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 September 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 lastest practicable date: 46,431,354 shares
of Common Stock, par value $.01 per share were outstanding at September 30,
1996.
<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 11-16
Part II - Other Information
Item 1. Legal Proceedings 17-18
Item 6. Exhibits and Reports on Form 8-K 19
2
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CYTEC INDUSTRIES INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. - Consolidated Financial Statements
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions of Dollars, except per share amounts)
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $321.7 $320.3 $944.3 $964.0
Manufacturing cost of sales 229.7 234.9 673.7 704.4
Selling and technical services 35.1 33.0 104.9 101.0
Research and process development 9.5 11.7 29.7 33.7
Administrative and general 11.0 11.2 33.1 33.9
_____ _____ _____ _____
Earnings from operations 36.4 29.5 102.9 91.0
Interest and other income (expense), net 2.1 2.6 5.9 6.5
Interest expense .8 .1 3.0 .1
_____ _____ _____ _____
Earnings before income taxes 37.7 32.0 105.8 97.4
Income tax provision 15.5 13.7 43.3 41.9
_____ _____ _____ _____
Earnings before earnings of
associated companies 22.2 18.3 62.5 55.5
Equity in net earnings of associated
companies 3.7 4.1 11.4 11.6
_____ _____ _____ _____
Net earnings 25.9 22.4 73.9 67.1
Dividends on preferred stock - 2.8 - 10.1
_____ _____ _____ _____
Net earnings available for common
stockholders $25.9 $19.6 $73.9 $57.0
_____ _____ _____ _____
_____ _____ _____ _____
Earnings per share
Primary $ .53 $.48 $1.48 $1.40
Fully diluted $ .53 $.37 $1.47 $1.07
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)
<TABLE>
Assets
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
Current assets
Cash and cash equivalents $17.3 $12.0
Accounts receivable, less
allowance for doubtful accounts of
$11.2 and $11.6 in 1996 and 1995,
respectively 217.3 216.8
Inventories 97.8 88.1
Deferred income taxes 78.1 74.5
Other current assets 13.6 12.6
_____ _____
Total current assets 424.1 404.0
Equity in net assets of and advances
to associated companies 143.2 155.1
Plants, equipment and facilities, at cost 1,351.4 1,317.2
Less: accumulated depreciation (764.2) (711.5)
_______ _______
Net plant investment 587.2 605.7
_______ _______
Intangibles resulting from business
acquisitions, net of accumulated
amortization 17.3 18.0
Deferred income taxes 108.1 107.1
Other assets 8.2 3.9
_______ _______
$1,288.1 $1,293.8
_______ _______
_______ _______
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 91.8 $98.3
Accrued expenses 219.0 218.3
Income taxes payable 29.2 1.1
_____ _____
Total current liabilities 340.0 317.7
_____ _____
Long-term debt 69.0 66.0
Other noncurrent liabilities 562.7 567.2
Put warrants 8.3 -
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
- 48,377,683 in 1996 and 50,054,643 in
1995 .5 .2
Additional paid-in capital 223.0 222.6
Retained earnings 191.7 117.8
Unearned compensation (4.5) (2.6)
Additional minimum pension liability (5.4) (5.4)
Accumulated translation adjustments 8.6 10.3
Treasury stock at cost, 1,946,329
shares in 1996 and 6,917 in 1995 (105.9) (.1)
_______ _______
Total stockholders' equity 308.1 342.9
_______ _______
$1,288.1 $1,293.8
_______ _______
_______ _______
See accompanying Notes to Consolidated Financial Statements.
4
</TABLE>
<PAGE>
<TABLE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of dollars)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows provided by (used for) operating
activities
Net earnings $ 73.9 $ 67.1
Non cash items included in net earnings:
Equity in undistributed net earnings of
associated companies (13.6) (15.8)
Depreciation 60.0 61.4
Amortization 6.6 4.9
Deferred income taxes (4.6) (5.6)
Changes in operating assets and liabilities
Accounts receivable (1.6) (17.0)
Inventories (10.1) 6.5
Accounts payable (6.1) (6.3)
Accrued expenses 1.5 5.4
Income taxes payable 31.1 7.8
Other assets (5.2) 12.7
Other liabilities (4.5) (2.4)
_____ _____
Net cash flows provided by operating activities 127.4 118.7
_____ _____
Cash flows provided by (used for) investing
activities
Additions to plants, equipment and
facilities (44.6) (79.0)
Proceeds received on sale of assets 2.0 -
Return of capital from associated companies 25.0 -
Change in investments and advances - 11.5
_____ _____
Net cash used for investing activities (17.6) (67.5)
_____ _____
Cash flows provided by (used for) financing
activities
Purchase of treasury stock (110.8) -
Change in long-term debt 3.0 1.0
Proceeds from exercise of stock options 1.8 1.3
Proceeds received on sale of put warrants 1.7 -
Dividend payments on preferred stock - (12.2)
Purchase of Series A preferred stock - (90.0)
_____ _____
Net cash flows used for financing activities (104.3) (99.9)
______ _____
Effect of exchange rate changes on cash and
cash equivalents (.2) .3
______ _____
Increase (decrease) in cash and cash
equivalents 5.3 (48.4)
Cash and cash equivalents, beginning of period 12.0 97.7
______ _____
Cash and cash equivalents, end of period $ 17.3 $49.3
______ _____
______ _____
See accompanying Notes to Consolidated Financial Statements.
5
</TABLE>
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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 September 30, 1996 and
for the three and nine month periods ended September 30, 1996 and
1995. Such adjustments are of a normal, recurring nature. The
statements of income for the three and nine month periods ended
September 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 nine month periods ended September 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 nine month periods ended September 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 nine months ended September
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)
(3) Inventories
Components of inventories at September 30, 1996 and December 31, 1995
were as follows:
September 30, December 31,
1996 1995
Finished goods $ 81.8 $ 77.4
Work in process 15.7 15.4
Raw materials & supplies 54.1 51.7
______ _____
$151.6 $144.5
Less reduction in LIFO
cost (53.8) (56.4)
______ _______
$ 97.8 $ 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 Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
Net sales $148.9 $154.1 $450.7 $456.6
Gross profit 38.9 40.8 115.1 117.0
Net income 12.9 13.7 41.4 43.8
The Company's share of
net earnings less
taxes provided by the
Company $ 3.7 $ 4.1 $ 11.4 $ 11.6
____ _____ _____ _____
____ _____ _____ _____
(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
7
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except per share amounts)
(5) Contingent Liabilities, Continued
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 September 30, 1996 the
Company was a party to, or otherwise involved in, legal proceedings direc-
ted 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
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.
8
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CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
(5)Contingent Liabilities, Continued
In accordance with the above policies, as of September 30, 1996 and
December 31, 1995, the aggregate environmental related accruals were
approximately $190.7 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 nine
months ended September 30, 1996 and 1995 was $13.1 and $12.9, respectively.
Environmental expenses accrued for the nine month periods ending September
30, 1996 and 1995 were $4.5 and $5.6, 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 environ-
mental 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 of the Company, but could be material to the results of operations
of the Company in any one accounting period.
(6) Other Financial Information
Taxes paid for the nine months ended September 30, 1996 and 1995 were
approximately $37.9 and $37.4, respectively. Interest paid for the nine
months ended September 30, 1996 was approximately $3.1. Interest paid for
the nine months ended September 30, 1995 was considered immaterial.
The Company's ratio of earnings to fixed charges for the three and nine
months ended September 30, 1996 was 11.4 and 13.1, 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
9
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CYTEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of Dollars, except share and per share amounts)
(6)Other Financial Information, Continued
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 of which approximately
885,400 shares were repurchased prior to the three for one stock split in
July of 1996. The remaining authorized balance was adjusted for the stock
split to bring the total shares authorized for repurchase to approximately
3,329,200. Pursuant to this program, for the nine months ended September
30, 1996 the Company repurchased approximately 2,019,300
shares of its common stock on the open market (equivalent to 3,790,100
shares on a post split basis) at a cost of approximately $110.8, leaving
1,309,900 shares remaining authorized to be repurchased. Depending
on the level, price and timing of repurchases, borrowings may be required.
The Company wrote put warrants on 1,500,000 shares of its common stock
(on a post split basis) for which it received premiums of approximately
$1.7 in cash. This resulted in a reclassification of approximately $40.1
from stockholders' equity to put warrants. 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 and nine month
periods ended September 30, 1996, warrants covering 600,000 and
1,200,000 shares, respectively, expired at no cost to the Company.
For the three and nine months ended September 30, 1996 approximately
$16.2 and $31.8, respectively, was reclassified from put warrants to
stockholders' equity. At September 30, 1996, warrants on 300,000
shares remained outstanding with strike prices ranging between
$27 1/6 and $28 1/2 per share on a post 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 remaining maximum
potential repurchase obligation as of September 30, 1996, $8.3, represents
the remaining balance that has been reclassified from stockholders'
equity to put warrants.
10
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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
Third Quarter of 1996 versus Third Quarter of 1995
Net sales for the third quarter of 1996 were $321.7, slightly above the
$320.3 in the third quarter of 1995 as increases in the Specialty businesses
were offset by decreased Building Block sales. International net sales were
38.8% of sales as compared to 39.7% in the third quarter of 1995.
Specialty Chemical net sales increased $3.5 or 1.9%. Sales increased in most
product lines, particularly Paper Chemicals and Water Treating Chemicals.
This is attributable to a mix of growth at existing accounts and new business.
Partially offsetting the gains were decreases in certain products the Company
is in the process of exiting.
Specialty Materials net sales increased $3.8 or 4.9% The largest increase was
in Aerospace Materials as the outlook for that market segment continues to
improve. Acrylic Fiber selling volumes were up, particularly export fiber to
China as this segment starts to show some improvement, although this was
partially offset by lower export fiber selling prices.
Building Block net sales were down $5.9 or 10.3%. Acrylonitrile sales were
down as compared to the third quarter of 1995 as higher selling volumes were
more than offset by lower selling prices. Methanol sales increased over the
prior year period due to higher selling prices.
Manufacturing cost of sales improved to 71.4% of net sales in the third
quarter of 1996 as compared to 73.3% in the like period of 1995. Product mix
improved as the Company continues to de-emphasize lower margin products and
focus on higher technology products. Several cost reduction and plant
efficiency programs also favorably impacted manufacturing cost of sales.
Selling prices were lower in Building Blocks and export Acrylic Fiber while
all other product lines were essentially flat. Raw material costs were
generally lower but the effect of this was more than offset by the much higher
costs for natural gas. Natural gas costs in the third quarter of 1996 have
decreased from second quarter levels although they are still well above 1995
purchase costs. The high natural gas costs had the largest impact on the
Building Block and Acrylic Fiber product lines.
Selling and technical service expenses increased $2.1 or 6.4% which reflects
efforts put in place in 1995 in certain of the Specialty Product lines. This
level of spending has remained constant throughout 1996.
Research and product development decreased $2.2 or 18.8% and is the result of
planned overhead reductions at the Stamford research facility and reduced
patent litigation expense. Technical R&D spending is on target for 1996.
Administrative and general expenses, at $11, were down 1.8% reflecting the
11
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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
Company's efforts to keep costs down in this area.
Interest and other income (expense), net is down $0.5 as a result of lower
interest income due to the use of cash for the repurchase the Company's Series
A and B preferred stock and the common stock repurchase program. This was
partially offset by increased royalty proceeds.
Interest expense increased $0.7 over the prior period due to higher levels of
debt outstanding principally from the Company's repurchase of its Series A and
B preferred stock and the common stock repurchase program.
Income taxes have increased $1.8 due to increased earnings but the effective
tax rate has declined to 41% from 43% as a result of actions taken towards
achieving the Company's goal to reduce its overall effective tax rate. The
Company believes that a further reduction in the effective tax rate is
feasible for 1997.
Equity in net earnings of associated companies decreased $0.4 as a
result of lower earnings from Criterion Catalyst. Hydroprocessing catalyst
selling volumes are up but selling prices are below the prior year period
particularly in Europe and Japan. This is due principally to the decline in
metals pricing. The purchase of intermediate product from third parties due
to capacity constraints also increased cost of sales. Additionally, startup
costs related to capacity expansions hindered the third quarter results. It
is expected that high startup costs will continue through the fourth quarter
and possibly into the first quarter of 1997. Partially offsetting the effect
of reduced Criterion Catalysts earnings were higher earnings from Cyro
Industries. Cyro continues to benefit from the methyl methacrylate and
acrylic sheet line expansions completed last year.
Dividends on preferred stock decreased $2.8 as the Company repurchased its
Series A and B preferred stock in the third and fourth quarters of 1995.
First Nine Months of 1996 versus First Nine Months of 1995
Net sales for the first nine months of 1996 were $944.3, a decrease of 2% as
compared to the $964.0 in the first nine months of 1995 with the decline
primarily in Building Blocks. International net sales were 38.6% of sales as
compared to 37.4% for the comparable period of 1995.
Specialty Chemical net sales decreased $2.9 or 0.5%. Sales were down due to
the discontinuance of certain marginal products and lower Coating Resin sales
due to lower selling prices and lower selling volumes. Coating Resin sales
volume was influenced by customer inventory reduction programs and lower than
expected production volumes in the coil industry. 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.
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
Specialty Materials net sales were up $7.9 or 3.3%. Aerospace Materials had
the majority of the increased sales due to a gradual improvement in the market
for these products. Acrylic Fiber selling volumes were up although this was
offset by lower export fiber selling prices.
Building Block net sales were down $24.8 or 14.8%. This is primarily
attributable to decreased methanol sales which 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 plus the plant being down for most of the
second quarter for mechanical repairs. In addition, acrylonitrile sales are
down due to lower selling prices.
Manufacturing cost of sales improved to 71.3% of net sales in the first nine
months of 1996 as compared to 73.1% 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 third quarter
analysis above also favorably impacted manufacturing cost of sales. Selling
prices were lower in Building Blocks, export Acrylic Fiber and Coating Resins
while the majority of the other product lines are 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. As mentioned in the third
quarter analysis above the high natural gas costs had the largest impact on
the Building Block and Acrylic Fiber product lines.
Selling and technical service expenses increased $3.9 or 3.9% and reflects
efforts put in place in 1995 in certain of the Specialty Product lines.
Research and product development decreased $4.0 or 11.9% and is the result of
planned overhead reductions at the Stamford research facility and a reduction
in patent litigation expense. Technical R&D spending is on target for the
year.
Administrative and general expenses decreased $0.8, or 2.4%.
Interest and other income (expense), net is down $0.6 as a result of lower
interest income due to the use of cash for the repurchase of the Company's
Series A and B preferred stock and the common stock repurchase program.
Interest expense is higher over the prior period due to increased levels of
debt outstanding principally from the Company's repurchase of its Series A and
B preferred stock and the common stock repurchase program.
Income taxes have increased $1.4 due to the increased earnings but its
effective tax rate has declined to 41% from 43% as a result of actions taken
towards achieving the Company's goal to reduce its overall effective tax
rate. The Company believes that a further reduction in the effective tax
rate is feasible for 1997.
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
Equity in net earnings of associated companies is essentially flat. Earnings
improved at Cyro Industries due to higher net sales as a result of the methyl
methacrylate 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 related to
the capacity expansions have hindered the nine month results. It is expected
that high startup costs will continue through the fourth quarter and possibly
into the first quarter of 1997. 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.
Dividends on preferred stock decreased $10.1 as the Company repurchased its
Series A and B preferred stock in the third and fourth quarters of 1995.
Liquidity and Financial Condition
At September 30, 1996, the Company's cash balance was $17.3, an increase of
$5.3 from year end 1995.
Net cash flows from operating activities totaled $127.4 for the first nine
months of 1996 compared to $118.7 in the same period of 1995. Cash was
favorably impacted by increased earnings, 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 production campaigning
and lower than anticipated net sales, and increased other assets due to
prepaid expenses principally related to prepaid insurance and prepaid
pension.
Net cash flows used for investing activities totaled $17.6 for the first nine
months of 1996 compared to $67.5 for the same period in 1995. Capital
expenditures for the nine months ended September 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 a maximum of $70.0.
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.
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 for the remainder of 1996, although borrowings
may be required for the Company's stock repurchase program.
14
<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
Net cash flows used for financing activities totaled $104.3 compared to
$99.9 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 of which approximately 885,400 shares were repurchased prior to
the three for one stock split in July of 1996. The remaining authorized
balance was adjusted for the stock split to bring the total shares authorized
for repurchase to approximately 3,329,200. Pursuant to this program, for the
nine months ended September 30, 1996, the Company repurchased approximately
2,019,300 shares of its common stock on the open market (equivalent to
3,790,100 shares on a post split basis) at a cost of approximately $110.8,
leaving 1,309,900 shares remaining authorized to be repurchased. At its
current rate of stock repurchases, the Company would complete its current
stock repurchase program by the first quarter of 1997, if not earlier,
although the actual timing of the repurchases could change depending on
changes in the price and/or volume of trading of the common stock. Depending
on the level, price and timing of repurchases, borrowings may be required.
In connection with the repurchase program the Company wrote put
warrants on 1,500,000 shares of its common stock (on a post split basis) for
which it received premiums of approximately $1.7 in cash. This resulted in a
reclassification of approximately $40.1 from stockholders' equity to put
warrants. 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 and nine month periods ended September 30, 1996, warrants
covering 600,000 and 1,200,000 shares, respectively, expired at no cost to the
Company. For the three and nine month periods ended September 30, 1996
approximately $16.2 and $31.8, respectively, was reclassified from put
warrants to stockholders' equity. At September 30, 1996, warrants on 300,000
shares remained outstanding with strike prices ranging between $27 1/6 and
$28 1/2 per share on a post 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 remaining maximum potential repurchase obligation as of
September 30, 1996, $8.3, represents the remaining balance that has been
reclassified from stockholders' equity to put warrants.
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 $82.0 available for borrowing at September 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 September 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
15
<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
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. It is expected
that a decision will be made on both before year end. The Company is also
pursuing other cost reduction initiatives and expects to start implementation
early next year.
Generally the Company's fourth quarter business is not as strong as the second
and third quarters and the pattern is expected to continue for the fourth
quarter of 1996. However, the unpredictability of the quarter is heightened
by sales fluctuations that can occur in certain of our businesses,
particularly in December dependent on customer manufacturing schedules
and/or inventory control.
16
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In connection with the Spin-off, the Company 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 eleven 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. Five 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 plaintiff who claims to have been injured due
to the presence of lead-based paints in buildings in which he
17
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings, Continued
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. A fifth case is a class action brought in the Court
of Common Pleas in Cuyahoga County, Ohio, on behalf of children with blood
levels of lead greater than twenty micrograms per deciliter.
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. Subsequently, the DEQ
reissued the Decision in accordance with the greater explanatory requirements
of the Court of Appeals judgment, and the plaintiffs have now appealed. 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.
In the opinion of management of the Company, resolution of the foregoing cases
will not have a material adverse 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.
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
assurance as to the actual amount of these liabilities or the timing thereof.
18
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
3.1 Certificate of Incorporation of Cytec Industries Inc.
3.2 By-Laws of Cytec Industries Inc.
10.13(g) Executive Income Continuity Plan
10.13(h) Key Manager Income Continuity Plan
11(a) Earnings Per Share computations for the three months ended
September 30, 1996
11(b) Earnings Per Share computations for the three months ended
September 30, 1995
11(c) Earnings Per Share computations for the nine months ended
September 30, 1996
11(d) Earnings Per Share computations for the nine months ended
September 30, 1995
12 Computation of Ratio of Earnings to Fixed Charges for the
three and nine months ended September 30, 1996
27 Financial Data Schedule
(b). No reports on Form 8-K were filed for the quarter ended
September 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
Executive Vice President & Chief Financial
Officer
November 12, 1996
19
<PAGE>
CERTIFICATE OF INCORPORATION
OF
CYTEC INDUSTRIES INC.
FIRST: The name of the Corporation is Cytec Industries Inc.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have the authority to issue is 95 million, consisting of
75 million shares of common stock, par value $0.01 per share (the "Common
Stock"), and 20 million shares of preferred stock, par value $0.01 per share
(the "Preferred Stock").
Shares of the Preferred Stock of the Corporation may be issued from
time to time in one or more classes or series, each of which class or series
shall have such distinctive designation or title as shall be fixed by the
Board of Directors of the Corporation (the "Board of Directors") prior to the
issuance of any shares thereof. Each such class or series of Preferred Stock
shall have such voting powers, full or limited, or no voting powers, and such
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated
in such resolution or resolutions providing for the issue of such class or
series of Preferred Stock as may be adopted form time to time by the Board of
Directors prior to the issuance of any shares thereof pursuant to the authority
hereby expressly vested in it, all in accordance with the laws of the State of
Delaware. Except as set forth in such resolutions, or as otherwise
may be required by law, the holders of shares of Preferred Stock shall not
have any voting rights.
FIFTH: The name and mailing address of the Sole Incorporator
is as follows:
Name Mailing Address
Deborah M. Reusch P. O. Box 636
Wilmington, Delaware 19899
SIXTH: The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. Subject to the terms and
provisions of any class or series of Preferred Stock, the Board of Directors
shall consist of not less than 5 (including any directors elected by the
holders of any class or series of Preferred Stock entitled to elect directors as
a class or series) nor more than 12 members, the exact number of which shall
be fixed from time to time by the Board of Directors. Except as provided in
the next paragraph, the directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as
nearly as may be possible, or one-third of the total number of directors
constituting the entire Board of Directors. The term of the initial Class
I directors shall terminate on the date of the 1994 annual meeting of
stockholders; the term of the initial Class II directors shall terminate on
the date of the 1995 annual meeting of stockholders; and the term of the
initial Class III directors shall terminate on the date of the 1996 annual
meeting of stockholders. At each annual meeting of stockholders beginning
in 1994, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional directors of any class elected
to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class,
but in no case will a decrease in the number of directors shorten the term of
any incumbent director. A Class I, II or III director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors in a Class I, II or III directorship,
howsoever resulting, may be filled by a majority or the directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill such a vacancy shall hold office for a term that
shall coincide with the term of the class to which such director shall have
been elected.
Whenever the holders of any one or more classes or series of
Preferred Stock issued by the Corporation shall have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies
and other features of such directorships shall be governed by the terms of
this Certificate of Incorporation or the resolution or resolutions adopted by
the Board of Directors pursuant to Article FOURTH applicable thereto, and such
directors so elected shall not be divided pursuant to this Article SIXTH into
classes with the directors elected by the holders of Common Stock unless
expressly provided by such terms.
SEVENTH: Any action required or permitted to be taken at any annual
or special meeting of any class of stockholders may be taken only upon the
vote of such class of stockholders at an annual or special meeting duly
noticed and called, as provided in the Certificate of Incorporation or By-laws
of the Corporation, and may not be taken by a written consent of such class
of stockholders pursuant to the GCL, unless (i) in the case of action
required or permitted to be taken by the holders of Common Stock, such written
consent is signed by all holders of Common Stock or (ii) in the case of action
required or permitted to be taken by the holders of any class or series of
Preferred Stock, such written consent is signed by holders of shares of such
class of series of Preferred Stock having not less than the minimum number
of votes that would be necessary to authorize or take such action at a meeting
at which all shares of such class or series entitled to vote thereon were
present and voted.
EIGHTH: Subject to the terms and provisions of any class or series
of Preferred Stock, special meetings of the stockholders of the Corporation for
any purpose or purposes may be called at any time by the Board of Directors,
the Chairman of the Board of Directors or the President of the Corporation,
and may not be called by any other person or persons.
NINTH: No director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty by such a director as a director. Notwithstanding
the foregoing sentence, a director shall be liable to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the GCL or (iv) for any transaction from
which the director derived an improper personal benefit. No amendment to or
repeal of this Article NINTH shall apply to or have any effect on the
liability or alleged liability of any director or the Corporation for or
with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
TENTH: The Corporation expressly elects not to be governed by
Section 203 of the GCL.
ELEVENTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to adopt,
repeal, alter, amend or rescind the By-laws of the Corporation.
TWELFTH: The Corporation reserves the right to repeal, alter,
amend, or rescind any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and
all rights conferred on stockholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand
this 17th day of December, 1993.
_______________________________________
Deborah M. Reusch
Sole Incorporator
BY-LAWS
OF
CYTEC INDUSTRIES INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle,
State of Delaware.
Section 2. Other Offices. The Corporation may also have offices
at such other places both within and without the State of Delaware as the
Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholder for
the election of directors or for any other purpose shall be held at such
time and place, either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders
shall be held on such date and at such time as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting, at
which meetings the stockholders shall elect by a plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the meeting in accordance with these By-laws. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten or more
than sixty days before the date of the meeting.
Section 3. Special Meetings. Subject to the terms and provisions
of any class or series of preferred stock of the Corporation, special meetings
of stockholders, for any purpose or purposes, may be called by the Board of
Directors, the Chairman of the Board of Directors or the President, and may not
be called by any other person or persons. Written notice of a special meeting
stating the place, date and hour of the meeting and purpose or purposes for
which the meeting is called shall be given not less than ten nor more than
sixty days before the date of the meeting, and only such business as is
stated in such notice shall be acted upon thereat.
Section 4. Advance Notification of Business to be Transacted at
Stockholder Meetings. To be properly brought before the annual or any special
stockholders' meeting, business must be either (a) specified in the notice of
meeting (or any supplement or amendment thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before the meeting
by or at the direction of the Board of Directors, or (c) otherwise properly
brought before the meeting by a stockholder. In addition to any other
applicable requirements, for business to be properly brought before an
annual or any special stockholders' meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 60 days nor more than 90 days prior to the meeting; provided,
however, that in the event that less than 75 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close
of business on the fifteenth day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made,
whichever first occurs; and provided, further, however, that this
Section 4 shall not apply to any special meeting of stockholders where only
the holders of one or more classes or series of preferred stock of the
Corporation are entitled to vote. Such stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before
the meeting (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class, series and number of shares of capital stock of
the Corporation which are beneficially owned by the stockholder and (iv)
any material interest of the stockholder in such business.
Except as otherwise provided in this Article II, Section 4, no
business shall be conducted at the annual or any special meeting except in
accordance with the procedures set forth in this Article II, Section 4,
provided, however, that nothing in this Section 4 shall be deemed to preclude
discussion by any stockholder of any business properly brought before the
meeting. The officer of the Corporation presiding at the meeting shall, if
the facts warrant, determine and declare to the meeting that business was
not properly brought before the meeting in accordance with the provisions of
this Article II, Section 4, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
Section 5. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be preesnt or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented
by proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting.
Section 6. Voting. Unless otherwise required by law, the
Certificate of Incorporation or these By-laws, any question brought before any
meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented thereat and entitled to vote on the subject
matter thereof. Unless otherwise provided in the Certificate of Incorporation,
each stockholder represented at a meeting of stockholders shall be entitled
to cast one vote for each share of the capital stock entitled to vote thereat
held by such stockholder. The Board of Directors, in its discretion, or the
officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 7. List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours,
for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder of the Corporation who
is present.
Section 8. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 7 of this Article II or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. Subject to the
terms and provisions of any class or series of preferred stock of the
Corporation, the Board of Directors shall consist of not less than 5
(including any directors elected by the holders of any class or series of
Preferred Stock entitled to elect directors as a class or series) nor more
than 12 members, the exact number of which shall be fixed from time to time
by the Board of Directors. Except as otherwise required in the Certificate
of Incorporation and as provided in Section 3 of this Article III, directors
shall be elected by a plurality of the votes cast at Annual Meetings of
Stockholders, and each director so elected shall hold office as provided
by Article SIXTH of the Certificate of Incorporation. Any director may
resign at any time upon written notice to the Corporation.
Section 2. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors; provided, however, that the following procedures shall
not apply to the nomination of persons for election as directors by vote of
any class or series of preferred stock of the Corporation. Nominations of
persons for election to the Board of Directors of the corporation at the
Annual Meeting may be made at such meeting by or at the direction of the
Board of Directors, by any committee or persons appointed by the Board of
Directors or by any common stockholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Article III, Section 2. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be
made pursuant to timely notice in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation not less
than 60 days nor more than 90 days prior to the meeting, provided, however,
that in the event that less than 75 days' notice or prior public disclosure
of the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the fifteenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made, whichever
first occurs. Such stockholder's notice to the Secretary shall set forth
(a) as to each person whom the stockholder proposes to nominate for election
or re-election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class, series and number of shares of capital stock of the
Corporation which are beneficially owned by the person and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to the Rules and
Regulations of the Securities and Exchange Commission under Section 14 of
the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder
giving the notice (i) the name and record address of the stockholder and (ii)
the class, series and number of shares of capital stock of the Corporation
which are beneficially owned by the stockholder. Such notice shall be
accompanied by the executed consent of each nominee to serve as a director if
so elected. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election as a director of the
Corporation by the holders of Common Stock of the Corporation unless nominated
in accordance with the procedures set forth herein. The officer of the
Corporation presiding at an Annual Meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting, and the defective nomination shall be
disregarded.
Section 3. Vacancies. Any vacancy on the Board of Directors,
which at an Annual Meeting of stockholders may be filled by the holders of
Common Stock, howsoever resulting, may be filled by a majority of the directors
then in office (excluding any director elected by any class or series of
Preferred Stock), though less than a quorum, or by a sole remaining director.
Any director elected to fill a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected.
Section 4. Duties and Powers. The business of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-laws directed or required to be exercised or done by the stockholders.
Section 5. Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as may from time
to time be determined by the Board of Directors. Special meetings of the
Board of Directors may be called by the Chairman of the Board of Directors,
the President or by a majority of the Board of Directors. Notice thereof
stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the
date of the meeting, or personally or by telephone, telegram, telecopy or
similar means of communication on twenty-four (24) hours' notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances.
Section 6. Quorum; Action of the Board of Directors. Except as
may be otherwise specifically provided by law, the Certificate of
Incorporation or these By-laws, at all meetings of the Board of Directors,
a majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 7. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the member of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 8. Meetings by Means of Conference Telephone. Members of
the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 8 shall
constitute presence in person at such meeting.
Section 9. Committees. Subject to the terms and provisions of
any class or series of preferred stock of the Corporation requiring the
establishment of any committee or committees and setting forth the procedures
for electing directors thereto, (i) the Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation, (ii) the Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee and (iii) in the
absence or disqualification of a member of a committee, and in the absence of
a designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any absent or disqualified member. Any
committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Unless the Board of Directors or such committee
shall otherwise provide, regular and special meetings and other actions
of any shall be governed by the provisions of this Article III applicable to
meetings and actions of the Board of Directors. Each committee shall keep
regular minutes and report to the Board of Directors when required.
Section 10. Fees and Compensation. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board of
Directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 11. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present
at or participates in the meeting or the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his
or their votes are counted for such purpose if (a) the material facts as to
his or their relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the committee, and
the Board of Directors or committee in good faith authorized the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
or (b) the material facts as to his or their relationship or interest and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (c) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof or the
stockholders. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, one or more Vice
Presidents, a Secretary and a Treasurer. The Board of Directors, in its
discretion, may also choose a Chairman of the Board of Directors (who must be a
director) and Assistant Secretaries, Assistant Treasurers and other officers.
Such officers as the Board of Directors may choose shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors. The Board of Directors may delegate to any other officer of the
Corporation the power to choose such other officers and to prescribe their
respective duties and powers; provided that any such selection shall be
evidenced by a document signed by the officer making the selection and filed
in the minute books of the Corporation, and any such selection shall terminate
at the next regular meeting of the Board of Directors unless such selection is
ratified by a vote of the Board of Directors at such meeting. Any number of
offices may be held by the same person, unless otherwise prohibited by law,
the Certificate of Incorporation or these By-laws. The officers of the
Corporation need not be stockholders or the corporation nor, except in the
case of the Chairman of the Board of Directors, need such officers be directors
of the Corporation.
Section 2. Election. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall elect the
officers of the Corporation, who shall be subject to the control of the
Board of Directors and shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors, and all officers of the Corporation
shall hold office until their successors are chosen and qualified, or until
their earlier resignation or removal. Any officer elected by the Board of
Directors may be removed at any time by the Board of Directors with or
without cause. Any vacancy occurring in any office of the Corporation shall
be filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (a) by the Chairman of the Board of Directors, the President or a
Vice President and (b) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by
(a) transfer agent other than the Corporation or its employee or (b) a
registrar other than the Corporation or its employee, any other signature on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
Section 3. Lost Certificates. The Board of Directors may
direct that a new certificate be issued, or establish procedures for the
issuance of a new certificate, in place of any certificate theretofore issued
by the Corporation alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen or destroyed. When authorizing such issuance, or
establishing such procedures, the Board of Directors or any duly authorized
officer may, in its or his discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such
manner as the Board of Directors or such officer shall require and/or give
the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-laws. Transfers
of stock shall be made on the books of the Corporation only by the person
named in the certificate or by his attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be canceled before
a new certificate shall be issued.
Section 5. Record Date. Except as otherwise provided in
Certificate of Incorporation, in order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof,or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty days nor less
than ten days before the date of such meeting, nor more than sixty days prior
to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-laws, to be given to any
director or stockholder, such notice may be given by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon pre-paid, and such notice shall be deemed to
be given at the time when the same shall be deposited in the United States
mail. Written notice may also be given personally or by telegram, telex,
cable or facsimile transmission.
Section 2. Waivers of Notice. Whenever any notice is required
by law, the Certificate of Incorporation or these By-laws, to be given to any
director or stockholder, a waiver thereof in writing, signed, by the person or
persons entitled to said notice, whether before or after the time stated
herein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividend. Dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting pursuant to law. Dividends may be paid in cash,
in property or in shares of capital stock. Before payment of any dividend,
there may be set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board of Directors from time to time,
in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Corporation, or for any proper purpose, and the Board
of Directors may modify or abolish any such reserve.
Section 2. Fiscal Year. The Fiscal year of the Corporation,
unless otherwise fixed by resolution of the Board of Directors, shall be the
calendar year.
Section 3. Corporation Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Signatures. Any one of (i) the Chairman of the
Board, (ii) the President, (iii) the Vice President, (iv) the Treasurer, (v)
the Assistant Treasurers, (vi) such other individual or individuals so
authorized from time to time (to the extent so authorized ) by the Board of
Directors, or (vii) such other individual or individuals so authorized from
time to time (to the extent so authorized) by an instrument signed by any two
of the Chairman of the Board, the President, the Vice Presidents or the
Treasurer, which is attested by the Secretary or an Assistant Secretary and
filed in the office of the Secretary, is authorized to sign, in the name and
on behalf of the Corporation, all contracts, leases, deeds, powers of
attorney, bonds, notes, guarantees, checks, drafts, receipts, endorsements,
acceptances, applications for letters of credit and other corporate
obligations and undertakings of the Corporation. Any authorization made
pursuant to clause (vii) of this section may be amended or terminated by an
instrument similarly signed, attested and filed.
Section 5. Representation at Meetings. Any one of (i) the Chairman
of the Board, (ii) the President, (iii) the Vice Presidents, (iv) the
Treasurer, (v) the Assistant Treasurers, (vi) the Secretary, (vii) the
Assistant Secretaries, (viii) such other individual or individuals so
authorized from time to time (to the extent so authorized ) by the Board of
Directors, or (ix) such other individual or individuals so authorized from
time (to the extent so authorized) in any instrument signed by any two of
the Chairman of the Board, the President, the Vice Presidents or the
Treasurer, which is attested by the Secretary or an Assistant Secretary
and filed in the Office of the Secretary, is authorized to represent the
Corporation at any meeting of holders of stock or debt obligations of any
corporation in which it may own capital stock or debt obligations.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings
other Than Those by or in the Right of the Corporation. Subject to Section 3
of this Article VIII, the Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a director, officer or employee of the
Corporation, or is or was a director, officer or employee of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
Section 2. Power to indemnify in Actions, Suits or Proceedings by
or in the Right of the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer or
employee of the Corporation, or is or was a director, officer or employee of
the Corporation serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extend
that the Court of Chancery or the Court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 or Section 2 of this
Article VIII, as the case may be. Such determination shall be made (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders. To the extent, however, that a director, officer
or employee of the Corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding described above, or in defense
of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith, without the necessity of authorization in the
specific case.
Section 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal
action or proceeding, to have had no reasonable cause to believe his conduct
was unlawful, if his action is based on the records or books of account of
the Corporation or another enterprise, or on information supplied to him by
the officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable
care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or
any partnership, joint venture, trust, employee benefit plan or other
enterprise of which such person is or was serving at
the request of the Corporation as a director, officer, employee or agent.
The provisions of this Section 4 shall not be deemed to be exclusive or to
limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Sections 1 or 2 of this
Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director,
officer or employee may apply to any court of competent jurisdiction in the
State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VIII. The basis of such indemnification
by a court shall be a determination by such court that indemnification of the
director, officer or employee is proper in the circumstances because he has met
the applicable standards of conduct set forth in Sections 1 or 2 of this Article
VIII, as the case may be. Neither a contrary determination in the specific case
under Section 3 of this Article VIII nor the absence of any determination
thereunder shall be a defense to such application or create a presumption that
the director, officer or employee seeking indemnification has not met any
applicable standard of conduct. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the Corporation promptly upon the
filing of such application. If successful, in whole or in part, the director,
officer or employee seeking indemnification shall also be entitled to be paid
the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director, officer or employee in defending or investigating a threatened or
pending action, suit or proceeding shall be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director, officer or employee to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advance of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to
the fullest extent permitted by law. The provisions of this Article VIII
shall not be deemed to preclude the indemnification of any person who is not
specified in Sections 1 or 2 of this Article VIII but whom the Corporation has
the power or obligation to indemnify under the provisions of the General
Corporation Law of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Corporation would have the power or the obligation to indemnify him
against such liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to the "Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any entity controlled by a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers or employees, so that any person who is or was a director,
officer or employee of such constituent corporation, or is or was a director,
officer or employee of such constituent corporation serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, shall stand in the same position under the provisions of
this Article VIII with respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation if its separate
existence had continued. For purposes of this Article VIII, references to
"fines" shall include any excise taxes assessed on a person with respect to
an employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or
agent of the corporation which imposes duties on, or involve services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and
in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the Corporation" as referred
to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify and director,
officer or employee in connection with a proceeding (or part thereof) initiated
by such person unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, or new By-Laws may be adopted by the common stockholders or
by the Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws by the stockholders shall be
contained in the notice of such meeting of stockholders or Board of Directors
as the case may be. All such amendments must be approved by either the
holders of a majority of the outstanding capital stock entitled to vote
thereon or by a majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX
and in these By-Laws generally, the term "entire Board of Directors" means the
total number of directors which the Corporation would have if there were no
vacancies.
CYTEC INDUSTRIES INC.
Executive Income Continuity Plan
As Revised through October 17, 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
the individuals who at the beginning of a period commencing 24
<PAGE>
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 it
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
<PAGE>
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
another location not within 25 miles of such location)
<PAGE>
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.
<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.
<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; 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;
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 the Date of
Termination. 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 (A) beyond the date of a Plan Member's 60th birthday,
or (B) (if Notice of Termination is given prior to a Change in
Control) beyond such earlier date as such Plan Member retires under
the Executive Supplemental Employees' Retirement Plan, if, in
either case, 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) 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.
<PAGE>
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 ofsuch 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.
<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.
CYTEC INDUSTRIES INC.
Key Manager Income Continuity Plan
As Revised through October 17, 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
subsequently
<PAGE>
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).
<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
<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.
<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 Cause or 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.
<PAGE>
5. Income Continuation. (a) Subject to the provisions of
Section 6, upon termination of the employment pursuant to Section 4
of a Plan Member, the Company shall pay to the Plan Member 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;
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) Except for the lump sum payments, which shall be paid
immediately as provided above, 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 the Date of Termination.
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
(A) beyond the date of a Plan Member's 60th birthday, or (B) (if
Notice of Termination is given by a Plan Member prior to a Change
in Control) beyond such earlier date as such Plan Member retires
under the Executive Supplemental Employees' Retirement Plan, if, in
either case, 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) 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
<PAGE>
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.
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
<PAGE>
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.
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.
CYTEC INDUSTRIES INC. AND SUBSIDIARIES Exhibit 11(a)
Earnings Per Share Computations
(Millions of Dollars or Shares, except per share amounts)
Three Months Ended
September 30, 1996
Fully
Primary Diluted
Net earnings available for common
stockholders $25.9 $25.9
____ ____
____ ____
Weighted average number of shares of
common stock outstanding
during the period exclusive of
the following: 46.9 46.9
Common stock equivalents:
Restricted stock .2 .2
Non qualified stock options 2.1 2.2
Adjusted weighted average number of
shares of common stock outstanding
during the period 49.2 49.3
_____ _____
_____ _____
Earnings per share $ .53 $ .53
____ ____
____ ____
See Note 2 of the Notes to the Consolidated Financial Statements included
herein for explanation of earnings per share.
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES Exhibit 11(b)
Earnings Per Share Computations
(Millions of Dollars or Shares, except per share amounts)
Three Months Ended
September 30, 1995
Fully
Primary Diluted
Net earnings $22.4 $22.4
Preferred stock dividend requirements (2.8) (1.2)
Net earnings available for common
stockholders $19.6 $21.2
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 .4 .4
Non qualified stock options 1.7 1.8
Assumed conversion of Series B
preferred stock - 16.8
_____ _____
Adjusted weighted average number of
shares of common stock outstanding
during the period 41.1 58.0
_____ _____
_____ _____
Earnings per share $ .48 $ .37
_____ _____
_____ _____
See Note 2 of the Notes to the Consolidated Financial Statements included
herein for explanation of earnings per share calculations.
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES Exhibit 11(c)
Earnings Per Share Computations
(Millions of Dollars or Shares, except per share amounts)
Nine Months Ended
September 30, 1996
Fully
Primary Diluted
Net earnings available for common
stockholders $73.9 $73.9
Weighted average number of shares
of common stock outstanding
during the period exclusive of
the following: 47.8 47.8
Common Stock equivalents:
Restricted stock .2 .2
Non qualified stock options 2.1 2.2
Adjusted weighted average number of
shares of common stock outstanding
during the period 50.1 50.2
_____ _____
_____ _____
Earnings per share $1.48 $1.47
_____ _____
_____ _____
See Note 2 of the Notes to the Consolidated Financial Statements included
herein for explanation of earnings per share calculations.
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES Exhibit 11(d)
Earnings Per Share Computations
(Millions of Dollars or Shares, except per share amounts)
Nine Months Ended
September 30, 1995
Fully
Primary Diluted
Net earnings $67.1 $67.1
Preferred stock dividend requirements (10.1) (5.4)
_____ _____
Net earnings available for common
stockholders $ 57.0 $61.7
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 .4
Non qualified stock options 1.5 1.8
Assumed conversion of Series B
preferred stock - 16.6
_____ ______
Adjusted weighted average number of
shares of common stock outstanding
during the period 40.8 57.8
_____ ______
_____ ______
Earnings per share $1.40 $1.07
_____ _____
_____ _____
See Note 2 of the Notes to the Consolidated Financial Statements included
herein for explanation of earnings per share calculations.
<PAGE>
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Millions of Dollars)
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
Earnings before income taxes $44.5 $124.8
Add:
Interest on indebtedness
net of capitalized interest 2.0 4.8
Portion of rents representative
of the interest factor 1.4 4.1
_____ ______
Earnings as adjusted $47.9 $133.7
Fixed charges:
Interest on indebtedness 2.8 6.1
Portion of rents representative
of the interest factor 1.4 4.1
____ _____
Fixed charges $4.2 $10.2
_____ _____
_____ _____
Ratio of earnings to fixed charges 11.4 13.1
_____ _____
_____ _____
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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>This schedule contains summary financial information extracted
from Form-10Q 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> 9-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 17,300
<SECURITIES> 0
<RECEIVABLES> 217,300
<ALLOWANCES> 11,200
<INVENTORY> 97,800
<CURRENT-ASSETS> 424,100
<PP&E> 1,351,400
<DEPRECIATION> (764,200)
<TOTAL-ASSETS> 1,288,100
<CURRENT-LIABILITIES> 340,000
<BONDS> 0
0
100
<COMMON> 500
<OTHER-SE> 307,500
<TOTAL-LIABILITY-AND-EQUITY> 1,288,100
<SALES> 944,300
<TOTAL-REVENUES> 944,300
<CGS> 673,700
<TOTAL-COSTS> 841,400
<OTHER-EXPENSES> (5,900)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> 105,800
<INCOME-TAX> 43,300
<INCOME-CONTINUING> 62,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,900<F2>
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.47
<FN>
<F1> This number represents interest income
<F2> This number includes equity in net income of associated companies
of $11,400,000 for the nine months ended September 30, 1996.
</FN>
</TABLE>
