Member or beneficiary entitled to receive any benefits hereunder is a
minor or is deemed by the Administrator or is adjudged to be legally incapable
of giving valid receipt and discharge for such benefits, they will be paid to
the duly appointed guardian of such minor or incompetent or to such other
legally appointed person as the Administrator might designate. Such payment
shall, to the extent made, be deemed a complete discharge of any liability for
such payment under the Plan.
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10.5 Inalienability of Benefits
The right of any person to any benefit or payment under the Plan shall not
be subject to voluntary or involuntary transfer, alienation or assignment, and,
to the fullest extent permitted by law, shall not be subject to attachment,
execution, garnishment, sequestration or other legal or equitable process. In
the event a person who is receiving or is entitled to receive benefits under the
Plan attempts to assign, transfer or dispose of such right, or if an attempt is
made to subject said right to such process, such assignment, transfer or
disposition shall be null and void.
10.6 Governing Law
Except to the extent pre-empted by federal law, the provisions of the Plan
will be construed according to the laws of the State of New Jersey.
112
CYTEC INDUSTRIES INC. AND SUBSIDIARIES Exhibit 11(a)
Earnings Per Share Computations
(Millions of Dollars or Shares, except per share amounts)
Three Months Ended
June 30, 1996
Fully
Primary Diluted
Net earnings available for common stockholders $25.4 $25.4
____ ____
____ ____
Weighted average number of shares of common stock
outstanding during the period exclusive of
the following: 48.0 48.0
Common stock equivalents:
Restricted stock .3 .3
Non qualified stock options 2.0 2.0
____ ____
Adjusted weighted average number of shares of
common stock outstanding during the period 50.3 50.3
____ ____
____ ____
Earnings per share $ .51 $ .51
____ ____
____ ____
See Note 2 of the Notes to the Consolidated Financial Statements included
herein for explanation of earnings per share.
113
CYTEC INDUSTRIES INC. AND SUBSIDIARIES Exhibit 11(b)
Earnings Per Share Computations
(Millions of Dollars or Shares, except per share amounts)
Three Months Ended
June 30, 1995
Fully
Primary Diluted
Net earnings $22.6 $22.6
Preferred stock dividend requirements (3.7) (2.1)
____ ____
Net earnings available for common stockholders $18.9 $20.5
____ ____
____ ____
Weighted average number of shares of common
stock outstanding during the period exclusive of
the following: 39.0 39.0
Common Stock equivalents:
Restricted stock .3 .3
Non qualified stock options 1.2 1.2
Assumed conversion of Series B preferred stock - 16.8
____ ____
Adjusted weighted average number of shares of
common stock outstanding during the period 40.5 57.3
____ _____
____ _____
Earnings per share $ .47 $ .36
____ _____
____ _____
See Note 2 of the Notes to the Consolidated Financial Statements included
herein for explanation of earnings per share calculations.
114
CYTEC INDUSTRIES INC. AND SUBSIDIARIES Exhibit 11(c)
Earnings Per Share Computations
(Millions of Dollars or Shares, except per share amounts)
Six Months Ended
June 30, 1996
Fully
Primary Diluted
Net earnings available for common stockholders $48.0 $48.0
____ ____
____ ____
Weighted average number of shares of common
stock outstanding during the period exclusive
of the following: 48.6 48.6
Common Stock equivalents:
Restricted stock .3 .3
Non qualified stock options 2.1 2.1
____ ____
Adjusted weighted average number of shares
of common stock outstanding during the period 51.0 51.0
____ ____
---- ----
Earnings per share $ .94 $ .94
---- ----
---- ----
See Note 2 of the Notes to the Consolidated Financial Statements included
herein for explanation of earnings per share calculations.
115
CYTEC INDUSTRIES INC. AND SUBSIDIARIES Exhibit 11(d)
Earnings Per Share Computations
(Millions of Dollars or Shares, except per share amounts)
Six Months Ended
June 30, 1996
Fully
Primary Diluted
Net earnings $44.7 $44.7
Preferred stock dividend requirements (7.4) (7.4)
---- ----
Net earnings available for common stockholders $37.3 $37.4
---- ----
---- ----
Weighted average number of shares of common stock
outstanding during the period exclusive of
the following: 39.0 39.0
Common stock equivalents:
Performance stock .3 .3
Non qualified stock options 1.2 1.2
Assumed conversion of Series B preferred stock - 16.5
---- ----
Adjusted weighted average number of shares of
common stock outstanding during the period 40.5 57.3
---- ----
---- ----
Earnings per share $ .92 $ .92
---- ----
---- ----
See Note 2 of the Notes to the Consolidated Financial Statements included
herein for explanation of earnings per share calculations.
116
CYTEC INDUSTRIES INC. AND SUBSIDIARIES Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in millions)
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
Earnings before income taxes $44.1 $83.2
Add:
Interest on indebtedness
net of capitalized interest 1.4 2.8
Portion of rents representative
of the interest factor 1.3 2.6
---- ----
Earnings as adjusted $46.8 $88.6
---- ----
---- ----
Fixed charges:
Interest on indebtedness $ 1.7 $ 3.3
Portion of rents representative
of the interest factor 1.3 2.6
---- ----
Fixed charges $ 3.0 $ 5.9
---- ----
---- ----
Ratio of earnings to fixed
charges 15.6 15.0
---- ----
---- ----
For purposes of computing the ratio of earnings to fixed charges (a) earnings
consist of earnings before income taxes which include the Company's share of
pre-tax equity in earnings of associated companies, plus fixed charges less
capitalized interest and (b) fixed charges consist of interest on long-term
debt, plus the portion of rentals representative of an interest factor plus the
Company's share of such charges of associated companies.
117
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>This schedule contains summary financial information extracted from
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-START> JAN-01-1996
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 26,800
<SECURITIES> 0
<RECEIVABLES> 217,400
<ALLOWANCES> 11,400
<INVENTORY> 77,000
<CURRENT-ASSETS> 433,300
<PP&E> 1,333,600
<DEPRECIATION> 743,600
<TOTAL-ASSETS> 1,291,400
<CURRENT-LIABILITIES> 94,300
<BONDS> 0
0
100
<COMMON> 200
<OTHER-SE> 296,700
<TOTAL-LIABILITY-AND-EQUITY> 1,291,400
<SALES> 622,600
<TOTAL-REVENUES> 622,600
<CGS> 444,000
<TOTAL-COSTS> 556,000
<OTHER-EXPENSES> (3,800) <F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,300
<INCOME-PRETAX> 68,100
<INCOME-TAX> 27,900
<INCOME-CONTINUING> 40,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,000 <F2>
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.94
<FN>
<F1> This number represents interest income.
<F2> This number includes equity in net earnings of associated companies
of $7,800,000 for the six months ended June 30, 1996.
</FN>
</TABLE>
