SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
Commission file number 1-12854
McWhorter Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3919940
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
400 East Cottage Place 847-428-2657
Carpentersville, Illinois 60110
(Address of principal executive offices, (Registrant's telephone number
including zip code) including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on
Which Registered
Common Stock, $0.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
As of December 31, 1996, the aggregate market value of the voting stock
(which excludes stock restricted from voting pursuant to Federal Trade
Commission Order) held by nonaffiliates of McWhorter Technologies, Inc.
(based upon the New York Stock Exchange closing prices) was approximately
$206,723,000.
As of December 31, 1996, 10,469,616 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of McWhorter Technologies, Inc.'s Proxy Statement filed with
the Securities and Exchange Commission on January 8, 1997 ("Proxy Statement")
are incorporated in Part III hereof by reference.
<PAGE>
McWHORTER TECHNOLOGIES, INC.
TABLE OF CONTENTS
PART I Page
Item 1.
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2.
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 3.
Legal Proceedings and Environmental Matters . . . . . . . . . . . 7
Item 4.
Submission of Matters to a Vote of Security Holders . . . . . . . 7
PART II
Item 5.
Market for the Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6.
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . 8
Item 7.
Management's Discussion and Analysis of Results of Operations and
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . 9
Item 8.
Financial Statements and Supplementary Data. . . . . . . . . . . .12
Item 9.
Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . 26
PART III
Item 10.
Directors and Executive Officers of the Registrant. . . . . . . . 26
Item 11.
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . 27
Item 12.
Security Ownership of Certain Beneficial Owners and Management. . 27
Item 13.
Certain Relationships and Related Transactions. . . . . . . . . . 28
PART IV
Item 14.
Exhibits, Financial Statement Schedules, and Reports on Form 8-K..28
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
<PAGE>
PART I
Item 1. Business
McWhorter Technologies, Inc. ("McWhorter" or the "Company") is one of the
leading manufacturers of surface coating resins in the United States and is
a manufacturer of resins used in the reinforced fiberglass plastics industry.
Surface coating resins are a primary component of paint and coatings which
are used for a variety of protective and decorative purposes. Resins used
for reinforced fiberglass plastics are a primary component for various
fiberglass products. In September 1996, the Company completed the joint
venture McWhorter Technologies Europe which will provide an opportunity to
enter the European market on a phased basis.
Prior to April 29, 1994, McWhorter was a wholly-owned subsidiary of The
Valspar Corporation ("Valspar"). On April 29, 1994, Valspar distributed
(the "distribution") to its shareholders 100 percent of the outstanding
McWhorter common stock on the basis of one share of common stock for every
two shares of Valspar common stock. The distribution followed the
February 18, 1994, acquisition (the "acquisition") by McWhorter of the Resin
Products Division of Cargill Incorporated ("RPD" and "Cargill," respectively),
and the transfer to Valspar of a portion of the McWhorter assets.
McWhorter's predecessor was incorporated in the State of California on
July 21, 1934 and was merged on February 18, 1994 into the Company, which was
incorporated in Delaware on November 24, 1993.
All references to years are to fiscal years ended October 31 unless otherwise
stated.
Products and Markets
McWhorter's product line focuses on the requirements of customers in the
paint and coatings and reinforced fiberglass plastics industries. Each of
these industries are highly fragmented with a large number of competitors.
For example, in the paint and coatings industry, McWhorter believes there are
over 800 active companies purchasing resins and selling paint and coatings
for a variety of end uses.
The paint and coatings industry is a mature market, growing at an estimated
2% per annum, or about the same rate as durable goods. Although a number of
paint and coating manufacturers have captive resin manufacturing capabilities
today, increased costs of product reformulation and updating of resin
manufacturing processes to comply with environmental regulations are causing
a shift from captive manufacturing to outsourcing. McWhorter believes this
trend will increase its sales opportunities in future years.
McWhorter produces various products including alkyds, copolymers, polyure-
thanes, polyester resins, unsaturated polyesters, acrylic emulsions, poly-
vinyl acetate emulsions, solution acrylics, powder resins, powder curing
agents and a number of small volume specialty resins. Various types of resins
are required by customers due to differing application and product perfor-
mance characteristics.
<PAGE>
Alkyd Resins and Copolymers. Alkyd resins and copolymers are McWhorter's
largest product category and are used in the manufacture of oil-based paints
and coatings. Alkyd resins and copolymers can be used in consumer paints
(e.g., house paint, deck stains, etc.), industrial coatings (e.g., decorative
and protective coatings used on machinery, equipment, tools, etc.) and
special purpose coatings (e.g., traffic-striping paints, automotive refinish
coatings and industrial maintenance coatings).
Alkyd resins and copolymers are formulated and engineered according to
customer specifications for various purposes and the same product can be used
in different applications depending on the product's formulation. Alkyd
resins and copolymers can also be modified with other raw materials to
improve performance; silicone for longer-lasting products or high temperature
applications, vinyl toluene for quicker-dry applications and acrylics for
improved durability.
Polyurethane Resins. Oil-modified polyurethane resins are a form of an alkyd
resin used primarily in varnishes and other clear wood coatings for
application on wood floors, furniture, kitchen cabinets, etc. Oil-modified
polyurethane resins are also used as additives to floor coatings and other
products to improve a product's performance characteristics.
Polyester Resins. Polyester resins are used in industrial coatings requiring
specific properties such as gloss and color retention, resistance to
corrosion and excellent flexibility. Typical uses for polyesters are coil
coated metal buildings, appliances and metal office furniture.
Unsaturated Polyester Resins. Unsaturated polyester resins are used for
various applications in the reinforced fiberglass plastics industry. The
largest uses are marine applications where unsaturated polyester resins are
used in the manufacture of boats. Other applications include tub and shower
enclosures, fiberglass tanks and cultured marble surfaces.
Acrylic and Polyvinyl Acetate Emulsion Resins. Acrylic and polyvinyl acetate
emulsion resins are used primarily in consumer latex paints. Acrylic emulsion
resins are used in trim paints and exterior applications where weathering,
color and gloss retention are critical. Emulsions are also used in
industrial and special purpose coatings. The major advantage of acrylic
emulsion resins is their ability to meet or exceed environmental regulations
because of their low solvent content.
Solution Acrylics. Solvent-borne acrylic resins are used in applications
where resistance to weathering is required. Coatings produced from solvent-
borne acrylic resins may be thermoplastic or may be combined with cross-
linkers to form high performance thermoset coatings. Typical applications
include marine and maintenance paints, and automotive topcoats.
Powder Resins. Powder resins are used in the manufacture of industrial
powder coatings. Powder coatings are dry coatings which provide an alterna-
tive to liquid coatings. The principal advantage of powder coatings are that
they emit no solvents, have excellent application and performance character-
istics and have a high degree of transfer efficiency. Powder coatings is the
fastest growing segment of the industrial coatings industry.
Powder Curing Agents. Powder curing agents are used in conjunction with
certain powder resins to impart durability and hardness. McWhorter produces
urethane curing agents, the largest volume category for powder paint.
<PAGE>
Sales and Distribution
McWhorter sells its liquid and powder coating resin products primarily to
customers in the paint and coatings industry through a direct sales force,
with the balance sold through agents or distributors. The majority of
McWhorter's sales of unsaturated polyester resins to the fiberglass resin
products industry are sold through distributors. McWhorter's business has
primarily been focused in North America. However, the completion in
September 1996 of the joint venture McWhorter Technologies Europe provides
the Company with a European presence and provides an opportunity to grow
the current European business both internally and through acquisitions.
McWhorter intends to identify additional channels of distribution outside
North America. These arrangements may take the form of additional export
sales, joint ventures or licensing agreements.
McWhorter's business is somewhat seasonal with sales volume being tradition-
ally the highest during the third quarter of its fiscal year. This seasonal-
ity is largely due to the buying cycle of the consumer paint and maintenance
coatings businesses. Since orders are generally filled within a minimum lead
time, McWhorter has no significant backlog.
Manufacturing and Research and Development
McWhorter operates its manufacturing plants 24 hours a day on a five or seven
day schedule, depending on local work practices, capacity utilization and
customer requirements.
Solvent-based products are generally produced in high temperature reactors.
Raw materials are fed into a reactor and heated to 400 degrees - 500 degrees
F for 10-30 hours, depending on the formulation. Once the desired properties
are achieved, the product is transferred to a mixing vessel, where additional
materials are added to complete the batch. Finally, the resin is filtered
and pumped into drums or bulk storage tanks before shipment to customers.
Emulsions are processed differently from solvent-based resins. Emulsions are
created by exothermic reactions in reactors designed to control the reaction by
cooling the product. Once the reaction is complete, material is filtered and
transferred to bulk storage tanks before shipment to customers.
McWhorter manufactures certain proprietary resins under tolling arrangements,
which are common in the resin industry. Such arrangements are subject to
confidentiality and secrecy agreements which safeguard the customer's
technology.
McWhorter's research and development activities have emphasized emerging
technologies in the paint and coatings industry, focusing on developing
products designed to comply with environmental laws and maintain the
integrity of a product's performance characteristics.
Raw Materials
Materials used in the manufacturing of resins are procured primarily from
domestic suppliers. Most of the raw materials are derived from either
petroleum or vegetable oil. McWhorter has not experienced difficulty in
recent years in obtaining an adequate supply of raw materials or other
supplies needed in the manufacturing process. The majority of the materials
purchased are subject to national supply contracts which generally average
one to three years in length with pricing subject to periodic reviews and
adjustment based on market conditions. Raw material prices move up and down
due to market conditions in the petrochemical or vegetable oil markets.
<PAGE>
After experiencing significant volatility in certain markets in 1995, raw
material prices settled back to more stable levels in 1996. However, raw
material prices still remain higher than pre-1995 levels. Refer to Item 7
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" for further discussion.
Intellectual Property
McWhorter's business is not materially dependent upon franchises, licenses or
similar rights, or on any single patent or trademark or group of related
patents or trademarks. The techniques and formulas used to produce solvent-
based resins are mature and well known. The techniques and formulas used to
produce acrylic emulsions, powder resins, curing agents and other specialty
resins are in some instances not well known or are protected by patents or as
trade secrets.
Competition
McWhorter encounters competition from numerous other companies with respect
to each of the products it produces. A significant number of resin
producers are vertically integrated into coatings manufacturers, providing a
captive source of resin products for such manufacturers. Some of these
captive producers also sell directly to third parties.
Consistent quality, responsive service, technology and price are the critical
elements that customers use to select their resin suppliers. McWhorter
believes that it competes favorably in each of these areas.
Employees
McWhorter employs approximately 590 full- and part-time employees of which
approximately 53 are covered by collective bargaining agreements.
Item 2. Properties
McWhorter's corporate headquarters is located in Carpentersville, Illinois
and its eight plant facilities are all owned, well maintained, and being
utilized for their intended purposes and have sufficient capacity to meet
their reasonably-anticipated needs. Total practical production capacity of
McWhorter's plant facilities is approximately 581 million wet pounds per
annum. McWhorter has no material encumbrances on its facilities. The
following table provides certain additional information regarding
McWhorter's properties:
<TABLE>
Plant Location Approximate Square Footage
<S> <C>
Carpentersville, Illinois 224,277
Philadelphia, Pennsylvania 112,653
Forest Park, Georgia 83,875
Lynwood, California 52,899
Ennis, Texas 45,969
Chicago Heights, Illinois 35,510
Columbus, Georgia 30,325
Portland, Oregon 14,995
</TABLE>
<PAGE>
The joint venture McWhorter Technologies Europe currently consists of three
plants, one each located in Sweden, Finland and the United Kingdom.
McWhorter leases from Valspar approximately 30,000 square feet of office and
laboratory space in Minneapolis, Minnesota.
Item 3. Legal Proceedings and Environmental Matters
McWhorter is not party to any legal or administrative proceedings, other than
routine litigation incidental to the business or involving claims for
immaterial amounts.
The operations of McWhorter, like those of other companies in its industry,
involve the generation and disposal of substances regulated by the United
States Environmental Protection Agency and certain state agencies under
various federal and state environmental laws. As a result, McWhorter is
involved in various claims relating to environmental and waste disposal
matters. These claims generally allege that McWhorter, together with other
parties, is responsible under federal and state environmental laws for the
remediation of hazardous waste at a particular site. Several of these laws
provide that potentially responsible parties may be held jointly and
severally liable for investigation and remediation costs regardless of fault.
Although McWhorter continually assesses its potential liability with respect
to its past and present operations, any potential liability ultimately
determined to be attributable to McWhorter is subject to a number of
uncertainties, including, among others, the number of parties involved with
respect to any given site, the volumetric contribution which may be attributed
to McWhorter relative to that attributable to other parties, the nature and
magnitude of the wastes involved, and the method and extent of remediation.
McWhorter does not believe that any potential liability, either individually
or in the aggregate, ultimately determined to be attributable to McWhorter
will have a material adverse effect on its business or financial condition.
At October 31, 1996 the estimated amount of probable environmental liability
of McWhorter is approximately $4,247,000. Cargill has agreed to indemnify
McWhorter, subject to certain limitations, for damages resulting from certain
environmental matters relating to RPD. As a result of the probable recovery
of $2,936,000 from Cargill, McWhorter's net estimated environmental liability
is approximately $1,311,000. There are a total of thirteen sites at which
McWhorter believes it has probably environmental liability, including eight
sites for which the estimated liablity is less than $10,000 per site. The
maximum estimated amount of environmental liability attributable to any
individual site is approximately $1,177,000, of which a significant portion
is expected to be reimbursed by Cargill. During 1996, McWhorter spent
approximately $1,062,000 on remediation costs of which $705,000 was spent on
on-site liability attributable to RPD and has been or is expected to be
reimbursed by Cargill. During 1997, McWhorter expects to spend approximately
$1,210,000 on remediation costs, of which $850,000 is expected to be reimbursed
by Cargill. During 1996, McWhorter spent approximately $1,000,000 on capital
expenditures to comply with environmental laws and regulation and during 1997
McWhorter expects to spend approximately $1,300,000 on such expenditures.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of 1996.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
McWhorter common stock is traded on the New York Stock Exchange under the
trading symbol "MWT."
The following table sets forth the high and low bid and ask sales prices for
the common stock for fiscal 1996 and 1995. The Company did not declare any
cash dividends on its common stock in either fiscal year.
<TABLE>
1996 1995
Low High Low High
<S> <C> <C> <C> <C>
First quarter 13 1/8 15 5/8 14 1/8 18 1/8
Second quarter 13 3/8 18 1/8 14 1/2 16
Third quarter 16 3/8 19 3/8 14 5/8 15 7/8
Fourth quarter 17 1/8 20 1/8 14 5/8 16 1/8
</TABLE>
As of December 31, 1996, there were 1,463 holders of record of the common
stock. There have been no sales of securities by the Company during the
period covered by this report that were not registered under the Securities
Act of 1933.
Item 6. Selected Financial Data
<TABLE>
Year Ended
Dollars in thousands, except per share amounts
October 31, October 31, October 31, October 29, October 30,
1996 1995 1994(a) 1993(a) 1992(a)
<S> <C> <C> <C> <C> <C>
Net sales $315,925 $311,398 $242,331 $109,839 $107,729
Net income 13,833 11,070 8,444(b) 7,095 4,748
Net income per
share 1.32 1.02 .78 .65 .43
Total assets 153,254 138,127 138,563 71,196 61,520
Total debt 23,140 31,764 38,618 150 180
</TABLE>
(a) See Note 2 of Notes to Financial Statements.
(b) See Note 12 of Notes to Financial Statements.
<PAGE>
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the consolidated
results of operations and financial condition of McWhorter Technologies, Inc.
(the "Company" or "McWhorter"). The discussion should be read in conjunction
with the consolidated financial statements and notes thereto. Except for
historical information contained herein, certain matters set forth in this
Annual Report are forward looking statements that involve certain risks and
uncertainties that could cause actual results to differ materially from those
in the forward looking statements. All references to years are to fiscal
years ended October 31 unless otherwise stated.
Results of Operations 1996 vs. 1995 Net sales for 1996 were $315,925,000
compared to $311,398,000 in the prior year. Volume increases of 4 percent
were partially offset by a 2 percent price decrease. The volume comparison
is impacted by the September 1, 1995 acquisition of The Glidden Company's
resin producing facility in Columbus, Georgia. On a comparable basis without
the acquisition, volume was flat. Volume improved significantly during the
second half of 1996 and the Company is cautiously optimistic about continued
volume growth in 1997. In the fourth quarter, volume in all businesses was
strong. In 1996, the Company experienced a decline in raw material costs
which resulted in the lowering of prices across businesses. The Company
expects raw material costs to remain relatively stable in 1997.
The Company's gross profit margin was 15.4 percent in 1996 compared to
13.5 percent in 1995. Declining raw material pricing and ongoing internal
process improvements implemented in 1995 led to a significant improvement in
gross margin percent for the year. As a result of the raw material price
decreases, the last-in, first-out ("LIFO") inventory valuation method had the
net effect of decreasing cost of sales by $1,358,000 pretax, $808,000 after
taxes, or 8 cents per share, in 1996 compared to 1995 when raw material price
increases had the net effect of increasing cost of sales by $1,090,000 pretax,
$649,000 after taxes, or 6 cents per share. Such charges increased gross
margin percent by .4 percent in 1996 and decreased gross margin percent by
.4 percent in 1995.
Operating expenses (research, selling, general and administrative) were 7.5
percent of sales in 1996 compared to 6.8 percent in 1995. Higher expenses
compared to 1995 primarily reflected higher costs associated with incentive
plans tied to the Company's performance.
In September 1996 we completed the joint venture in McWhorter Technologies
Europe ("McWhorter Europe"). This investment is accounted for on the equity
method with earnings reflected as a component of other expense (income), net
in 1996. The current year effects of the investment did not have a material
impact on earnings for the year.
Net interest expense was $1,653,000 in 1996 compared to $2,310,000 last year.
This comparison reflects reduced debt levels and lower average borrowing
rates from a year ago.
The effective tax rate was 40.5 percent in 1996 and 1995.
<PAGE>
Net income in 1996 was $13,833,000, or $1.32 per share, compared to
$11,070,000, or $1.02 per share, last year. This comparison is impacted by
the Company's share repurchase program, which had a favorable impact of
5 cents per share in 1996.
Results of Operations 1995 vs. 1994 Net sales for 1995 were $311,398,000
compared to $242,331,000 in 1994. This comparison is impacted by the
February 18, 1994 acquisition of the Resin Products Division of Cargill
Incorporated ("RPD") and the transfer of a portion of McWhorter's assets to
The Valspar Corporation ("Valspar"). The 1995 net sales increased 11 percent
over 1994 pro forma net sales of $281,340,000.
Refer to Note 2 of Notes to Financial Statements for discussion of the RPD
acquisition and spin-off.
Price increases of 14 percent were partially offset by a 2 percent volume
decrease and a 1 percent decrease from an unfavorable change in product mix.
Liquid and powder coatings volume was down 6 percent reflecting softness in
the industrial and architectural coatings markets in addition to in sourcing
by some major customers with resin producing capability. The composite
polymer volume was up 16 percent. The acquisition of The Glidden Company's
resin producing facility in Columbus, Georgia was completed on September 1,
1995. The incremental sales from this facility did not have a material impact
on the year. Average raw material cost increases approximated 20 percent
year over year. The Company experienced some softening and stability of the
raw material markets late in the year. The Company raised its prices several
times during the year and covered the majority of the increases in raw
material costs.
The Company's gross profit margin was 13.5 percent in 1995 compared to
15.5 percent in 1994. After taking into account the impacts of the RPD
acquisition and the transfer of certain assets to Valspar, the 1994 gross
margin was 15.9 percent. The 1995 gross margin reflects the compression on a
percentage basis from correspondingly higher selling prices and higher raw
material costs. Additionally, the 1995 gross margin percent was negatively
impacted by under absorption at the Company's production facilities due to
lower production levels. As a result of the raw material price increases,
the LIFO inventory valuation method had the net effect of increasing cost of
sales by $1,090,000 pretax, $649,000 after taxes, or 6 cents per share, in
1995 and by $1,522,000 pretax, $921,000 after taxes, or 8 cents per share, in
1994. Such charges decreased gross margin percent by .4 percent and
.6 percent in 1995 and 1994, respectively.
Operating expenses (research, selling, general and administrative) were
6.8 percent of sales in 1995 compared to 8.2 percent in 1994. Lower expenses
compared to 1994 reflected lower costs associated with incentive plans tied
to the Company's performance, tighter expense controls and significantly
higher spending in 1994 for expenses associated with being a new independent
public company.
Other expense in 1994 included $2,474,000 pretax, $1,497,000 after taxes, or
14 cents per share, of expenses associated with the write-down of the Los
Angeles resin facility, which was transferred to Valspar during the second
quarter. The write-down relates to an impairment in value of the facility
as determined by an independent appraisal.
<PAGE>
Net interest expense was $2,310,000 in 1995 compared to $1,138,000 in 1994.
This comparison reflects the higher borrowing to fund the RPD acquisition,
the payment of the interest-bearing intercompany receivable by Valspar in the
second quarter of 1994 and higher overall interest rates.
The effective tax rate was 40.5 percent in 1995 compared to 39.5 percent in
1994.
Net income in 1995 was $11,070,000, or $1.02 per share, compared to
$8,444,000, or $.78 per share in 1994, including the after-tax charge for the
write-down of the Los Angeles facility. This comparison is impacted by the
February 18, 1994 RPD acquisition and the transfer of a portion of
McWhorter's assets to Valspar. Pro forma net income for 1994 was
$11,507,000, or $1.06 per share, excluding the after-tax charge discussed
above.
Financial Condition In 1996 operations generated cash of $25,778,000
compared to $24,141,000 in 1995. Working capital levels increased slightly
from the prior year primarily because an aggressive inventory management plan
significantly reduced inventory levels in the prior year. This plan was
implemented by the Company early in the fourth quarter of 1995 in
anticipation of falling raw material costs. The Company's current ratio was
1.5 at the end of 1996 compared to 1.6 at the end of 1995.
Investing activities used cash of $12,417,000 in 1996 compared to $8,994,000
in 1995. The increase relates primarily to the investment in McWhorter
Europe in the fourth quarter. Refer to Note 1 and Note 5 of Notes to
Financial Statements for discussion of the investment in McWhorter Europe.
Capital expenditures were $6,991,000 in 1996 versus $6,469,000 in 1995. The
1996 and 1995 expenditures were primarily for productivity improvements.
Capital spending for 1997 is budgeted to be approximately $9,000,000.
Financing activities used cash of $14,205,000 in 1996 compared to $14,619,000
in 1995. Debt as a percentage of invested capital was 22.5 percent at
October 31, 1996, reduced from 30.8 percent a year ago. Total debt decreased
to $23,140,000 at October 31, 1996 from $31,764,000 a year ago. Strong cash
flow from operations provided sufficient cash to reduce the revolving credit
facility debt by $9,000,000.
During 1996 and 1995, the Company completed the repurchase of 500,000 shares
of its common stock from the 1995 authorization. The total cost of those
shares repurchased was $7,194,000. Also, in February 1996 the Company
announced that its Board of Directors passed a resolution authorizing the
repurchase by the Company of up to an aggregate of 500,000 additional shares
of its common stock over a twelve month period. As of October 31, 1996, the
Company had acquired 14,300 of these shares at a total cost of $236,000.
The Company has a $60,000,000 unsecured revolving credit facility that
terminates on February 10, 1999. At October 31, 1996, $49,000,000 was
available under this facility. Historically, while sales for McWhorter have
been lowest in the first quarter, monthly fluctuations in working capital
have been modest. The credit facility and internally generated funds are
expected to be adequate to finance McWhorter's capital expenditures and other
operating requirements.
<PAGE>
Refer to Item 3 Legal Proceedings and Environmental Matters and Note 9 of
Notes to Financial Statements for discussion of environmental liabilities.
Item 8. Financial Statements and Supplementary Data Page
Report of Independent Auditors. . . . . . . . . . . . . . . . . 13
Statements of Income for the Years Ended October 31,
1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . 14
Balance Sheets as of October 31, 1996 and 1995. . . . . . . . . 15
Statements of Cash Flows for the Years Ended October 31,
1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . 16
Statements of Changes in Shareholders' Equity for the Years
Ended October 31, 1996, 1995 and 1994 . . . . . . . . . . . .17
Notes to Financial Statements. . . . . . . . . . . . . . . . . .18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of McWhorter Technologies, Inc.
We have audited the accompanying balance sheets of McWhorter Technologies,
Inc. as of October 31, 1996 and 1995, and the related statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended October 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of McWhorter Technologies,
Inc. at October 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended October 31, 1996,
in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
November 18, 1996
<TABLE>
McWHORTER TECHNOLOGIES, INC.
STATEMENTS OF INCOME
<CAPTION>
Year Ended
Dollars in thousands,
except per share amounts
October 31, October 31, October 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales $315,925 $311,398 $242,331
Costs and expenses:
Cost of sales 267,161 269,233 204,659
Research 7,469 6,758 5,560
Selling, general and
administrative 16,368 14,537 14,255
Other expense (income),
net (Note 12) 25 (45) 2,759
Income from operations 24,902 20,915 15,098
Interest expense, net 1,653 2,310 1,138
Income before income
taxes 23,249 18,605 13,960
Income tax expense
(Note 8) 9,416 7,535 5,516
Net income $ 13,833 $ 11,070 $ 8,444
Net income per share $ 1.32 $ 1.02 $ .78
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
McWHORTER TECHNOLOGIES, INC.
BALANCE SHEETS
<CAPTION>
Dollars in thousands, except share amounts
October 31, October 31,
1996 1995
<S> <C> <C>
Assets
Current assets
Cash $ 1,060 $ 1,904
Accounts receivable less allowances
for doubtful accounts of $385 in
1996 and $300 in 1995 47,166 41,223
Inventories (Note 3) 18,151 12,020
Other current assets 5,019 5,237
71,396 60,384
Property, plant and equipment (Note 4) 107,119 100,751
Less accumulated depreciation 33,489 24,653
Net property, plant and equipment 73,630 76,098
Other assets (Note 5) 8,228 1,645
$153,254 $138,127
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt (Note 7) $ 9,995 $ 12,582
Trade accounts payable 26,363 16,066
Accrued liabilities (Notes 6 and 9) 10,504 9,808
46,862 38,456
Long-term debt, less current portion
(Note 7) 13,145 19,182
Deferred income taxes (Note 8) 10,486 6,670
Accrued environmental liabilities
(Note 9) 3,037 2,295
Shareholders' equity
Common stock (par value $.01 per share;
authorized 30,000,000 shares; issued
and outstanding 10,465,940 shares in
1996 and 10,847,064 shares in 1995) 110 110
Additional paid-in capital 10,803 10,895
Retained earnings 77,562 63,729
Currency translation adjustments (74)
Restricted stock awards (Note 11) (1,463) (1,463)
Treasury stock, at cost (499,607 shares
in 1996 and 117,000 shares in 1995 ) (7,214) (1,747)
79,724 71,524
$153,254 $138,127
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
McWHORTER TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended
Dollars in thousands
October 31, October 31, October 31,
1996 1995 1994
<S> <C> <C> <C>
Operating Activities
Net income $13,833 $11,070 $8,444
Adjustments to reconcile
net income to net cash
provided (used) by operating
activities:
Depreciation and amortization 9,079 7,901 6,195
Deferred income taxes 3,530 3,708 1,459
Loss on property, plant and
equipment 166 344 2,474
Other, net (253) (208) 307
Changes in working capital:
Accounts and notes receivable (5,943) (1,923) (32,208)
Inventories (6,131) 10,118 (3,933)
Trade accounts payable and
accrued liabilities 10,993 (5,652) 18,051
Other current assets 504 (1,217) (1,177)
Net cash provided (used) by operating
activities 25,778 24,141 (388)
Investing Activities
Capital expenditures (6,991) (6,469) (4,694)
Investment in joint venture (5,467)
Acquisition spending (2,558) (75,745)
Proceeds from receivable from Valspar 36,810
Proceeds from asset transfer to Valspar 6,835
Other, net 41 33 161
Net cash used by investing activities (12,417) (8,994) (36,633)
Financing Activities
(Decrease) increase in debt, net (8,624) (12,872) 38,468
Purchase of treasury stock (5,683) (1,747)
Other, net 102 (104)
Net cash (used) provided by financing
activities (14,205) (14,619) 38,364
(Decrease) increase in cash (844) 528 1,343
Cash at beginning of period 1,904 1,376 33
Cash at end of period $ 1,060 $ 1,904 $ 1,376
Noncash Aspects of Acquisitions
The Company's 1995 acquisition spending
involved the following:
Fair value of assets acquired $ 8,576
Note issued by seller (6,018)
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
McWHORTER TECHNOLOGIES, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
Dollars in thousands,
except share amounts
Common Stock Additional Retained
Shares Amount Paid-in Capital Earnings
<S> <C> <C> <C> <C>
Balance October 29, 1993 $300 $ 9,104 $44,215
Net income 8,444
Distribution of common
stock, net 10,854,532 (191) 87
Issuance of common stock
for restricted stock
awards 10,367 168
Balance October 31, 1994 10,864,899 109 9,359 52,659
Net income 11,070
Issuance of common stock
for restricted stock
awards 99,165 1 1,536
Purchase of treasury
stock (117,000)
Balance October 31, 1995 10,847,064 110 10,895 63,729
Net income 13,833
Issuance of common stock
for restricted stock
awards 1,483 22
Exercise of stock options 14,693 (114)
Purchase of treasury stock (397,300)
Currency translation
adjustments
Balance October 31, 1996 10,465,940 $110 $10,803 $77,562
</TABLE>
<TABLE>
McWhorter Technologies, Inc.
Statements of Changes in Shareholders' Equity
<CAPTION>
Dollars in thousands, except share amounts
Currency Restricted
Translation Stock Treasury
Adjustments Awards Stock
<S> <C> <C> <C>
Balance October 29, 1993
Net income
Distribution of common stock, net
Issuance of common stock for
restricted stock awards
Balance October 31, 1994
Net income
Issuance of common stock for
restricted stock awards (1,463)
Purchase of treasury stock (1,747)
Balance October 31, 1995 (1,463) (1,747)
Net income
Issuance of common stock for
restricted stock awards
Exercise of stock options 216
Purchase of treasury stock (5,683)
Currency translation adjustments (74)
Balance October 31, 1996 $(74) $(1,463) $(7,214)
See Notes to Financial Statements
<PAGE>
McWHORTER TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business and basis of presentation The Company operates in
one business segment, the manufacture and distribution of resin used in
coatings and composite polymer industries, and sells primarily to customers
located in the United States.
The financial statements are presented as if the Company had existed as a
free- standing entity for all periods presented and include the historical
assets, liabilities, revenues and expenses that are directly related to the
business that comprises the Company's operations, including the results of
operations relating to the facilities that were transferred to Valspar prior
to the distribution.
For the periods presented prior to February 18, 1994, expenses reflected in
the financial statements include an allocation of certain corporate expenses
from Valspar. These allocations were for general management, treasury, tax,
payroll, financial reporting, benefits administration, insurance,
communication, public affairs and other miscellaneous services. Management
believes that the foregoing allocations were made on a reasonable basis and
are indicative of the costs that would have been incurred by the Company on
a stand-alone basis.
In September of 1996, the Company acquired for cash a one-third interest in
the McWhorter Europe joint venture. The current ownership of McWhorter
Europe is divided equally among the three partners and is accounted for on
the equity method, with the Company's share of the earnings reflected as a
component of other expense (income), net.
Use of estimates The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Inventories Inventories are stated at the lower of cost or market. Costs
are recorded on the LIFO method.
Property, plant and equipment Property, plant and equipment are recorded at
cost. Depreciation is based upon estimated useful lives of 10 to 20 years
for buildings and 3 to 10 years for machinery and equipment, using primarily
the straight-line method.
Stock-based compensation In December 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard (SFAS)
No. 123, "Accounting for Stock-based Compensation" which establishes a fair
value based method of accounting for stock-based compensation plans. Under
SFAS No.123, the Company has the option of either accounting for its stock-
based compensation plans under the fair value method or continuing under the
accounting provisions of Accounting Principles Board Opinion No. 25 (APB
No. 25). The Company intends to continue accounting for its stock-based
compensation plans under the provisions of APB No. 25.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Net income per share Net income per common share amounts were computed on
the basis of the weighted average number of common and common equivalent
shares outstanding. Such weighted average shares used in the computations
were 10,484,279 in 1996; 10,878,326 in 1995; and 10,867,907 in 1994.
NOTE 2 - THE RPD ACQUISITION AND SPIN-OFF
Prior to April 29, 1994, McWhorter Technologies, Inc. was a wholly-owned
subsidiary of The Valspar Corporation. On April 29, 1994, Valspar
distributed to its shareholders 100 percent of the outstanding McWhorter
common stock on the basis of one share of common stock for every two shares
of Valspar common stock. The distribution followed the February 18, 1994
acquisition by McWhorter of the Resin Products Division of Cargill
Incorporated, and the transfer to Valspar of a portion of the McWhorter
assets. Financial results reflect the RPD operations subsequent to the
acquisition date, and include, until their February 18, 1994 transfer to
Valspar, the results of the portion of McWhorter's assets that were retained
by Valspar.
The RPD acquisition included substantially all of the RPD assets, consisting
primarily of inventory and fixed assets but excluding accounts receivable.
The acquisition was accounted for as a purchase. The entire purchase price
of $75,385,000 has been allocated to net tangible assets. The purchase
agreement also contains provisions dealing with the assumption or retention
of environmental obligations in connection with the assets acquired from RPD.
The assets that the Company transferred to Valspar on February 18, 1994
included tangible and intangible assets related to facilities in Los Angeles,
California; Rockford, Illinois; Kankakee, Illinois; and Garland, Texas.
Valspar also assumed substantially all related liabilities.
Pro forma information for the year ended October 31, 1994, assuming the
acquisition and distribution had occurred at October 29, 1993, was net sales
$281,340,000, net income $10,010,000 and net income per share $.92. The
information does not necessarily indicate what the results for McWhorter
would have been had McWhorter been an independent company or had the business
of McWhorter and the RPD business been combined during the pro forma period.
Net sales to Valspar from October 30, 1993 to the April 29, 1994 distribution
date were $14,398,000. Subsequent to April 29, 1994, sales to Valspar have
continued but the companies are no longer related parties.
NOTE 3 - INVENTORIES
The major classes of inventories consist of the following:
</TABLE>
<TABLE>
Dollars in thousands
October 31, October 31,
1996 1995
<S> <C> <C>
Manufactured products $11,916 $ 6,565
Raw materials, supplies and
work-in-process 6,235 5,455
$18,151 $12,020
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Inventories are stated at cost as determined by the LIFO method and are
approximately $2,151,000 and $3,509,000 lower at October 31, 1996 and 1995,
respectively, than such costs determined under the first-in, first-out (FIFO)
method. In 1996, the LIFO valuation method had the net effect of increasing
pretax income as compared to the FIFO method by $1,358,000, $808,000 after
taxes, or $.08 per share. This was due to the impact of declining raw
material costs in 1996 versus 1995. In 1995, the LIFO valuation method had
the net effect of decreasing pretax income as compared to the FIFO method by
$1,090,000, $649,000 after taxes, or $.06 per share. The pretax impact of
raw material cost increases of $3,062,000 was partially offset by the
$1,972,000 pretax effect of a partial inventory liquidation in 1995.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment classifications are as follows:
<TABLE>
Dollars in thousands
October 31, October 31,
1996 1995
<S> <C> <C>
Land $ 3,868 $ 3,868
Buildings 18,849 18,090
Machinery and equipment 84,402 78,793
107,119 100,751
Less accumulated depreciation 33,489 24,653
Net property, plant and equipment $ 73,630 $ 76,098
</TABLE>
NOTE 5 - OTHER ASSETS
Other assets include the following:
<TABLE>
Dollars in thousands
October 31, October 31,
1996 1995
<S> <C> <C>
Investment in McWhorter Europe $5,428
Other 2,800 $1,645
$8,228 $1,645
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - ACCRUED LIABILITIES
Accrued liabilities include the following:
<TABLE>
Dollars in thousands
October 31, October 31,
1996 1995
<S> <C> <C>
Employee compensation $ 4,797 $ 2,832
Accrued environmental liabilities 1,210 1,145
Other 4,497 5,831
$10,504 $ 9,808
</TABLE>
NOTE 7 - DEBT
Long-term debt consists of the following:
<TABLE>
Dollars in thousands
October 31, October 31,
1996 1995
<S> <C> <C>
Revolving credit borrowings $11,000 $15,000
6% note payable in annual installments
with final payment due in 1998 4,187 6,078
Other 53 86
15,240 21,164
Less current maturities 2,095 1,982
$13,145 $19,182
</TABLE>
The Company has $60,000,000 available under a revolving credit facility that
enables the Company to borrow funds on an unsecured basis. Under the terms
of the agreement, interest rates are determined at the time of borrowing and
are based on London Interbank Offered Rates plus an applicable margin up to
.5% or other alternative rates. This facility terminates on February 10,
1999. At October 31, 1996, borrowings totaling $11,000,000, approximating
fair value, were outstanding under this agreement all of which were classified
with long-term debt as they are supported by the long-term credit facility
and will continue to be refinanced beyond October 31, 1997. In addition, the
Company had $7,900,000 outstanding at October 31, 1996, under an overnight
credit facility. At October 31, 1996, the weighted average interest rate
on outstanding short-term borrowings was 6.1%. The aggregate payments of
long-term debt outstanding plus interest accrued to date on the 6% note
payable at October 31, 1996 for the next five years, excluding revolving
credit borrowings, are as follows: 1997--$2,095,000; and 1998--$2,145,000.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Interest paid during 1996, 1995 and 1994 was $1,725,000, $2,261,000 and
$1,208,000, respectively.
At October 31, 1996 the Company had outstanding $3,977,000 in unissued
letters of credit.
NOTE 8 - INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
Year Ended
Dollars in thousands
October 31, October 31, October 31,
1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $4,568 $3,334 $3,517
State 1,318 493 540
Total current income taxes 5,886 3,827 4,057
Deferred income taxes 3,530 3,708 1,459
Total income taxes $9,416 $7,535 $5,516
</TABLE>
Income taxes paid during 1996, 1995 and 1994 were $5,315,000, $3,227,000 and
$3,505,000, respectively.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities are as
follows:
<TABLE>
Dollars in thousands
October 31, October 31,
1996 1995
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit carryforward $ 316 $1,633
Accrued environmental liabilities 361 677
Accrued employee compensation 531 386
Workers' compensation 202 106
Other 414 256
Total deferred tax assets 1,824 3,058
Deferred tax liabilities:
Tax over book depreciation 11,179 8,883
Net deferred tax liability $ 9,355 $5,825
</TABLE>
NOTES TO FINANCIAL STATEMENTS (Continued)
The principal items comprising the difference between income tax expense
computed at the Federal statutory rate and the actual provision for income
taxes are as follows:
<TABLE>
Year Ended
Dollars in thousands
October 31, October 31, October 31,
1996 1995 1994
<S> <C> <C> <C>
Statutory rate applied to pretax income
(35%--1996; 34%--1995; 34%--1994) $8,138 $6,326 $4,746
Add:
State taxes
(net of federal tax benefit) 1,170 1,016 586
Other, net 108 193 184
$9,416 $7,535 $5,516
Effective tax rate 40.5% 40.5% 39.5%
</TABLE>
NOTE 9 - ENVIRONMENTAL LIABILITIES
With respect to environmental liabilities, management reviews each individual
site, taking into consideration the numerous factors that influence the costs
that will likely be incurred. Based on these reviews, McWhorter accrues for
potential environmental liabilities. Reserves are adjusted as additional
information becomes available to better estimate the total remediation costs
at individual sites. While uncertainties exist with respect to the amounts
and timing of McWhorter's ultimate environmental liabilities, management
believes that such costs, individually and in the aggregate, will not have
a material adverse effect on the Company's financial condition or results of
operations.
Pursuant to the terms of the distribution agreement, McWhorter will retain
liability for all costs or liabilities arising from existing or future
environmental claims relating to its plants located in Philadelphia,
Pennsylvania; Portland, Oregon; and Carpentersville, Illinois. Currently,
McWhorter is involved with remedial and other environmental compliance
activities at these plant sites. Additionally, McWhorter has been named a
potentially responsible party for the remediation of independently operated
waste disposal sites previously used by these plants.
At October 31, 1996 the estimated amount of probable environmental liability
of the Company is approximately $4,247,000. Cargill has agreed to indemnify
McWhorter, subject to certain limitations, for damages resulting from certain
environmental matters relating to RPD. As a result of the probable recovery
of $2,936,000 from Cargill, McWhorter's net estimated environmental liability
is approximately $1,311,000.
NOTE 10 - RETIREMENT BENEFIT PROGRAMS
In February 1994, McWhorter adopted an Employee Stock Ownership Plan (ESOP)
and an Employee Savings Plan. These primary retirement benefit programs are
defined contribution plans covering the majority of the employees. The
total costs of the ESOP were $1,556,000, $570,000 and $1,075,000
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
in 1996, 1995 and 1994, respectively. The total costs of the Employee
Savings Plan were $515,000, $457,000 and $294,000 in 1996, 1995 and 1994,
respectively. Contributions are made to the ESOP at the rate of 4 percent of
each participant's compensation and additional contributions can be made at
the Company's discretion.
The Company also sponsors a defined benefit plan for certain hourly
employees. The related pension costs and obligations are not material.
NOTE 11 - STOCK PLANS
The Companys' two stock incentive plans adopted in 1994 and 1996 provide for
the granting of options and the issuance of restricted stock, deferred stock
and stock appreciation rights of up to 1,050,000 shares of common stock of
which 472,427 shares are available for future grants. Options issued to date
under these plans have a term of ten years and become fully vested over a
period of up to five years. Outstanding options will expire over a period
ending no later than September 1, 2006.
A summary of stock option activity for the 1994 and 1996 Stock Incentive
Plans follows:
<TABLE>
Number of Average Option
Options Price Per Share
<S> <C> <C>
Options outstanding October 29, 1993
Granted 389,293 $15.95
Options outstanding October 31, 1994 389,293 15.95
Granted 41,935 15.38
Cancelled (21,984) 16.62
Options outstanding October 31, 1995 409,244 15.86
Granted 55,636 15.49
Exercised (14,693) 7.03
Cancelled (3,802) 18.61
Options outstanding October 31, 1996 446,385 16.09
Options exercisable at October 31, 1996 196,040
</TABLE>
Restricted stock performance awards have been granted to key officers under
the 1994 plan. These restricted stock awards will vest only if the Company
achieves certain financial goals over a three-year performance period. A
total of 94,354 restricted shares were issued in 1995 under the performance
plan at an average market value of $15.50 per share. The awards were
recorded at the market value of the shares at the time the shares were
awarded. The total market value of the shares will be charged to compensation
expense based on achievement of the related financial goals. After comparing
the Company's performance to the financial goals, $250,000 was charged to
expense in 1996 and no expense was recorded in 1995.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
The Company also issued 1,483, 10,291 and 10,367 restricted and deferred
shares in 1996, 1995 and 1994, respectively, with vesting periods of up to
three years. Amounts charged to expense were $22,000 in 1996, $159,000 in
1995 and $168,000 in 1994.
In 1996 the Company also established the 1996 Nonemployee Director Stock
Option and Award Plan (the "1996 Directors' Plan"). The 1996 Directors' Plan
provides for the issuance of up to 50,000 shares of the Company's common
stock of which 43,929 shares are available for future grants. Participation
in the 1996 Directors' Plan is limited to members of the Board of Directors
of the Company who are not salaried officers or employees of the Company or
any of its direct or indirect subsidiaries.
At October 31, 1996, 6,071 deferred stock awards had been granted under this
plan, and $110,000 was charged to expense in 1996.
Each outstanding common share includes a right to purchase one one-hundredth
share of Series A Junior Preferred Participating Stock (Preferred Stock)
under certain circumstances. Until exercisable, the rights are not separable
from the underlying common shares. The rights only become exercisable if a
person or group (an "acquiring person") acquires, or makes an offer to
acquire, 15% or more of the Company's common stock without the prior approval
of the Company's Board of Directors. The exercise price of each right is
$70. If someone becomes an acquiring person, the holder of each right (other
than the acquiring person) will be entitled to purchase common stock of the
Company having a value of twice the exercise price of the right. In addition,
if the Company is acquired in a transaction in which the Company's common
stock is exchanged for cash or securities or more than 50% of its consolidated
assets or earnings power are sold, each holder (other than the acquiring
person) will have the right to purchase common stock of the acquiring
company having a market value of twice the exercise price of the right. The
rights may be redeemed by the Company at the price of $.01 per right at any
time prior to anyone becoming an acquiring person. 150,000 shares of
Preferred Stock are reserved for issuance upon exercise of the rights. The
Preferred Stock is nonredeemable, with a $100 liquidation preference and 100
votes per share, and is entitled to 100 times the per-share dividends on the
common stock.
NOTE 12 - OTHER EXPENSE
Other expense for the first quarter of 1994 included $2,474,000 pretax,
$1,497,000 after taxes, or $.14 per share, of expenses associated with the
write- down of the Los Angeles resin facility, which was transferred to
Valspar during the second quarter at the time the Company acquired the Resin
Products Division assets of Cargill Incorporated. The write-down of this
facility relates to an impairment in value of the facility and was supported
by an independent appraisal.
NOTE 13 - CONTINGENCIES
The Company is involved in various legal actions arising in the normal course
of business. Management, after taking into consideration legal counsel's
evaluation of such actions, is of the opinion that the outcome of these
matters will not have a material adverse effect on the Company's financial
position.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 14 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
Dollars in thousands,
except per share amounts
Net Net Income
Net Sales Gross Profit Income Per Share
> <C> <C> <C> <C>
Fiscal 1996 quarter ended:
January 31 $ 65,240 $ 9,755 $ 2,128 $ .20
April 30 76,917 11,632 3,187 .31
July 31 87,144 13,996 4,360 .42
October 31 86,624 13,381 4,158 .40
$315,925 $48,764 $13,833 $1.32
Fiscal 1995 quarter ended:
January 31 $ 67,309 $ 9,016 $ 1,819 $ .17
April 30 79,120 11,024 2,794 .26
July 31 82,974 11,269 3,294 .30
October 31 81,995 10,856 3,163 .29
$311,398 $42,165 $11,070 $1.02
</TABLE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Inapplicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors
Incorporated by reference from pages 2-4 of the Proxy Statement section
entitled "Election of Directors."
(b) Identification of Executive Officers
Set forth below are the names, ages and titles of the persons who serve as
executive officers of McWhorter:
Name Age Positions
John R. Stevenson 54 Chairman and Chief Executive Officer
Jeffrey M. Nodland 41 President, Chief Operating Officer and
Secretary
Patrick T. Heffernan 47 Senior Vice President, Coatings Resins
Kevin W. Brolsma 42 Vice President, Powder
Douglas B. Rahrig 45 Vice President, Technology
Louise M. Tonozzi-Frederick 40 Vice President and Chief Financial Officer
<PAGE>
JOHN R. STEVENSON is Chairman and Chief Executive Officer of the Company.
Prior to being named in January 1997 to his current position, Mr. Stevenson
was President and Chief Executive Officer of the Company beginning in
February 1994. Previously he held the position of Vice President, Special
Products Group and Administration of Valspar beginning in August 1992 and
Vice President, Administration of Valspar beginning in February 1991.
JEFFREY M. NODLAND is President, Chief Operating Officer, and Secretary of
the Company. Prior to being named in January 1997 to his current position,
Mr. Nodland was Executive Vice President, Chief Operating Officer, and
Secretary of the Company beginning in May 1995. Previously he held the
position of Senior Vice President, Chief Financial Officer, Secretary, and
Treasurer of the Company beginning in February 1994, and President of
McWhorter, Inc. beginning in June 1991.
PATRICK T. HEFFERNAN is Senior Vice President, Coatings Resins of the
Company. Prior to being named in February 1994 to his current position, Mr.
Heffernan was an Assistant Vice President and General Manager of the Midwest
Region of the Resin Products Division of Cargill beginning in January 1986.
Mr. Heffernan held various positions with Cargill since January 1968.
KEVIN W. BROLSMA is Vice President, Powder of the Company. Prior to being
named in May 1996 to his current position, Mr. Brolsma was Vice President,
Operations of the Company beginning in February 1994. Previously he was the
General Manager of the Southeast Region of the Resin Products Division of
Cargill beginning in January 1990. From January 1988 to January 1990, Mr.
Brolsma was the National Accounts Manager and General Sales Manager of the
Resin Products Division.
DOUGLAS B. RAHRIG is Vice President, Technology of the Company. Prior to
being named in February 1994 to his current position, Dr. Rahrig was
Department Manager of the Technology Department of S.C. Johnson & Son, Inc.
beginning in February 1993. Dr. Rahrig held various technical and management
positions with S.C. Johnson & Son, Inc. since 1985.
LOUISE M. TONOZZI-FREDERICK is Vice President and Chief Financial Officer
of the Company. Prior to being named in September 1996 to her current
position, Ms. Tonozzi-Frederick was Treasurer and Controller beginning in
May 1995. Previously, she was Controller beginning in May 1994, and
prior to then was associated with Mallinckrodt Group, Inc. for seven years
in various financial positions, most recently as Assistant Controller.
Item 11. Executive Compensation
Incorporated by reference from pages 6-8 of the Proxy Statement section
entitled "Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference from pages 4-6 of the Proxy Statement section
entitled "Security Ownership of Certain Beneficial Owners."
Item 13. Certain Relationships and Related Transactions
Incorporated by reference from pages 2-8 of the Proxy Statement sections
entitled "Election of Directors," "Security Ownership of Certain Beneficial
Owners" and "Executive Compensation."
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8- K
(a) (1) Financial Statements commence on page 14.
(2) Financial Statement Schedules. All schedules for which provision is
made in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions or
are inapplicable and therefore have been omitted.
(3) Exhibits:
# 3.1 Certificate of Incorporation, as amended
3.2 By-Laws, as amended
# 4.1 Form of Common Stock Certificate
# 4.2 Rights Agreement
*10.1 Distribution Agreement
*10.2 Environmental Matters Agreement
#10.3 Amended and Restated Technology License Agreement
*10.4 Tax Sharing Agreement
#10.5 Amended and Restated Master Tolling Agreement
*10.8 1994 Stock Incentive Plan
##10.8.1 Amendment to 1994 Stock Incentive Plan
#10.9 Employee Stock Ownership Plan and Trust
#10.10 Employee 401(k) Savings Plan and Trust
**10.11 Sale and Purchase of Assets Agreement between Cargill,
Incorporated and McWhorter, Inc. dated as of May 19, 1993, as
subsequently modified and amended
**10.12 Agreement Containing Consent Order executed as of September 30,
1993 by the Federal Trade Commission, The Valspar Corporation
and McWhorter, Inc.
*10.13 $60,000,000 Credit Agreement dated as of February 1, 1994 among
McWhorter, Inc., McWhorter Technologies, Inc., the Banks listed
therein and Wachovia Bank of Georgia, N.A., as Agent
<PAGE>
#10.14 Lease Agreement between McWhorter Technologies, Inc. and The
Valspar Corporation for the lease to McWhorter of office and
laboratory space in Minneapolis, Minnesota
#10.15 Lease Agreement between McWhorter Technologies, Inc. and The
Valspar Corporation for the lease to Valspar of manufacturing,
warehousing, laboratory and office space in Philadelphia,
Pennsylvania
##10.16 Indemnification Agreement dated May 17, 1995 between McWhorter
Technologies, Inc. and John R. Stevenson
####10.16.1 Amendment to Indemnification Agreement dated May 17, 1995
between McWhorter Technologies, Inc. and John R. Stevenson
##10.17 Indemnification Agreement dated May 17, 1995 between McWhorter
Technologies, Inc. and Jeffrey M. Nodland.
####10.17.1 Amendment to Indemnification Agreement dated May 17, 1995
between McWhorter Technologies, Inc. and Jeffrey M. Nodland
##10.18 Indemnification Agreement dated May 17, 1995 between McWhorter
Technologies, Inc. and Michelle L. Collins
####10.18.1 Amendment to Indemnification Agreement dated May 17, 1995
between McWhorter Technologies, Inc. and Michelle L. Collins
##10.19 Indemnification Agreement dated May 17, 1995 between McWhorter
Technologies, Inc. and Edward M. Giles
####10.19.1 Amendment to Indemnification Agreement dated May 17, 1995
between McWhorter Technologies, Inc. and Edward M. Giles
##10.20 Indemnification Agreement dated May 17, 1995 between McWhorter
Technologies, Inc. and D. George Harris
####10.20.1 Amendment to Indemnification Agreement dated May 17, 1995
between McWhorter Technologies, Inc. and D. George Harris
##10.21 Indemnification Agreement dated May 17, 1995 between McWhorter
Technologies, Inc. and Heinn F. Tomfohrde III
####10.21.1 Amendment to Indemnification Agreement dated May 17, 1995
between McWhorter Technologies, Inc. and Heinn F. Tomfohrde III
###10.23 Indemnification Agreement dated December 13, 1995 between
McWhorter Technologies, Inc. and John G. Johnson, Jr.
####10.23.1 Amendment to Indemnification Agreement dated December 13, 1995
between McWhorter Technologies, Inc. and John G. Johnson, Jr.
10.24 1996 Incentive Stock Plan
10.25 1996 Nonemployee Director Stock Option and Award Plan
10.26 Stockholders Agreement for McWhorter Technologies Europe
<PAGE>
10.27 Deferred Compensation Plan
11.1 Statement regarding computation of net income per share
23.1 Consent of Independent Auditors
27 Financial Data Schedules
#### Previously filed as exhibit to the Registrant's Form 10-Q for the
quaterly period ended July 31, 1996
### Previously filed as exhibit to the Registrant's Form 10-K Registration
Statement for the fiscal year ended October 31, 1995
## Previously filed as exhibit to the Registrant's Form 10-Q for the
quarterly period ended April 30, 1995.
# Previously filed as exhibit to the Registrant's Form 10-K Registration
Statement for the fiscal year ended October 31, 1994
* Previously filed as exhibit to the Registrant's Form S-1 Registration
Statement (Registration No. 33-75726) originally filed on February 25,
1994
** Previously filed as exhibit to the Registrant's Registration Statement
on Form 10 (File No. 1-12638) filed on December 3, 1993
(b) No reports on Form 8-K were filed during the fourth quarter of 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
McWHORTER TECHNOLOGIES, INC.
January 27, 1997
By: /s/ John R. Stevenson
JOHN R. STEVENSON
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ John R. Stevenson January 27, 1997
JOHN R. STEVENSON
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Jeffrey M. Nodland January 27, 1997
JEFFREY M. NODLAND
President, Chief Operating Officer,
Secretary and Director
/s/ Louise M. Tonozzi-Frederick January 27, 1997
LOUISE M. TONOZZI-FREDERICK
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ D. George Harris January 27, 1997
D. GEORGE HARRIS
Director
/s/ Michelle L. Collins January 27, 1997
MICHELLE L. COLLINS
Director
/s/ Edward M. Giles January 27, 1997
EDWARD M. GILES
Director
/s/ Heinn F. Tomfohrde, III January 27, 1997
HEINN F. TOMFOHRDE, III
Director
/s/ John G. Johnson, Jr. January 27, 1997
JOHN G. JOHNSON, JR.
Director
<PAGE>
EXHIBIT 11.1 - Statement regarding computation of net income per share
<TABLE>
Year Ended
October 31, October 31,
1996 1995
<S> <C> <C>
Primary
Average common shares outstanding 10,535,456 10,912,348
Less: Shares of restricted stock
awards issued, not yet vested (94,354) (44,604)
Net effect of dilutive stock options--
based on the treasury stock method
using average market price 43,177 10,582
Total 10,484,279 10,878,326
Net income $13,833,000 $11,070,000
Net income per share $ 1.32 $ 1.02
Fully Diluted
Average common shares outstanding 10,535,456 10,912,348
Net effect of dilutive stock
options--based on the treasury
stock method using the year-end
market price, if higher than
average market price 80,778 10,582
Total 10,616,234 10,922,930
Net income $13,833,000 $11,070,000
Net income per share $ 1.30 $ 1.01
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statements of Income, Balance Sheets, and Statements of Cash Flows and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 1,060
<SECURITIES> 0
<RECEIVABLES> 47,551
<ALLOWANCES> (385)
<INVENTORY> 18,151
<CURRENT-ASSETS> 71,396
<PP&E> 107,119
<DEPRECIATION> 33,489
<TOTAL-ASSETS> 153,254
<CURRENT-LIABILITIES> 46,862
<BONDS> 4,240
0
0
<COMMON> 110
<OTHER-SE> 79,614
<TOTAL-LIABILITY-AND-EQUITY> 153,254
<SALES> 315,925
<TOTAL-REVENUES> 315,925
<CGS> 267,161
<TOTAL-COSTS> 267,161
<OTHER-EXPENSES> 25,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,653
<INCOME-PRETAX> 23,249
<INCOME-TAX> 9,416
<INCOME-CONTINUING> 13,833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,833
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 0
</TABLE>
BY-LAWS
of
MCWHORTER TECHNOLOGIES, INC.
ARTICLE I
Offices
SECTION 1. Registered Offices in Delaware.
The registered office of McWhorter Technologies,
Inc. (hereinafter called the "Corporation") in
the State of Delaware shall be in the City of
Wilmington, County of New Castle, and the
registered agent in charge thereof shall be The
Corporation Trust Company.
SECTION 2. Other Offices. The Corporation
may have such other offices in such places,
either within or without the State of Delaware,
as the Board of Directors may from time to time
determine or the business of the Corporation may
require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Annual Meeting. The annual
meeting of stockholders for the election of
directors and for the transaction of such other
business as may properly come before the meeting
shall be held at such place within or without
the State of Delaware, and at such date and
hour, as shall be designated by the Board of
Directors.
SECTION 2. Special Meetings. A special
meeting of stockholders, for any purpose or
purposes, may be called at any time by any
member of the Board of Directors or by the
President of the Corporation. Any such meeting
shall be held at such place within or without
the State of Delaware, and at such date and
hour, as shall be designated in the notice of
such meeting.
SECTION 3. Notice of Meeting. Unless
waived in writing by the stockholder of record
or unless such stockholder is represented
thereat in person or by proxy, each stockholder
of record shall be given written notice of each
meeting of stockholders, which notice shall
state the place, date and hour of the meeting,
and, in the case of a special meeting, the
purpose or purposes for which the meeting is
called. Such notice shall be given at least ten
days before the date fixed for such meeting.
<PAGE>
SECTION 4. Quorum. At each meeting of
stockholders, the holders of record of a
majority of the issued and outstanding stock of
the Corporation entitled to vote at such
meeting, present in person or by proxy, shall
constitute a quorum for the transaction of
business, except where otherwise provided by
law, the Certificate of Incorporation or these
By-Laws. In the absence of a quorum, any
officer entitled to preside at, or act as
secretary of, such meeting shall have the power
to adjourn the meeting from time to time until a
quorum shall be constituted. At any such
adjourned meeting at which a quorum shall be
present any business may be transacted which
might have been transacted at the meeting as
originally called, but only those stockholders
entitled to vote at the meeting as originally
noticed shall be entitled to vote at any
adjournment or adjournments thereof.
SECTION 5. Voting. Except as otherwise
provided in the Certificate of Incorporation, at
every meeting of stockholders each holder of
record of the issued and outstanding stock of
the Corporation entitled to vote thereat shall
be entitled to one vote, in person or by proxy,
for each share of stock held by such
stockholder. Shares of capital stock of this
Corporation belonging to the Corporation
directly or indirectly shall not be voted
directly or indirectly. At all meetings of
stockholders, a quorum being present, all
matters shall be decided by majority vote of the
shares of stock entitled to vote thereat, except
as otherwise required by the laws of the State
of Delaware. Unless demanded by a stockholder
of the Corporation present in person or by proxy
at any meeting of stockholders and entitled to
vote thereat or so directed by the chairman of
the meeting or required by the laws of the State
of Delaware, the vote thereat on any question
need not be by ballot. On a vote by ballot,
each ballot shall be signed by the stockholder
voting, or in his name by his proxy, if there be
such proxy, and shall state the number of shares
voted by him and the number of votes to which
each share is entitled.
SECTION 6. Closing of Transfer Books or
Fixing Record Date. The Board of Directors
shall have power to close the stock transfer
books of the Corporation for a period not
exceeding sixty (60) days preceding the date of
any meeting of shareholders or the date for
payment of any dividend or the date for the
allotment of rights or the date when any change
or conversion or exchange of capital stock shall
go into effect; provided, however that in lieu
of closing the stock transfer books as
aforesaid, the Board of Directors may fix in
advance a date not exceeding sixty (60) days
preceding the date of any meeting of
shareholders or the date for the payment of any
dividend or the date for the allotment of rights
or the date when any change or conversion or
exchange of capital stock shall go into effect
as a record date for the determination of the
shareholders entitled to notice of
<PAGE>
and to vote at any such meeting, or entitled to receive
payment of any such dividend, or to any such
allotment of rights, or to exercise the rights
in respect of any such change, conversion or
exchange of capital stock, and in such case only
such shareholders as shall be shareholders of
record on the date so fixed shall be entitled to
such notice of and to vote at such meeting, or
to receive payment of such dividend, or to
receive such allotment of rights, or to exercise
such rights, as the case may be, notwithstanding
any transfer of any stock on the books of the
Corporation after any such record date fixed as
aforesaid.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The property,
business and affairs of the Corporation shall be
managed by the Board of Directors.
SECTION 2. Number and Term of Holding
Office. The number of directors which shall
constitute the whole Board of Directors shall be
such number not fewer than one as shall from
time to time be fixed by the Board of Directors.
Each of the directors of the Corporation shall
hold office until the annual meeting next after
his election and until his successor shall be
elected and shall qualify or until his earlier
death or resignation or removal in the manner
hereinafter provided.
SECTION 3. Organization and Order of
Business. At each meeting of the Board of
Directors, the Chairman of the Board of
Directors or any director chosen by a majority
of the directors present thereat shall act as
chairman of the meeting and preside thereat.
The Secretary of the Corporation or, in the case
of his absence, any person whom the chairman
shall appoint, shall acts secretary of such
meeting and keep the minutes thereof.
SECTION 4. Resignations. Any director may
resign at any time by giving written notice of
his resignation to the Chairman of the Board of
Directors, the President or the Secretary of the
Corporation. Any such resignation shall take
effect at the time specified therein or, if the
time when it shall become effective shall not be
specified therein, it shall take effect when
accepted by action of the Board of Directors.
Except as aforesaid, the acceptance of such
resignation shall not be necessary to make it
effective.
SECTION 5. Removal of Directors. Any
director may be removed, either with or without
cause, at any time by vote of a majority in
interest of the stockholders of the Corporation.
<PAGE>
SECTION 6. Vacancies. Any vacancy in the
Board of Directors, arising from death,
resignation, removal, an increase
in the number of directors or any other cause,
may be filled either by a majority vote of the
remaining directors, although less than a
quorum, or by the stockholders of the
Corporation at the next annual meeting or any
special meeting called for the purpose.
SECTION 7. Pledge of Meeting. The Board
of Directors may hold its meetings at such place
or places within or without the State of
Delaware as the Board may from time to time by
resolution determine or as shall be designated
in the respective notices or waivers of notice
thereof.
SECTION 8. Meetings.
(A) Annual Meetings. As soon as
practicable after each annual election of
directors, the Board of Directors shall meet for
the purpose of organization and the transaction
of other business.
(B) Other Meetings. Other meetings
of the Board of Directors shall be held at such
times and places as the Board shall from time to
time determine or upon call by the Chairman of
the Board of Directors or the President of the
Corporation.
SECTION 9. Notice of Meeting. The
Secretary of the Corporation shall give notice
to each director of each meeting, including the
time and place of such meeting. Notice of each
such meeting shall be mailed to each
director, addressed to him at his residence or
usual place of business, at least three days
before the day on which such meeting is to be
held, or shall be sent to him by telegraph,
cable, wireless or other form of recorded
communication or be delivered personally or by
telephone not later than the day before the day
on which such meeting is to be held. Notice of
any meeting shall not be required to be given to
any director who shall attend such meeting. A
written waiver of notice, signed by the person
entitled thereto, whether before or after the
time stated therein, shall be deemed equivalent
to adequate notice.
SECTION 10. Quorum and Manner of Acting.
Except as provided by law, the Certificate of
Incorporation or these By-Laws, a majority of
the directors then in office shall be necessary
at any meeting of the Board of Directors in
order to constitute a quorum for the transaction
of business at such meeting, and the vote of a
majority of those directors present at any such
meeting at which a quorum is present shall be
necessary for the passage of any resolution or
act of the Board. In the absence of a quorum
for any such meeting, a majority of the
<PAGE>
directors present thereat may adjourn such
meeting from time to time until a quorum shall
be present thereat. Notice of any adjourned
meeting need not be given.
SECTION 11. Action by 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 a
written consent thereto is signed by all members
of the Board or of such committee, as the case
may be, and such written consent is filed with
the minutes of the proceedings of the Board or
such committee.
SECTION 12. Meetings by Telephone, etc.
Members of the Board of Directors, or of any
committee thereof, may participate in a meeting
of the Board, or of such committee, by means of
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 shall constitute presence in
person at such meeting.
SECTION 13. Compensation. Each director,
in consideration of his serving as such, shall
be entitled to receive from the Corporation such
amount per annum of such fees for attendance at
meetings of the Board of Directors or of any
committee thereof, or both, as the Board shall
from time to time determine. The Board may
likewise provide that the Corporation shall
reimburse each director or member of a committee
for any expenses incurred by him on account of
his attendance at any such meeting. Nothing
contained in this Section shall be construed to
preclude any director from serving the
Corporation in any other capacity and receiving
compensation therefor.
SECTION 14. Committees. The Board of
Directors, by resolution passed by a majority of
the whole Board, may designate members of the
Board to constitute one or more committees,
which shall in each case consist of such number
of directors, not fewer than two, and shall have
and may exercise such powers as the Board may by
resolution determine and specify in the
respective resolutions appointing them. A
majority of all the members of any such
committee may fix its rules of procedure,
determine its action and fix the time and place,
whether within or without the State of Delaware,
of its meetings and specify what notice thereof,
if any, shall be given, unless the Board shall
otherwise by resolution provide. The Board
shall have power to change the members of any
such committee at any time, to fill vacancies
therein and to discharge any such committee,
either with or without cause, at any time.
<PAGE>
ARTICLE IV
Officers
SECTION 1. Number. The officers of the
Corporation shall be a Chairman of the Board, a
President, one or more Vice Presidents, a
Treasurer and a Secretary. Each such officer
shall be elected by the Board of Directors at
its initial organization meeting and thereafter
at its annual meeting of the Board and shall
serve until his successor is elected or until
his earlier death or resignation or removal in
the manner hereinafter provided.
The Board may elect or appoint such other
officers of the Corporation (including one or
more Assistant Treasurers and one or more
Assistant Secretaries) as it deems necessary who
shall have such authority and shall perform such
duties as the Board may prescribe. If
additional officers are elected or appointed
during the year, each of them shall hold office
until the next annual meeting of the Board at
which officers are regularly elected or
appointed and until his successor is elected or
appointed or until his earlier death or
resignation or removal in the manner hereinafter
provided.
A vacancy in any office may be filled for
the unexpired portion of the term in the same
manner as provided for election or appointment
to such office.
All officers and agents elected or
appointed by the Board shall be subject to
removal at any time by the Board with or without
cause.
Any officer may resign at any time by
giving written notice to the President or the
Secretary of the Corporation, and such
resignation shall take effect at the time
specified therein or, if the time when it shall
become effective shall not be specified therein,
it shall take effect when accepted by action of
the Board. Except as aforesaid, the acceptance
of such resignation shall not be necessary to
make it effective.
SECTION 2. The Chairman of the Board.
The Chairman of the Board of the Corporation,
subject to the direction of the board of
Directors, shall be the chief executive officer
of Corporation, shall have general charge of the
business and affairs of the Corporation, shall
have the direction of all other officers, agents
and employees and may assign such duties to the
other officers of the Corporation as he deems
appropriate.
SECTION 3. The President. The President,
subject to the direction of the Board of
Directors and the Chairman of the
<PAGE>
Board, shall be the chief operating officer of the
Corporation and shall, in general, perform all
duties incident to the office of President. In
the absence or inability of the Chairman to act,
the President shall perform the duties of the
Chairman of the Board.
SECTION 4. Vice Presidents. Each Vice
President shall have such powers and perform
such duties as the Chairman of the Board or the
Board of Directors may from time to time
prescribe and shall perform such other duties as
may be prescribed by these By-Laws. At the
request of the President, or in case of his
absence or inability to act, any of the Vice
Presidents shall perform the duties of the
President and, when so acting, shall have all
the powers of, and be subject to all the
restrictions upon, the President.
SECTION 5. Treasurer. The Treasurer of
the Corporation shall have charge and custody of
and be responsible for all funds and securities
of the Corporation and its books of account.
SECTION 6. Secretary. The Secretary of
the Corporation shall keep the records of all
meetings of the stockholders and the Board of
Directors. He shall affix the seal of the
Corporation to all deeds, contracts, bonds or
other instruments requiring the corporate seal
when the same shall have been signed on behalf
of the Corporation by a duly authorized officer
and shall be custodian of all contracts, deeds,
documents and all other indicia of title to
properties owned by the Corporation and of its
other corporate records.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, etc.
SECTION 1. Execution of Documents. Any
member of the Board of Directors and any
officer, employee or agent of the Corporation
designated by the Board of Directors shall have
power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, checks, drafts and
other orders for the payment of money and other
documents for and in the name of the
Corporation, and the Board of Directors may
authorize any such officer, employee or agent to
delegate such power (including authority to
redelegate) by written instrument to other
officers, employees or agents of the
Corporation.
SECTION 2. Deposits. All funds of the
Corporation not otherwise employed shall be
deposited from time to time to the credit of the
Corporation or otherwise as the Board of
Directors, the Chairman of the Board, the
President or any other officer of
<PAGE>
the Corporation to whom power in that respect shall
have been delegated by the Board shall select.
ARTICLE VI
Books and Records
The books and records of the Corporation
may be kept at such places within or without the
State of Delaware as the Board of Directors may
from time to time determine.
ARTICLE VII
Seal
The Board may adopt a corporate seal, which
shall be in the form of a circle and shall bear
the full name of the Corporation and the word
"Delaware" and representing the year of its
incorporation.
ARTICLE VIII
Indemnification
To the extent permitted by Section 145 of
the General Corporation Law of the State of
Delaware, as now in effect and as from time to
time amended, or any successor provisions
thereof, 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
and whether or not such action is an action 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, employee
or agent of the Corporation or is or was serving
at the request of the Corporation as a director,
officer, employee or agent of another
corporation, partnership, joint venture, trust
or other enterprise.
ARTICLE IX
Shares and Their Transfer
SECTION 1. Certificates of Stock. Every
owner of stock of the Corporation shall be
entitled to have a certificate certifying the
number of shares owned by him or it in the
Corporation and designating the class of stock
to which such shares belong, which shall
otherwise be in such form as the Board of
Directors shall prescribe. Each such
certificate shall be signed by the Chairman of
the Board, the President or a Vice President and
the Treasurer or an Assistant Treasurer or the
<PAGE>
Secretary or an Assistant Secretary of the
Corporation. In case any officer or officers
who shall have signed any such certificate or
certificates shall cease to be such officer or
officers of the Corporation, whether because of
death, resignation, removal or otherwise, before
such certificate or certificates shall have been
delivered by the Corporation, such certificate
or certificates may nevertheless be adopted by
the Corporation and be issued and delivered as
though the person or persons who signed such
certificate had not ceased to be such officer or
officers of the Corporation.
SECTION 2. Record. A record shall be
kept of the name of the person, firm or
corporation owning the stock represented by each
certificate for stock of the Corporation issued,
the number of shares represented by each such
certificate, and the date thereof, and, in the
case of cancellation, the date of cancellation.
The person in whose name shares of stock stand
on the books of the Corporation shall be deemed
the owner thereof for all purposes as regards
the Corporation.
SECTION 3. Transfer of Stock. Transfers
of shares of the stock of the Corporation shall
be made only on the books of the Corporation by
the registered holder thereof, or by his
attorney thereunto authorized by power of
attorney duly executed and filed with the
Secretary of the Corporation, and on the
surrender of the certificate or certificates for
such shares properly endorsed.
SECTION 4. Lost, Destroyed or Mutilated
Certificate. In case of the alleged loss or
destruction or the mutilation of a certificate
representing stock of the Corporation, a new
certificate may be issued in place thereof, in
the manner and upon such terms as the Board of
Directors may prescribe.
ARTICLE X
Consent Order
SECTION 1. General Provisions.
Notwithstanding anything herein to the contrary,
the Corporation shall be bound by the terms and
provisions of the Final Order in The Matter of
The Valspar Corporation and McWhorter, Inc.,
File No. 931-0098 (1993) (the "Order"), until
the Order is of no further force or effect. In
the event of any conflict or inconsistency
between the other Articles of these By-Laws, or
any amendment thereto, and the Order, or any
amendment thereto, the Order shall govern. In
addition, in the event of any conflict or
inconsistency between the other Articles of
these By-Laws, or any amendment thereto, and
this Article X, this Article X shall govern.
<PAGE>
SECTION 2. Interim Board of Directors.
The directors of this Corporation, after the
Acquisition (as defined in the Order) and prior
to the distribution of the Corporation's stock
to the stockholders of Valspar, shall consist of
at least two non- Valspar directors, officers or
employees and no more than one Valspar director,
officer, employee or agent, provided, however,
that such Valspar director, officer, employee or
agent shall enter into a confidentiality
agreement prohibiting disclosure of confidential
information until the day after the divestitures
required by the Order have been completed and
shall not be a person involved in Valspar's
Coating Resins (as defined in the Order)
business. Such director who is also a Valspar
director, officer, employee or agent shall
participate in matters that come before the
Corporation's board of directors for the limited
purpose of considering a capital investment or
other transactions exceeding $500,000 and
carrying out Valspar's and the Corporation's
responsibilities under the Order. Except as
permitted by the Order, such director shall not
participate in any matter that would involve a
conflict of interest.
SECTION 3. Records. Meetings of the board
of directors of this Corporation during the term
of the Agreement to Hold Separate shall be
stenographically transcribed and the transcripts
retained for two years after the termination of
such agreement.
SECTION 4. Election of Directors. Within
seven days of the distribution or other
divestiture of the Corporation's stock by
Valspar, any director of the Corporation who is
also a Valspar director, officer, employee or
agent shall resign from the Corporation's board,
and the remaining directors of the Corporation
shall designate a new director or new directors
in accordance with the Order and these By-Laws
who are not directors, officers, employees or
agents of Valspar. In addition, the Corporation
shall, within twelve months of the distribution
or other divestiture of the Corporation stock by
Valspar, call a stockholders' meeting for the
purpose of electing directors.
SECTION 5. Officers and Directors. Except
as provided above, after completion of the
Acquisition (as defined in the Order), no
officer, director or employee of Valspar shall
concurrently serve as an officer, director or
employee of this Corporation nor shall any
officer, director or employee of this
Corporation serve concurrently as an officer,
director or employee of Valspar while the order
is in force and effect.
ARTICLE XI
Amendments
<PAGE>
Except for Article X hereof which may be
amended only to the extent such amendment is
consistent with the terms of the Order, or any
amendment thereto, these By-Laws, or any of
them, may be altered, amended or repealed, or
new By-Laws may be made, by the stockholders
entitled to vote thereon at any annual or
special meeting thereof or by the Board of
Directors.
McWHORTER TECHNOLOGIES, INC.
1996 INCENTIVE STOCK PLAN
1. Purpose. The 1996 Incentive Stock Plan (the "Plan") is
intended to provide incentives which will attract and retain highly competent
persons as officers, key employees and consultants of McWhorter Technologies,
Inc., a Delaware corporation (the "Company"), and its subsidiaries, by
providing them opportunities to acquire shares of Common Stock of the Company
("Common Stock") or to receive monetary payments based on the value of such
shares pursuant to the Benefits described herein.
2. Administration. The Plan will be administered by the
Compensation Committee of the Board of Directors of the Company or another
committee (the "Committee"), appointed by the Board from among its members
consisting of two or more non-employee Directors who shall meet the
requirements for "disinterested persons" as set forth in Securities and
Exchange Commission Regulation Section 240.16b-3 ("Rule 16b-3") or any
successor regulation.
3. Participants. Participants will consist of such key employees
(including officers) and consultants of the Company or its subsidiaries as the
Committee in its sole discretion determines to be significantly responsible
for the success and future growth and profitability of the Company and whom
the Committee may designate from time to time to receive Benefits under the
Plan. Designation of a participant in any year shall not require the
Committee to designate such person to receive a Benefit in any other year or,
once designated, to receive the same type or amount of Benefit as granted to
the participant in any year. The Committee shall consider such factors as it
deems pertinent in selecting participants and in determining the type and
amount of their respective Benefits.
4. Types of Benefits. Benefits under the Plan ("Benefits") may
be granted in any one or a combination of (a) Incentive Stock Options; (b) Non-
qualified Stock Options; (c) Stock Appreciation Rights; (d) Stock Awards; and
(e) Tax-Offset Bonus Rights; all as described below.
5. Shares Reserved under the Plan. There is hereby reserved for
issuance under the Plan an aggregate of 500,000 shares of Common Stock,
which may be authorized but unissued or treasury shares. In addition, any
shares of Common Stock remaining available for Benefits under the Company's
1994 Stock Incentive Plan, as amended, (the "1994 Plan") on the date of the
1996 annual meeting of shareholders of the Company and any shares of
Common Stock subject to Benefits under the Company's 1994 Plan on such date
which thereafter lapse, expire or are terminated shall thereafter be
available for Benefits hereunder. All of such shares may, but need not, be
issued pursuant to the exercise of Incentive Stock Options. The maximum
number of option shares which may be awarded to any participant in any fiscal
year during the term of the Plan is 50,000 shares. No more than 50,000
shares may be issued as Stock Awards not based on performance goals during
the term of the Plan. Any shares subject to stock options or Stock
Appreciation Rights or issued under such options or rights or as Stock Awards
may thereafter be subject to new options, rights or awards
<PAGE>
under this Plan if there is a lapse, expiration, termination or cancellation of
any such options or rights prior to issuance of the shares or if shares are
issued under such options or rights or as such awards, and thereafter are
reacquired by the Company pursuant to rights reserved by the Company upon
issuance thereof.
6. Stock Options. Stock options shall consist of options to
purchase shares of Common Stock and shall be either incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or any successor legislation ("Incentive Stock Options") or non-
qualified stock options ("Non-qualified Stock Options") as determined by the
Committee. The option price shall be not less than 100% of the fair market
value of the Common Stock on the date the option is granted. Said purchase
price may be paid by check or, in the discretion of the Committee, by the
delivery (or certification of ownership) of shares of Common Stock of the
Company owned by the participant for a period of at least six months. In the
discretion of the Committee, payment may also be made by delivering a
properly executed exercise notice to the Company, together with a copy of the
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the exercise price. Non-qualified
Stock Options shall be exercisable not earlier than six months and not later
than fifteen years after the date they are granted and Incentive Stock
Options shall be exercisable not earlier than six months and not later than
ten years after the date they are granted. In the event of termination of
employment or consulting arrangement, all stock options shall terminate at
such times and upon such conditions or circumstances as the Committee shall
in its discretion set forth in such option at the date of grant. The
aggregate fair market value (determined as of the time the option is granted)
of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by a participant during any calendar year
(under all option plans of the Company and its subsidiary corporations) shall
not exceed $100,000. The Committee may provide, either at the time of grant
or subsequently, that a stock option include the right to acquire a replace-
ment stock option upon exercise of the original stock option (in whole or in
part) prior to termination of employment or consulting arrangement of the
participant and through payment of the exercise price in shares of Common
Stock. The terms and conditions of a replacement option shall be determined
by the Committee in its sole discretion.
7. Stock Appreciation Rights. The Committee may, in its
discretion, grant Stock Appreciation Rights to the holders of any stock options
granted hereunder. In addition, Stock Appreciation Rights may be granted
independently of and without relation to options. Each Stock Appreciation
Right shall be subject to such terms and conditions consistent with the Plan as
the Committee shall impose from time to time, including the following:
(a) A Stock Appreciation Right relating to an option may
be made part of such option at the time of its grant or at
any time there-after up to six months prior to its expiration.
(b) Each Stock Appreciation Right will entitle the holder
to elect to receive the appreciation in the fair market value
of the shares subject thereto up to the date the right is
exercised. In the case of a right issued in relation to a
stock option, such appreciation shall be measured from not
less than the option
<PAGE>
price and in the case of a right issued independently of any
stock option, such appreciation shall be measured from not
less than the fair market value of the Common Stock on the
date the right is granted. Payment of such appreciation shall
be made in cash or in Common Stock, or a combination thereof,
as set forth in the award, but no Stock Appreciation Right
shall entitle the holder to receive, upon exercise thereof,
more than the number of shares of Common Stock (or cash of
equal value) with respect to which the right is granted.
(c) Each Stock Appreciation Right will be exercisable at the times
and to the extent set forth therein, but no Stock Appreciation
Right may be exercisable more than fifteen years after it was
granted. Exercise of a Stock Appreciation Right shall reduce
the number of shares issuable under the Plan (and the related
option, if any) by the number of shares with respect to
which the right is exercised.
8. Stock Awards. Stock Awards will consist of Common Stock
transferred to participants without other payment therefor as additional
compensation for services to the Company and its subsidiaries. Stock Awards
shall be subject to such terms and conditions as the Committee determines
appropriate, including, without limitation, restrictions on the sale or other
disposition of such shares, rights of the Company to reacquire such shares
upon termination of the participant's employment or consulting arrangement
within specified periods and conditions requiring that the shares be earned
in whole or in part upon the achievement of performance goals established by
the Committee over a designated period of time.
9. Tax-Offset Bonus Rights. The Committee, in its sole
discretion, may grant Tax-Offset Bonus Rights with respect to Non-qualified
Stock Options. Such Tax-Offset Bonus Rights may be granted to a participant
at the time of the grant of the related Non-qualified Stock Option or subsequent
thereto, but only with respect to the related Non-qualified Stock Option. A
Tax-Offset Bonus Right shall entitle the participant to receive from the
Company or a subsidiary upon exercise of the related Non-qualified Stock
Option an amount in cash equal to (1) the excess, if any, of the aggregate
fair market value of shares acquired by the exercise of a Non-qualified Stock
Option on the date of exercise over the aggregate purchase price of the
shares acquired by such exercise, multiplied by (2) a fraction, the numerator
of which is not more than the maximum marginal individual income tax rate,
and the denominator of which is one minus such rate. The Committee shall
determine all of the terms and provisions of any Tax-Offset Bonus Right
including but not limited to the date of grant, the term, the effect of
employment or consulting arrangement termination and death.
10. Adjustment Provisions.
(a) If the Company shall at any time change the number
of issued shares of Common Stock without new consideration
to the Company (such as by stock dividends or stock splits),
the total number of shares reserved for issuance under this
Plan and the number of shares covered by each outstanding
Benefit
<PAGE>
shall be adjusted so that the aggregate consideration
payable to the Company and the value of each such Benefit
shall not be changed. The Committee may also provide for the
continuation of Benefits or for other equitable adjustments
after changes in the Common Stock resulting from
reorganization, sale, merger, consolidation or similar
occurrence.
(b) Notwithstanding any other provision of this Plan, and
without affecting the number of shares otherwise reserved or
available hereunder, the Committee may authorize the issuance
or assumption of Benefits in connection with any merger,
consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem
appropriate.
(c) In the case of any merger, consolidation or combination of the
Company with or into another corporation, other than a
merger, consolidation or combination in which the Company
is the continuing corporation and which does not result in the
outstanding Common Stock being converted into or exchanged for
different securities, cash or other property, or
any combination thereof (an "Acquisition"):
(i) any participant to whom a stock option has been granted
under the Plan shall have the right (subject to the
provisions of the plan and any limitation applicable to
such option) thereafter and during the term of such
option, to receive upon exercise thereof the Acquisition
Consideration (as defined below) receivable upon such
Acquisition by a holder of the number of shares of Common
Stock which might have been obtained upon exercise of
such option or portion thereof, as the case may be,
immediately prior to such Acquisition;
(ii) any participant to whom a Stock Appreciation Right has
been granted under the Plan shall have the right (subject
to the provisions of the Plan and any limitation
applicable to such right) thereafter and during the term
of such right to receive upon exercise thereof
the difference between the aggregate fair market value
on the applicable date (as set forth in such right) of
the Acquisition Consideration receivable upon
such Acquisition by a holder of the number of shares of
Common Stock which might have been obtained upon exercise
of the option related thereto or any portion thereof, as
the case may be, immediately prior to such Acquisition
and the aggregate option price of the related option, or
the aggregate fair market value on the date of grant of
the right, whichever is applicable.
The term "Acquisition Consideration" shall mean the kind and amount
of shares of the surviving or new corporation, cash, securities, evidence of
indebtedness, other property or any
<PAGE>
combination thereof receivable in respect of one share of Common Stock of
the Company upon consummation of an Acquisition.
11. Nontransferability. Each Benefit granted under the Plan shall
not be transferable otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during a participant's lifetime, only
by him or his guardian or legal representative. In the event of the death of
a participant, each Benefit theretofore granted to him shall be exercisable
within the period after his death established by the Committee at the time
of grant (but not beyond the stated duration of the Benefit) and then only:
(a) By the executor or administrator of the estate of the
deceased participant or the person or persons to whom the
deceased participant's rights under the Benefit shall pass by
will or the laws of descent and distribution; and
(b) To the extent that the deceased participant was entitled to do
so at the date of his death.
Notwithstanding the foregoing, at the discretion of the Committee, an award of
a Benefit may permit the transferability of the Benefit by the participant
solely to members of the participant's immediate family or trusts or family
partnerships for the benefit of such persons subject to such terms and
conditions as may be established by the Committee.
12. Other Provisions. The award of any Benefit under the Plan
may also be subject to such other provisions (whether or not applicable to the
Benefit awarded to any other participant) as the Committee determines
appropriate, including without limitation, provisions for the installment
purchase of Common Stock under Stock Options, provisions for the installment
exercise of Stock Appreciation Rights, provisions to assist the participant in
financing the acquisition of Common Stock, restrictions on resale or other
disposition, provisions for the acceleration of exercisability of Benefits in
the event of a change of control of the Company, provisions for the payment
of the value of the Benefits to participants in the event of a change of
control of the Company, provisions to comply with Federal and state
securities laws, or understandings or conditions as to the participant's
employment or consulting arrangement in addition to those specifically
provided for under the Plan.
13. Rules. The Committee may establish such rules and
regulations as it considers desirable for the administration of the Plan.
14. Manner of Action by Committee. A majority of the members
of the Committee qualified to act on a question may act by meeting or by
writing signed without meeting and may execute, or delegate to one of its
members authority to execute any instrument or document required. The
Committee may delegate the performance of ministerial functions in connection
with the Plan to such person or persons as the Committee may select. The costs
of administration of the Plan will be paid by the Company.
15. Fair Market Value. The fair market value of the Common
Stock at any time shall be determined in such manner as the Committee may
deem equitable or as required by applicable law or regulation.
<PAGE>
16. Taxes. The Company shall be entitled to pay or withhold the
amount of any tax attributable to any shares deliverable or amounts payable
under the Plan after giving the person entitled to receive such amount notice as
far in advance as practicable, and the Company may defer making delivery as to
any Benefit if any such tax may be pending until indemnified to its
satisfaction. When a person is required to pay to the Company an amount
required to be withheld under applicable tax laws in connection with
exercises of Non-qualified Stock Options or other Benefits under the Plan,
the Committee may, in its discretion and subject to such rules as it may adopt,
permit such person to satisfy the obligation, in whole or in part, by
electing to have the Company withhold shares of Common Stock having a fair
market value equal to the amount required to be withheld.
17. Tenure. A participant's right, if any, to continue to serve the
Company and its subsidiaries as an officer, employee, consultant or otherwise,
shall not be enlarged or otherwise affected by his designation as a participant
under the Plan.
18. Amendment and Termination. The terms and conditions
applicable to any Benefit granted under the Plan may be amended or modified
by mutual agreement between the Company and the participant or such other
persons as may then have an interest therein. Also, by mutual agreement
between the Company and a participant hereunder, or under any other present or
future plan of the Company, stock options or other Benefits may be granted to
such participant in substitution and exchange for, and in cancellation of, any
Benefits previously granted such participant under this Plan, or any Benefit
previously or hereafter granted to him under any other present or future plan of
the Company. The Board of Directors may amend the Plan from time to time or
terminate the Plan at any time. However, no action authorized by this paragraph
shall reduce the amount of any existing Benefit or change the terms and
conditions thereof without the participant's consent. No amendment of the Plan
shall, without approval of the shareholders of the Company, (i) increase the
total number of shares which may be issued under the Plan or increase the
amount or type of Benefits that may be granted under the Plan; (ii) change
the minimum purchase price, if any, of Common Stock which may be made subject
to the Benefits under the Plan; or (iii) modify the requirements as to
eligibility for Benefits under the Plan. However, the Board of Directors may
amend the Plan in any respect without shareholder approval if shareholder
approval is not then required to comply with Rule 16b-3 or other similar
requirements.
19. Shareholder Approval. The Plan was adopted by the Board of
Directors of the Company on December 13, 1995. The Plan and any Benefits
granted hereunder shall be null and void if shareholder approval is not obtained
within twelve (12) months of the adoption of the Plan by the Board of
Directors. This Plan shall continue in effect until terminated by the Board
pursuant to Section 18; provided, however, that no Incentive Stock Option
shall be granted more than ten years after the date of the adoption of this
Plan by the Board.
Exhibit 10.25
McWHORTER TECHNOLOGIES, INC.
1996 NONEMPLOYEE DIRECTOR STOCK OPTION AND AWARD PLAN
1. Purpose. The 1996 Nonemployee Director Stock Option and Award
Plan (the "Plan") is intended to provide incentives which will attract and
retain outstanding individuals to serve as members of the Board of Directors
of McWhorter Technologies, Inc., a Delaware corporation, (the "Company") by
providing such persons opportunities to acquire shares of Common Stock of the
Company (the "Common Stock") thereby strengthening the mutuality of interest
between such persons and the Company's stockholders.
2. Participants. Participation in this Plan is limited to
members of the Board of Directors of the Company who are not salaried
officers or employees of the Company or any of its direct or indirect
subsidiaries (a "Nonemployee Director" or "Participant").
3. Shares Reserved under the Plan. There is hereby reserved for
issuance under the Plan an aggregate of 50,000 shares of Common Stock, which
may be authorized but unissued or treasury shares. If there is a lapse,
expiration, termination or cancellation of any option granted under this
Plan, all unissued shares subject to or reserved for such option may again be
used for new options granted under this Plan.
4. Options to be Granted under the Plan. Effective on the date
of his or her initial election to the Board of Directors, each Nonemployee
Director will automatically be granted a non-qualified stock option to purchase
10,000 shares of Common Stock. Effective on the date of the initial election
of a Nonexecutive Director as Chairman of the Board of Directors, such person
shall automatically be granted a non-qualified stock option to purchase 25,000
shares of Common Stock.
5. Option Exercise Price. Each option granted under this Plan
shall be exercisable at an option price equal to the Fair Market Value of the
Common Stock on the date immediately preceding the date of grant.
6. Limitations on Exercise. Any option granted under this Plan
may be exercised (in accordance with Section 7 hereof) in whole or in part,
from time to time after the date granted, subject to the following limitations:
(a) No option granted hereunder may be exercised during the first
six months following the date such option was granted.
Thereafter, each option may be exercised in full.
<PAGE>
(b) Any option granted under this Plan may not be exercised:
(i) more than six months after termination of any Nonemployee
Director's service as a member of the Board for any reason
other than death or retirement (and then only to the extent
that the Nonemployee Director could have exercised
such option on the date of termination); or
(ii) more than twelve months after a Nonemployee Director's
retirement from the Board or death (and then only to the
extent that the Nonemployee Director could have exercised
such option on the date of termination);
provided, however, that no option granted hereunder may be exercised more
than ten years from the date the option is granted.
7. Method and Time of Exercise; Delivery of Certificates. Any
option granted under this Plan shall be deemed exercised on the date written
notice of exercise is received by the Chief Financial Officer or Treasurer of
the Company at the Company's corporate headquarters. Such notice shall be
accompanied by: (i) a check payable to the Company for the purchase price of
the shares to be purchased; or (ii) delivery (or certification of ownership)
of shares of Common Stock owned for at least six months whose Fair
Market Value on the date of exercise equals the purchase price of the shares
to be purchased; or (iii) any combination of the foregoing. A Participant
may also use cashless exercise as permitted under the Federal Reserve Board's
Regulation T.
8. Deferred Stock. Each Nonexecutive Director shall have the right
to elect to receive a deferred stock award under this Plan in lieu of such
director's annual retainer. For purposes of this Section "retainer" means
the annualretainer to be paid by the Company to a Nonemployee Director for a
given fiscal year of the Company with respect to such person's service on
the Board of Directors for such fiscal year, exclusive of fees relating to such
person's attendance at meetings of the Board of Directors and committees
thereof. The number of shares of deferred stock to be awarded in lieu
of the retainer shall be determined by dividing the Nonexecutive Director's
annual retainer by the Fair Market Value of the Common Stock on the date the
retainer is payable. The shares of deferred stock to be issued to the
Nonexecutive Director pursuant to this Section shall be issued to the
Nonexecutive Director or, in the case of the Nonexecutive Director's death, to
the Nonexecutive Directors' estate, thirty days after the Nonexecutive
Director ceases to be a director of the Company. Prior to that time the
Nonexecutive Director will have no rights as a stockholder of the Company
with respect to the deferred stock award.
9. Nontransferability. Any option or deferred stock award
granted under this Plan shall not be transferable other than by will or the
laws of descent and distribution, and any option shall be exercisable, during
the Participant's lifetime, only by the Participant or the
<PAGE>
Participant's guardian or legal representative. If a Nonemployee Director dies
during the option period, any option granted to such Participant may be
exercised by his estate or the person to whom the option passes by will
or the laws of descent and distribution, but only in accordance with
Section 6 above. Notwithstanding the foregoing, an option or deferred stock
award will automatically become transferable to the Participant's immediate
family or trusts or family partnerships for the benefit of such persons if
and to the extent the Securities and Exchange Commission specifically
removes the transferability restrictions from Securities and Exchange
Commission Rule 16b-3 ("Rule 16b-3").
10. Other Provisions; Securities Registration. The grant of any
option or deferred stock award under the Plan may also be subject to other
provisions as counsel to the Company deems appropriate, including, without
limitation, such provisions as may be appropriate to comply with federal or
state securities laws and stock exchange or stock market listing requirements.
11. Definition of Fair Market Value. The term "Fair Market Value"
shall mean, as of any date, the closing price of the Common Stock, as
reflected in the New York Stock Exchange Composite Transaction Quotations for
the date of calculation (or such other consolidated transaction reporting
system on which such Common Stock is primarily traded) for such day, or if
such Common Stock was not traded on such day, then the next preceding day on
which the stock was traded, all as reported by such source as the Board of
Directors may select.
12. Adjustment Provisions. If the Company shall at any time
change the number of issued shares of Common Stock without new
consideration to the Company (such as by stock dividend or stock split), the
total number of shares reserved for issuance under this Plan and the number
of shares covered by each outstanding option and deferred stock award shall be
automatically adjusted so that the aggregate consideration payable to the
Company and the value of each option and deferred stock award shall not be
changed. If, during the term of any option or deferred stock award granted
under this Plan, the Common Stock of the Company shall be changed into
another kind of stock, securities, cash or other property whether as a result
of reorganization, sale, merger, consolidation, or other similar transaction,
the Board of Directors shall cause adequate provision to be made whereby the
Participants shall thereafter be entitled to receive, upon the due exercise
of any outstanding options and upon issuance of shares of Common Stock pursuant
to any deferred stock awards, the stock, securities, cash or other property the
Participants would have been entitled to receive immediately prior to the
effective date of any such transaction for shares of Common Stock which could
have been acquired through the exercise of such options or were issuable
pursuant to deferred stock awards.
13. Amendment or Discontinuation of Plan. The Board of Directors
may amend the Plan at any time or suspend or discontinue the Plan at any
time, but no such action shall adversely affect any outstanding option or
deferred stock award; provided that this Plan may not be amended more
frequently than once every six months and no amendment shall be adopted which
would result in any Nonemployee Director losing his or her status as a
"disinterested" administrator under Rule 16b-3 with respect to any employee
benefit plan of the Company or result in the Plan losing its status as a
protected plan under Rule 16b-3.
<PAGE>
14. Stockholder Approval. The Plan was adopted by the Board of
Directors on December 13, 1995, subject to stockholder approval. The Plan
and any benefits granted thereunder shall be null and void if stockholder
approval is not obtained at the next annual meeting of stockholders.
Exhibit 10.26
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this
"Agreement") is made as of September 1, 1996 by
and among McWhorter Technologies AB, a
corporation organized under the laws of Sweden
(the "Company"), McWhorter Technologies, Inc., a
corporation organized under the laws of the
State of Delaware, U.S.A. ("McWhorter"), AB
Wilh. Becker, a corporation organized under the
laws of Sweden ("Becker"), and Tikkurila Oy, a
corporation organized under the laws of Finland
("Tikkurila"). McWhorter, Becker, and Tikkurila
are hereinafter sometimes collectively referred
to, together with their respective subsidiaries,
as "Stockholders".
Prior hereto, the Company was
organized as a wholly-owned subsidiary of Becker
as an inactive shelf company. Thereafter, the
Company acquired all of the capital stock of
McWhorter Technologies Limited, a corporation
organized under the laws of England ("McWhorter
England"), and of McWhorter Technologies Oy, a
corporation organized under the laws of Finland
("McWhorter Finland"). Thereafter, the Company
issued to each of Tikkurila, Becker, and
McWhorter 360,000 shares of its capital stock in
exchange for 36 million SEK from each such
company. Thereafter, the Company contributed 20
million SEK to each of McWhorter Finland and
McWhorter England in respect of its share
capital. Thereafter, (i) the Company acquired
substantially all of the assets of the resin
business of Soab AB, a corporation organized
under the laws of Sweden and a wholly-owned
subsidiary of Becker ("Soab AB"), located in
Molndal, Sweden in exchange for 35 million SEK
in cash and an obligation to pay an additional
amount of 52 million SEK with interest, (ii)
McWhorter Finland acquired (x) substantially all
of the assets of the resin business of Tikkurila
located in Vantaa, Finland in exchange for 33
million SEK in cash and an obligation to pay an
additional amount of 29 million SEK with
interest and (y) certain intellectual property
of Kemira Coatings Limited, a corporation
organized under the laws of England and a
wholly-owned subsidiary of Tikkurila ("Kemira
Coatings") in exchange for an obligation to pay
20 million SEK, and (iii) McWhorter England
acquired substantially all of the assets of the
resin business of Kemira Coatings located in
Bury, England in exchange for 10 million SEK in
cash and an obligation to pay an additional
amount of 15.3 million SEK with interest. The
amounts set forth in this paragraph are
represented in "SEK" but may be paid in other
currency.
Concurrent with the execution of
this Agreement the parties and others are
executing those agreements set forth in
paragraph 8 below.
The Company and the Stockholders
desire to enter into this Agreement for the
purposes, among others, of (i) establishing
<PAGE>
the composition of the Company's Board of Directors
(the "Board"), (ii) assuring continuity in the
management and ownership of the Company, (iii)
limiting the manner and terms by which the
Stockholders' capital stock of the Company may
be transferred, and (iv) providing for the
noncompetition by the Stockholders with the
Company.
NOW, THEREFORE, in consideration of
the mutual covenants contained herein and other
good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged,
the parties to this Agreement hereby agree as
follows:
1. Board of Directors.
(a) From and after the Closing (as
defined in the Purchase Agreement) and until the
provisions of this paragraph 1 cease to be
effective, each Stockholder shall vote all of
its Stockholder Shares (as defined below) and
shall take all other necessary or desirable
actions within its control, and the Company
shall take all necessary and desirable actions
within its control (including, without
limitation, calling special board and
stockholder meetings), so that:
(i) the authorized number of
directors on the Board shall be established at
six directors plus an additional number of
directors sufficient to satisfy statutorily
required directorships;
(ii) two representatives
designated by each Stockholder shall be elected
to the Board; provided, however, that in the
event McWhorter owns a majority of the capital
stock of the Company, each of Tikkurila and
Becker shall (provided each owns at least 10% of
the outstanding shares of capital stock of the
Company) designate one representative to be
elected to the Board and McWhorter shall
designate four representatives to be elected to
the Board;
(iii) the composition of the
board of directors of each of the Company's
subsidiaries (a "Sub Board") with respect to the
Stockholder's nominees shall be the same as that
of the Board;
(iv) the Chairman of the
Board shall be designated by McWhorter and the
Chairman of the Board shall cast the deciding
vote in event of a tie in a vote by the Board;
(v) the removal from the
Board or a Sub Board (with or without cause) of
any representative designated by a
<PAGE>
Stockholder hereunder shall be at the written request of the
Stockholder making such designation; and
(vi) in the event that any
representative designated by a Stockholder
hereunder for any reason ceases to serve as a
member of the Board or a Sub Board during his
term of office, the resulting vacancy on the
Board or the Sub Board shall be filled by a
representative designated by the Stockholder
making such designation.
(b) The Company shall pay the
reasonable out-of-pocket expenses incurred by
each director designated by a Stockholder in
connection with attending the meetings of the
Board, any Sub Board and any committee thereof.
(c) If any party fails to
designate a representative to fill a
directorship pursuant to the terms of this
paragraph 1, the election of a person to such
directorship shall be accomplished in accordance
with the Company's bylaws and applicable law.
(d) "Stockholder Shares" means (i)
any shares of any class or series of capital
stock of the Company purchased or otherwise
acquired by any Stockholder, (ii) any equity
securities issued or issuable directly or
indirectly with respect to the capital stock of
the Company by way of stock dividend or stock
split or in connection with a combination of
shares, recapitalization, merger, consolidation
or other reorganization and (iii) any securities
or instruments that may be converted into or
exchangeable for any equity securities.
1A. Stockholder Policy. The
Stockholders shall adopt an initial policy of
causing the Company to distribute to the
Stockholders 30% of the Company's annual net
income; provided, however, that the Stockholders
may revise such policy at their discretion.
2. Transfer and Issuance of
Stockholder Shares.
(a) Transfer of Stockholder
Shares. No Stockholder shall sell, transfer,
assign, pledge or otherwise dispose of (a
"Transfer") any interest in any Stockholder
Shares except pursuant to the provisions of this
paragraph 2. Each Stockholder agrees not to
consummate any Transfer until 60 days after the
later of the delivery to the Company and the
other Stockholders of such Stockholder's Offer
Notice, unless the parties to the Transfer have
been finally determined pursuant to this
paragraph 2 prior to the expiration of such
60-day period (the "Election Period").
<PAGE>
(b) First Offer Right. At least
60 days prior to making any Transfer of any
Stockholder Shares, the transferring Stockholder
(the "Transferring Stockholder") shall deliver a
written notice (the "Offer Notice") to the
Company and the other Stockholders (the "Other
Stockholders"). The Offer Notice shall disclose
in reasonable detail the proposed number of
Stockholder Shares to be transferred and the
proposed terms and conditions of the Transfer.
McWhorter may elect to purchase all or a portion
of the Stockholder Shares specified in the Offer
Notice at the price and on the terms specified
therein by delivering written notice of such
election to the Transferring Stockholder and the
Other Stockholders as soon as practical but in
any event within 30 days after the delivery of
the Offer Notice. If McWhorter has not elected
to purchase all of the Stockholder Shares within
such 30-day period, each Other Stockholder may
elect to purchase all (but not less than all) of
its Pro Rata Share (as defined below) of the
Stockholder Shares specified in the Offer Notice
at the price and on the terms specified therein
by delivering written notice of such election to
the Transferring Stockholder as soon as
practical but in any event within 45 days after
delivery of the Offer Notice. Any Stockholder
Shares not elected to be purchased by the end of
such 45-day period shall be reoffered for the
15- day period prior to the expiration of the
Election Period by the Transferring Stockholder
on a pro rata basis to the Other Stockholders
who have elected to purchase their Pro Rata
Share. If McWhorter or any Other Stockholders
have elected to purchase Stockholder Shares from
the Transferring Stockholder, the transfer of
such shares shall be consummated as soon as
practical after the delivery of the election
notices, but in any event within 90 days after
the expiration of the Election Period. To the
extent that McWhorter and the Other Stockholders
have not elected to purchase all of the
Stockholder Shares being offered, the
Transferring Stockholder may, within 180 days
after the expiration of the Election Period and
subject to the provisions of subparagraph (c)
below, transfer such Stockholder Shares to one
or more third parties at a price no less than
the price per share specified in the Offer
Notice and on other terms no more favorable to
the transferees than offered to McWhorter and
the Other Stockholders in the Offer Notice. The
purchase price specified in any Offer Notice
shall be payable solely in cash at the closing
of the transaction or in installments over time.
Each Stockholder's "Pro Rata Share" shall be
based upon such Stockholder's proportionate
ownership of all Stockholder Shares on a
fully-diluted basis.
(c) Preemptive Right. If the
Board members nominated by McWhorter, on behalf
of the Stockholders, determine that the Company
needs, requires, or desires additional capital
for the purpose of major capital improvements,
expansions, or acquisitions, the Stockholders
shall authorize the issuance and sale to McWhorter
<PAGE>
of shares of capital stock in exchange
therefor. Any issuances and sales of capital
stock other than exclusively to McWhorter
pursuant to the previous sentence shall be
determined by all the Stockholders. In
addition, if the Stockholders otherwise
authorize the issuance or sale of any shares of
capital stock, the Company shall first offer to
sell McWhorter such shares of capital stock.
The number of shares of capital stock to be
issued, if any, pursuant to this clause (c) by
the Company shall be sufficient to cause
McWhorter's fully-diluted percentage ownership
of the capital stock of the Company to be equal
to (x) McWhorter's proportion of the Company's
stockholders' equity, as set forth on the
Company's most recent quarterly balance sheet,
plus the fair market value of the amount of
capital contributed by McWhorter (which in the
case of acquisitions of ongoing business shall
mean the total consideration paid or to be paid
therefor), in cash or kind, divided by (y) the
Company's stockholders' equity, as set forth on
the Company's most recent quarterly balance
sheet, plus the fair market value of the amount
of capital contributed by McWhorter, in cash or
kind; provided, however, that notwithstanding
the foregoing, the Company shall use reasonable
efforts to maintain a target ratio of
stockholders' equity to total assets (each as
set forth on a then current balance sheet of the
Company) of not less than 40%.
(d) Sale of the Company. If the
Board and holders of a majority of the shares of
capital stock of the Company then outstanding
approve the sale of the Company to an
independent third party (whether by merger,
consolidation, sale of all or substantially all
of its assets, or sale of all or substantially
all of the outstanding shares of capital stock)
(an "Approved Sale"), each Stockholder shall
consent to, vote for, and raise no objections
against the Approved Sale and, if the Approved
Sale is structured as a sale of stock, shall
agree to sell all Stockholder Shares held by
such Stockholder on the terms and conditions
approved by the Board and the holders of a
majority of the shares of capital stock of the
Company then outstanding, and each Stockholder
shall take all necessary and desirable actions
in connection with the consummation of an
Approved Sale. For purposes of this paragraph
2(d), an "independent third party" is any person
who (i) alone or together with one or more other
persons, does not own 5% or more of the
outstanding shares of capital stock on a
fully-diluted basis, and (ii) is not
controlling, controlled by, or under common
control with any owner of 5% or more of the
outstanding shares of capital stock on a
fully-diluted basis.
(e) Permitted Transfers. The
restrictions contained in this paragraph 2 shall
not apply with respect to any Transfer of
Stockholder Shares by any Stockholder to any
other person controlling, controlled by, or
under common control with such
<PAGE>
Stockholder (collectively referred to herein as "Permitted
Transferees"); provided that the restrictions
contained in this paragraph 2 shall continue to
be applicable to the Stockholder Shares after
any such Transfer and provided further that the
transferees of such Stockholder Shares shall
have agreed in writing to be bound by the
provisions of this Agreement affecting the
Stockholder Shares so transferred.
3. Legend. Each certificate
evidencing Stockholder Shares and each
certificate issued in exchange for or upon the
transfer of any Stockholder Shares shall be
stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented by this
certificate are subject to a Stockholders
Agreement dated as of _________, among the
issuer of such securities (the "Company") and
the Company's stockholders. A copy of such
Stockholders Agreement will be furnished without
charge by the Company to the holder hereof upon
written request."
The Company shall imprint such
legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof.
4. Transfer. Prior to
transferring any Stockholder Shares to any
person or entity, the transferring Stockholder
shall cause the prospective transferee to
execute and deliver to the Company and the other
Stockholders a counterpart of this Agreement.
5. Put Arrangement.
(a) At any time during the Put
Exercise Period, each of Becker and Tikkurila
shall have the right to require McWhorter to
purchase all but not less than all of its
Stockholder Shares at the Put Price by
delivering a written notice to McWhorter (each,
a "Put Notice"). The "Put Exercise Period"
shall be the 180- day period following the date
McWhorter acquires a majority of the outstanding
shares of capital stock of the Company on a
fully-diluted basis.
(b) Upon the delivery of each Put
Notice, McWhorter, Becker, and Tikkurila shall
in good faith promptly determine the Put Price
as provided hereunder, and within 180 days after
the Put Price has been determined, McWhorter
will purchase and each of Becker and Tikkurila,
as applicable, will sell its Stockholder Shares
at a mutually agreeable time and place (the "Put
Closing").
(c) At the Put Closing, each of
Becker and Tikkurila, as applicable, shall
deliver to McWhorter duly executed instruments
transferring its Stockholder Shares to McWhorter
against payment of
<PAGE>
the appropriate Put Price by
cashier's or certified checks payable to each of
Becker and Tikkurila or by wire transfer of
immediately available funds to accounts
designated by each of Becker and Tikkurila.
(d) The "Put Price" of each of
Becker's and Tikkurila's total number of
Stockholder Shares to be purchased by McWhorter
shall mean 5.5 multiplied by (x) one half of the
Company's consolidated earnings before interest,
taxes, depreciation, and amortization ("EBITDA")
for the preceding eight quarters as set forth on
the Company's income statements relating to such
quarters less long-term indebtedness, multiplied
by (y) the percentage ownership of all
Stockholder Shares owned on a fully-diluted
basis by Becker and Tikkurila, respectively.
(e) The terms of this paragraph 5
are subject to the terms of paragraph 6(b) in
the event a single capital contribution event
causes either Becker or Tikkurila's percentage
ownership of the capital stock of the Company to
fall below 10%.
6. Call Arrangements.
(a) Fifth Anniversary.
(i) In the event McWhorter
owns less than a majority of the outstanding
shares of capital stock on a fully-diluted basis
on the fifth anniversary hereof, at any time
during the Call Exercise Period, McWhorter shall
have the right to purchase pro rata from Becker
and Tikkurila a sufficient number of Stockholder
Shares held by Becker and Tikkurila at the Call
Price in order that following such purchase
McWhorter shall own 51% of the outstanding
capital stock of the Company on a fully-diluted
basis. McWhorter shall exercise its right by
delivering written notice to Becker and
Tikkurila (the "Call Notice"). Each "Call
Exercise Period" shall be the 180-day period
following the fifth anniversary of the date
hereof.
(ii) Upon delivery of the
Call Notice, McWhorter, Becker, and Tikkurila
shall in good faith promptly determine the Call
Price hereunder, and within 180 days after the
Call Price has been determined, McWhorter will
purchase and Becker and Tikkurila will sell the
Stockholder Shares as set forth in the Call
Notice at a mutually agreeable time and place
(the "Call Closing").
(iii) At the Call Closing,
each of Becker and Tikkurila, as applicable,
shall deliver to McWhorter duly executed
instruments transferring its Stockholder Shares
to McWhorter, against payment of the appropriate
Call Price by
<PAGE>
cashier's or certified checks payable to each of Becker and Tikkurila or by
wire transfer of immediately available funds to accounts designated by each
of Becker and Tikkurila.
(iv) The "Call Price" of the
number of shares of each of Becker's and
Tikkurila's Stockholder Shares to be purchased
by McWhorter shall mean 6.5 multiplied by (x)
one-half the Company's consolidated EBITDA for
the preceding eight quarters as set forth on the
Company's income statements relating to such
quarters less long-term indebtedness, multiplied
by (y) a percentage equal to the number of
Stockholder Shares to be purchased by McWhorter
pursuant to that Section 6(a) from Becker and
Tikkurila, respectively, divided by the total
number of Stockholder Shares outstanding.
(b) Supermajority.
(i) In the event either
Tikkurila or Becker owns 10% or less of the
outstanding shares of capital stock of the
Company, McWhorter shall have the right to
purchase from each of Becker and Tikkurila all
of its shares, and each of Becker and Tikkurila
shall have the right to sell to McWhorter all of
its shares, on the terms set forth in this
paragraph 6(b) (the "Supermajority Put/Call").
McWhorter, on the one hand, and Tikkurila or
Becker, on the other hand, shall exercise their
rights by delivering written notice to the other
parties hereto (the "Supermajority Put/Call
Notice").
(ii) Upon delivery of the
Supermajority Put/Call Notice, McWhorter,
Becker, and Tikkurila, as applicable, shall in
good faith promptly determine the Supermajority
Put/Call Price hereunder, and within 180 days
after the Supermajority Put/Call Price has been
determined, McWhorter will purchase and Becker
and Tikkurila will sell the Stockholder Shares
as set forth in the Supermajority Put/Call
Notice at a mutually agreeable time and place
(the "Supermajority Put/Call Closing").
(iii) At the Supermajority
Put/Call Closing, each of Becker and Tikkurila,
as applicable, shall deliver to McWhorter duly
executed instruments transferring its
Stockholder Shares to McWhorter, against payment
of the appropriate Supermajority Put/Call Price
by cashier's or certified checks payable to each
of Becker and Tikkurila or by wire transfer of
immediately available funds to accounts
designated by each of Becker and Tikkurila.
<PAGE>
(iv) The "Supermajority Put/Call Price" of each of Becker's and
Tikkurila's Stockholder Shares to be purchased by McWhorter shall mean the
sum of:
with respect to the Stockholder
Shares that cause Tikkurila or Becker to own no
less than 10% of the outstanding capital stock
of the Company, 6.0 multiplied by (x) one- half
of the Company's consolidated EBITDA for the
preceding eight quarters as set forth on the
Company's income statements relating to such
quarters less long-term indebtedness, multiplied
by (y) the percentage ownership of all
Stockholder Shares owned by Becker and
Tikkurila, respectively; and
with respect to the Stockholder
Shares to be purchased and sold that cause
either of Tikkurila or Becker to own less than
10% of the outstanding capital stock of the
Company, 8.0 multiplied by (x) one-half of the
Company's consolidated EBITDA for the preceding
eight quarters as set forth on the Company's
income statements relating to such quarters less
long-term indebtedness, multiplied by (y) the
percentage ownership of all Stockholder Shares
owned by Becker and Tikkurila, respectively.
For example, if Becker and Tikkurila each own 12% of the outstanding capital
stock of the Company, and additional capital is to be contributed by
McWhorter (in exchange for the issuance to McWhorter of capital stock), and as
a result Becker and Tikkurila's percentage ownership would fall to 8%, and
Tikkurila, Becker or McWhorter choose to exercise the Supermajority Put/Call
pursuant to this paragraph 6, then the multiple that would be used pursuant
to the preceding clauses would be (i) 6.0 for the Stockholder Shares that
caused each of Becker and Tikkurila's percentage ownership to fall from 12%
to 10%, and (ii) 8.0 for the Stockholder Shares that caused each of
Becker and Tikkurila's percentage ownership to fall from 10% to 8%.
7. Transfers in Violation of Agreement. Any Transfer or
attempted Transfer of any Stockholder Shares in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer
on its books or treat any purported transferee of such Stockholder Shares as
the owner of such shares for any purpose.
8. Concurrent Agreements. Concurrently with the execution of this
Agreement, the following agreements are being executed:
<PAGE>
a. the Asset Purchase Agreement by and between Kemira
Coatings and McWhorter England, relating to certain Bury,
England assets and liabilities,
b. the Asset Purchase Agreement by and
between Tikkurila and McWhorter Finland,
relating to certain Vantaa, Finland assets and liabilities,
c. the Asset Purchase Agreement by and
among Becker, Soab AB, and the Company, relating
to certain Molndal, Sweden assets and liabilities,
d. the Ground Lease and Purchase Option
Agreement by and between Tikkurila and the
Company relating to the Vantaa, Finland real property,
e. the Services Agreement by and between Tikkurila and
McWhorter Finland relating to the Vantaa, Finland facility,
f. Lease granted by Kemira Coatings to
McWhorter England relating to the Bury, England
real property and facility,
g. the Services Agreement by and
between Kemira Coatings and McWhorter England
relating to the Bury, England real property and facility,
h. the Supply Agreement by and between
Tikkurila and McWhorter Finland,
i. the supply letter agreements by
Tikkurila, Becker and Kemira Coatings in favor
of the Company,
j. Technology License Agreement by and
between McWhorter and the Company, relating to
the licensing by the Company of certain of
McWhorter's technologies, and
k. Technology License Agreement by and
among McWhorter, the Company, McWhorter Finland,
and McWhorter England, relating to the licensing
by McWhorter of all of the Company's, McWhorter
Finland's, and McWhorter England's technologies.
9. Noncompetition. Each Stockholder acknowledges and agrees with
the Company that the Company would be irreparably damaged if such Stockholder
were to become affiliated or otherwise involved with any person or entity
competing with the Company or engaged in a similar business. Each such
Stockholder accordingly covenants and agrees with the Company that during the
period
<PAGE>
commencing with the date of this Agreement and ending on the third
anniversary of the date such Stockholder holds 10% or less of the outstanding
shares of capital stock of the Company on a fully-diluted basis (the
"Noncompetition Period"), such Stockholder will not, directly or indirectly,
either for itself or for any other individual, corporation, partnership,
joint venture, or other entity, participate in any business (including,
without limitation, any division, group or franchise of a larger
organization) in Europe which engages or which proposes to engage in the
promotion, development, sale, distribution, or production of products sold by
the resin businesses of Soab AB, Tikkurila, or Kemira Coatings on the date
hereof. For purposes of this Agreement, the term "participate in" will mean
having any direct or indirect interest in any corporation, partnership, joint
venture, or other entity, whether as a stockholder, partner, joint venturer,
creditor, or otherwise; provided however that the beneficial ownership of less
than 10% of the fully-diluted equity of an entity shall not constitute
"participation" for purposes of this paragraph 9.
Each such Stockholder further covenants and agrees with the Company
that during the Noncompetition Period in the event that such Stockholder
acquires, directly or indirectly, any business or assets ("Competing Assets")
which engage in Europe in the promotion, development, sale, distribution, or
production of products sold by the resin businesses of Soab AB, Tikkurila, or
Kemira Coatings on the date hereof, such Stockholder shall transfer such
Competing Assets within 12 months of their acquisition to an independent
third party, provided such Stockholder shall offer to sell any of such
Competing Assets to the Company on the same terms and conditions as
offered to third parties and the Company shall have the right of first
refusal to purchase all or a portion of the Competing Assets on such
terms and conditions.
10. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by each of the Company and the
Stockholders. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
11. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction,
<PAGE>
such invalidity, illegality or unenforceability shall not affect any other
provision or any other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
12. Entire Agreement. Except as otherwise expressly set forth
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes
and preempts any prior understandings, agreements or representations by
or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
13. Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
14. Notices. Any notice provided for in this Agreement shall be
in writing and shall be either personally delivered, or mailed first class
mail (postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the schedules hereto and to any
subsequent holder of Stockholder Shares subject to this Agreement at such
address as indicated by the Company's records, or at such address or
to the attention of such other person as the recipient party has specified by
prior written notice to the sending party. Notices will be deemed to have
been given hereunder when delivered personally, seven days after deposit
in the mail and three days after deposit with a reputable overnight courier
service. The Company's address is:
McWhorter Technologies AB
Box 55
S-431 21 Molndal, Sweden
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Sweden without giving effect to
any choice or conflict of law provision or rule (whether of Sweden or any
other jurisdiction) that would cause the application of the laws of
any jurisdiction other than Sweden. Any dispute in connection with this
Agreement shall be finally settled by arbitration in Stockholm in
accordance with the Rules of the Arbitration Institute of the Stockholm
Chamber of Commerce. The arbitral tribunal shall be composed of three
members. The arbitration proceeding shall be conducted in the English language.
<PAGE>
16. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
McWHORTER TECHNOLOGIES AB
By: /s/ Gary L. Kubera
Its: Authorized Signatory
McWHORTER TECHNOLOGIES, INC.
By: /s/ Gary L. Kubera
Its: Vice President, Corporate Development
AB WILHELM BECKER
By: /s/ Magnus Lindstam
Its: Authorized Signatory
TIKKURILA OY
By: Jukka Riihimaki and Eero Katajavuor
Its: Authorized Signatories
Exhibit 10.27
McWHORTER TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
Effective October 1, 1996
Copyright 1996
By Compensation Resource Group, Inc.
All Rights Reserved
TABLE OF CONTENTS
Page
Purpose 1
ARTICLE 1 Definitions 1
ARTICLE 2 Selection, Enrollment, Eligibility 8
2.1 Selection by Committee 8
2.2 Enrollment Requirements 8
2.3 Eligibility; Commencement of
Participation 8
2.4 Termination of Participation and/or
Deferrals 9
ARTICLE 3 Deferral Commitments/Crediting/Taxes 9
3.1 Minimum Deferral 9
3.2 Maximum Deferral 10
3.3 Election to Defer; Effect of
Election Form 11
3.4 Base Annual Salary Amount 11
3.5 Annual Bonus Amount 11
3.6 Annual Company Contribution Amount 12
3.7 Restricted Stock Amount 12
3.8 Stock Option Deferral Amount 12
3.9 Vesting 12
3.10 Crediting/Debiting of Account Balances
Prior to Distribution 13
3.11 No Actual Investment 14
3.12 Interest Crediting for Installment
Distributions 14
3.13 FICA, Withholding and Other Taxes 15
3.14 Sources of Stock: Limitation on Amount
of Stock-Denominated Deferrals 15
ARTICLE 4 Short-Term Payout; Withdrawal Election; 15
4.1 Short-Term Payout 15
4.2 Other Benefits Take Precedence Over
Short-Term Payout 16
4.3 Withdrawal Election 16
ARTICLE 5 Retirement Benefit 16
5.1 Retirement Benefit 16
5.2 Payment of Retirement Benefit 16
5.3 Death Prior to Completion of
Retirement Benefit 17
<PAGE>
ARTICLE 6 Pre-Retirement Survivor Benefit 17
6.1 Pre-Retirement Survivor Benefit 17
6.2 Payment of Pre-Retirement Survivor
Benefit 17
ARTICLE 7 Termination Benefit 17
7.1 Termination Benefit 17
7.2 Payment of Termination Benefit 17
ARTICLE 8 Disability Waiver and Benefit 18
8.1 Disability Waiver 18
8.2 Continued Eligibility; Disability
Benefit 18
ARTICLE 9 Beneficiary Designation 19
9.1 Beneficiary 19
9.2 Beneficiary Designation; Change;
Spousal Consent 19
9.3 Acknowledgment 19
9.4 No Beneficiary Designation 19
9.5 Doubt as to Beneficiary 19
9.6 Discharge of Obligations 19
ARTICLE 10 Leave of Absence 20
10.1 Paid Leave of Absence 20
10.2 Unpaid Leave of Absence 20
ARTICLE 11 Termination, Amendment or Modification 20
11.1 Termination 20
11.2 Amendment 21
11.3 Plan Agreement 21
11.4 Effect of Payment 21
ARTICLE 12 Administration 21
12.1 Committee Duties 21
12.2 Agents 21
12.3 Binding Effect of Decisions 22
12.4 Indemnity of Committee 22
12.5 Employer Information 22
ARTICLE 13 Other Benefits and Agreements 22
13.1 Coordination with Other Benefits 22
<PAGE>
ARTICLE 14 Claims Procedures 22
14.1 Presentation of Claim 22
14.2 Notification of Decision 22
14.3 Review of a Denied Claim 23
14.4 Decision on Review 23
14.5 Legal Action 24
ARTICLE 15 Trust 24
15.1 Establishment of the Trust 24
15.2 Interrelationship of the Plan and the
Trust 24
15.3 Distributions From the Trust 24
15.4 Stock Transferred to the Trust 24
ARTICLE 16 Miscellaneous 24
16.1 Status of Plan 24
16.2 Unsecured General Creditor 24
16.3 Employer's Liability 25
16.4 Nonassignability 25
16.5 Not a Contract of Employment 25
16.6 Furnishing Information 25
16.7 Terms 25
16.8 Captions 25
16.9 Governing Law 26
16.10 Notice 26
16.11 Successors 26
16.12 Spouse's Interest 26
16.13 Validity 26
16.14 Incompetent 26
16.15 Court Order 27
16.16 Distribution in the Event of Taxation 27
16.17 Insurance 27
16.18 Legal Fees to Enforce Rights After
Change in Control 27
<PAGE>
McWHORTER TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
Effective October 1, 1996
Purpose
The purpose of this Plan is to provide
specified benefits to a select group of
management or highly compensated Employees who
contribute materially to the continued growth,
development and future business success of
McWhorter Technologies, Inc., a Delaware
corporation, and its subsidiaries, if any, that
sponsor this Plan. This Plan shall be unfunded
for tax purposes and for purposes of Title I of
ERISA.
ARTICLE 1
Definitions
For purposes of this Plan, unless
otherwise clearly apparent from the context, the
following phrases or terms shall have the
following indicated meanings:
1.1 "Account Balance" shall mean, with
respect to a Participant, a credit on the
records of the Employer equal to the sum of (i)
the Base Annual Salary Account balance, (ii) the
Annual Bonus Account balance, (iii) the
Restricted Stock Account balance, (iv) the Stock
Option Deferral Account balance and (v) the
Company Contribution Account balance. The
Account Balance, and each other specified
account balance, shall be a bookkeeping entry
only and shall be utilized solely as a device
for the measurement and determination of the
amounts to be paid to a Participant, or his or
her designated Beneficiary, pursuant to this
Plan.
1.2 "Annual Bonus" shall mean any
compensation, in addition to Base Annual Salary,
relating to services performed during any
calendar year payable to a Participant as an
Employee under any Employer's annual bonus and
cash incentive plans, excluding restricted stock
and stock options.
1.3 "Annual Bonus Amount" shall mean
that portion of a Participant's Annual Bonus
that a Participant elects to have, and is
deferred, in accordance with Section 3.5, for
any one Plan Year. In the event of a
Participant's Retirement, Disability (if
deferrals cease in accordance with Section 8.1),
death or a Termination of Employment prior to
the end of a Plan Year, such year's Annual Bonus
Amount shall be the actual amount withheld prior
to such event.
1.4 "Annual Bonus Account" shall mean
(i) the sum of all of a Participant's Annual
Bonus Amounts, plus (ii) amounts
credited/debited in accordance with all the
applicable crediting/debiting provisions of this
Plan, less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant
to this Plan that relate to his or her Annual
Bonus Account.
<PAGE>
1.5 Annual Company Contribution Amount
shall mean, with respect to a Participant for
any one Plan Year, the amount determined in
accordance with Section 3.6.
1.6 Annual Discretionary Company
Contribution Amount shall mean with respect to
a Participant for any one Plan Year, an amount
(if any) that the Employer, in its sole and
absolute discretion, elects to credit to the
Participant s Company Contribution Account under
this Plan. The Employer is not required to
credit an Annual Discretionary Company
Contribution Amount under this Plan with respect
to any Participant or for any Plan Year. The
Annual Discretionary Company Contribution Amount
credited to a Participant may be smaller or
larger than the amount credited to any other
Participant, may be smaller or larger than the
amount credited to that Participant for any
other Plan Year, and may be zero, even though
one or more Participants receive an Annual
Discretionary Company Contribution Amount for
that Plan Year.
1.7 Annual ESOP Restoration Amount
shall mean with respect to a Participant for any
one Plan Year, an amount calculated by the
Employer, that the Employer, in its sole and
absolute discretion, may elect to credit to the
Participant s Company Contribution Account under
this Plan, equal to the product of (x) the
difference between (i) the Participant s
compensation (as that term is defined in the
ESOP, without respect to any limitations set
forth therein) and (ii) the Limitation Amount
(as that term is defined in the ESOP, as in
effect for such calendar year) multiplied by (y)
a fraction, the numerator of which is equal to
the percentage contribution by the Employer
under the ESOP for such calendar year, and the
denominator of which is the average closing
price of one share of Stock on the New York
Stock Exchange for the last ten trading days of
the calendar year.
1.8 Annual Excess 401(k) Match Amount
shall mean with respect to a Participant for any
one Plan Year who elects to have contributions
to the 401(k) Plan contributed directly to this
Plan once the Participant contributes the
maximum amount possible under the 401(k) Plan,
an amount calculated by the Employer, that the
Employer, in its sole and absolute discretion,
may elect to credit to the Participant s Company
Contribution Account under this Plan, equal to
the difference between the Company matching
contribution under the 401(k) Plan for that
calendar year and what the Company matching
contribution under the 401(k) Plan would have
been but for the compensation limitation under
Section 401(a)(17) of the Code and the
limitation on exclusion for excess deferrals
under Section 402(g) of the Code .
1.9 Annual Restricted Stock Amount
shall mean, with respect to a Participant for
any one Plan Year, the value of unvested
restricted stock under any McWhorter
Technologies, Inc. stock incentive plan,
deferred in accordance with Section 3.7 of this
Plan.
1.10 Annual Stock Option Deferral Amount
shall mean, with respect to a Participant for
any one Plan Year, the amount of Qualifying
Gains deferred on a Qualified Stock Option
exercise in accordance with Section 3.8 of this
Plan, calculated for each exercise during the
Plan Year using the closing price of Stock as of
the end of the business day closest to the date
of the relevant Qualified Stock Option exercise.
<PAGE>
1.11 "Base Annual Salary" shall mean the
annual cash compensation relating to services
performed during any calendar year, excluding
bonuses, commissions, overtime, fringe benefits,
stock options, relocation expenses, incentive
payments, non-monetary awards, directors fees
and other fees, automobile and other allowances
paid to a Participant for employment services
rendered (whether or not such allowances are
included in the Employee s gross income). Base
Annual Salary shall be calculated before
reduction for compensation voluntarily deferred
or contributed by the Participant pursuant to
all qualified or non-qualified plans of any
Employer and shall be calculated to include
amounts not otherwise included in the
Participant's gross income under Code Sections
125, 402(e)(3), 402(h), or 403(b) pursuant to
plans established by any Employer; provided,
however, that all such amounts will be included
in compensation only to the extent that, had
there been no such plan, the amount would have
been payable in cash to the Employee.
1.12 "Base Annual Salary Account" shall
mean (i) the sum of all of a Participant's
Annual Base Salary Amounts, plus (ii) amounts
credited/debited in accordance with all the
applicable crediting/debiting provisions of this
Plan that relate to his or her Base Annual
Salary Account, less (iii) all distributions
made to the Participant or his or her
Beneficiary pursuant to this Plan that relate to
his or her Base Annual Salary Account.
1.13 "Base Annual Salary Amount" shall
mean that portion of a Participant's Base Annual
Salary that a Participant elects to have, and is
deferred, in accordance with Section 3.4, for
any one Plan Year. In the event of a
Participant's Retirement, Disability (if
deferrals cease in accordance with Section 8.1),
death or a Termination of Employment prior to
the end of a Plan Year, such year's Base Annual
Salary Amount shall be the actual amount
withheld prior to such event.
1.14 "Beneficiary" shall mean one or more
persons, trusts, estates or other entities,
designated in accordance with Article 9, that
are entitled to receive benefits under this Plan
upon the death of a Participant.
1.15 "Beneficiary Designation Form" shall
mean the form established from time to time by
the Committee that a Participant completes,
signs and returns to the Committee to designate
one or more Beneficiaries.
1.16 "Board" shall mean the board of
directors of the Company.
1.17 "Change in Control" shall mean the
first to occur of any of the following events:
(a) Any "person" (as that term is
used in Section 13 and 14(d)(2) of the
Securities Exchange Act of 1934 ("Exchange
Act")) becomes the beneficial owner (as that
term is used in Section 13(d) of the Exchange
Act), excluding the ESOP or other Company
sponsored benefit plans, directly or indirectly,
of 50% or more of the Company's capital stock
entitled to vote in the election of directors;
<PAGE>
(b) During any period of not more
than two consecutive years, not including any
period prior to the adoption of this Plan,
individuals who at the beginning of such period
constitute the board of directors of the
Company, and any new director (other than a
director designated by a person who has entered
into an agreement with the Company to effect a
transaction described in clause (a), (c), (d) or
(e) of this Section 1.17) whose election by the
board of directors or nomination for election by
the Company's stockholders was approved by a
vote of at least three- fourths (3/4ths) of the
directors then still in office who either were
directors at the beginning of the period or
whose election or nomination for election was
previously so approved, cease for any reason to
constitute at least a majority thereof;
(c) The shareholders of the Company approve any consolidation
or merger of the Company, other than a consolidation or
merger of the Company in which the holders of
the common stock of the Company immediately
prior to the consolidation or merger hold more
than 50% of the common stock of the surviving
corporation immediately after the consolidation or merger;
(d) The shareholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company; or
(e) The shareholders of the Company approve the sale or
transfer of all or substantially all of the assets of
the Company to parties that are not within a "controlled
group of corporations" (as defined in Code
Section 1563) in which the Company is a member.
1.18 "Claimant" shall have the meaning
set forth in Section 14.1.
1.19 "Code" shall mean the Internal
Revenue Code of 1986, as it may be amended from
time to time.
1.20 "Committee" shall mean the committee
described in Article 12.
1.21 "Company" shall mean McWhorter
Technologies, Inc., a Delaware corporation, and
any successor to all or substantially all of the
Company s assets or business.
1.22 Company Contribution Account shall
mean the sum of the Participant s ESOP
Restoration Subaccount, the Participant s Excess
401(k) Match Subaccount and the Participant s
Discretionary Company Contribution Subaccount.
1.23 "Deduction Limitation" shall mean
the following described limitation on a benefit
that may otherwise be distributable pursuant to
the provisions of this Plan. Except as
otherwise provided, this limitation shall be
applied to all distributions that are "subject
to the Deduction Limitation" under this Plan.
If an Employer determines in good faith prior to
a Change in Control that there is a reasonable
likelihood that any compensation paid to a
Participant for a taxable year of the Employer
would not be deductible by the Employer solely
by reason of the limitation under Code Section
162(m), then to the extent deemed
<PAGE>
necessary by the Employer to ensure that the entire amount of
any distribution to the Participant pursuant to
this Plan prior to the Change in Control is
deductible, the Employer may defer all or any
portion of a distribution under this Plan. Any
amounts deferred pursuant to this limitation
shall be credited/debited with amounts in
accordance with Section 3.10 below, even if such
amount is being paid out in installments. The
amounts so deferred and amounts credited/debited
thereon shall be distributed to the Participant
or his or her Beneficiary (in the event of the
Participant's death) at the earliest possible
date, as determined by the Employer in good
faith, on which the deductibility of
compensation paid or payable to the Participant
for the taxable year of the Employer during
which the distribution is made will not be
limited by Section 162(m), or if earlier, upon
the effective date of a Change in Control.
Notwithstanding anything to the contrary in this
Plan, the Deduction Limitation shall not apply
to any distributions made after a Change in
Control.
1.24 "Disability" shall mean a period of
disability during which a Participant qualifies
for permanent disability benefits under the
Participant's Employer's long-term disability
plan, or, if a Participant does not participate
in such a plan, a period of disability during
which the Participant would have qualified for
permanent disability benefits under such a plan
had the Participant been a participant in such a
plan, as determined in the sole discretion of
the Committee. If the Participant's Employer
does not sponsor such a plan, or discontinues to
sponsor such a plan, Disability shall be
determined by the Committee in its sole
discretion.
1.25 "Disability Benefit" shall mean the
benefit set forth in Article 8.
1.26 Discretionary Company Contribution
Subaccount shall mean (i) the sum of the
Participant s Annual Discretionary Company
Contribution Amounts, plus (ii) amounts
credited/debited in accordance with the
applicable crediting/debiting provisions of this
Plan that relate to the Participants
Discretionary Company Contribution Subaccount,
less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant
to this Plan that relate to the Participant s
Discretionary Company Contribution Subaccount.
1.27 "Election Form" shall mean the form
established from time to time by the Committee
that a Participant completes, signs and returns
to the Committee to make an election under the
Plan.
1.28 "Employee" shall mean a person who
is an employee of any Employer.
1.29 "Employer(s)" shall mean the Company
and/or any of its subsidiaries (now in existence
or hereafter formed or acquired) that have been
selected by the Board to participate in the Plan
and have adopted the Plan as a sponsor.
1.30 "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.31 ESOP shall mean the McWhorter Technologies,
Inc. Employees Stock Ownership Plan.
<PAGE>
1.32 ESOP Restoration Subaccount shall
mean (i) the sum of the Participant s Annual
ESOP Restoration Amounts, plus (ii) amounts
credited/debited in accordance with all the
applicable crediting/debiting provisions of this
Plan that relate to the Participant s ESOP
Restoration Subaccount, less (iii) all
distributions made to the Participant or his or
her Beneficiary pursuant to this Plan that
relate to the Participant s ESOP Restoration
Subaccount.
1.33 Excess 401(k) Match Subaccount
shall mean (i) the sum of the Participant s
Annual Excess 401(k) Match Amounts, plus (ii)
amounts credited/debited in accordance with all
the applicable crediting/debiting provisions of
this Plan that relate to the Participant s
Excess 401(k) Match Subaccount, less (iii) all
distributions made to the Participant or his or
her Beneficiary pursuant to this Plan that
relate to the Participant s Excess 401(k) Match
Subaccount.
1.34 First Plan Year shall mean the period
beginning October 1, 1996 and ending December 31, 1996.
1.35 401(k) Plan shall mean the McWhorter
Technologies, Inc. Employees 401(k) Savings Plan.
1.36 "Participant" shall mean any
Employee (i) who is selected to participate in
the Plan, (ii) who elects to participate in the
Plan, (iii) who signs a Plan Agreement, an
Election Form and a Beneficiary Designation
Form, (iv) whose signed Plan Agreement, Election
Form and Beneficiary Designation Form are
accepted by the Committee, (v) who commences
participation in the Plan, and (vi) whose Plan
Agreement has not terminated. A spouse or
former spouse of a Participant shall not be
treated as a Participant in the Plan or have an
account balance under the Plan, even if he or
she has an interest in the Participant's
benefits under the Plan as a result of
applicable law or property settlements resulting
from legal separation or divorce.
1.37 "Plan" shall mean the Company's
Deferred Compensation Plan, which shall be
evidenced by this instrument and by each Plan
Agreement, as they may be amended from time to
time.
1.38 "Plan Agreement" shall mean a
written agreement, as may be amended from time
to time, which is entered into by and between an
Employer and a Participant. Each Plan Agree
ment executed by a Participant and the
Participant s Employer shall provide for the
entire benefit to which such Participant is
entitled under the Plan; should there be more
than one Plan Agreement, the Plan Agreement
bearing the latest date of acceptance by the
Employer shall supersede all previous Plan
Agreements in their entirety and shall govern
such entitlement. The terms of any Plan
Agreement may be different for any Participant,
and any Plan Agreement may provide additional
benefits not set forth in the Plan or limit the
benefits otherwise provided under the Plan;
provided, however, that any such additional
benefits or benefit limitations must be agreed
to by both the Employer and the Participant.
<PAGE>
1.39 "Plan Year" shall, except for the
First Plan Year, mean a period beginning on
January 1 of each calendar year and continuing
through December 31 of such calendar year.
1.40 "Pre-Retirement Survivor Benefit"
shall mean the benefit set forth in Article 6.
1.41 Qualified Stock Option shall mean
one or more non- qualified stock option(s)
selected by the Committee in its sole discretion
and exercisable under any McWhorter
Technologies, Inc. stock incentive plan
permitting a Participant under this Plan to
defer gain with respect to such option.
1.42 Qualifying Gain shall mean the
value accrued upon exercise of a Qualified Stock
Option (i) using a Stock-for- Stock payment
method and (ii) having an aggregate fair market
value in excess of the total Stock purchase
price necessary to exercise the option. In
other words, the Qualifying Gain upon exercise
of a Qualified Stock Option equals the total
market value of the shares (or share equivalent
units) acquired minus the total stock purchase
price. For example, assume a Participant elects
to defer the Qualifying Gain accrued upon
exercise of a Qualified Stock Option to purchase
1000 shares of Stock at an exercise price of $20
per share, when Stock has a current fair market
value of $25 per share. Using the
Stock-for-Stock payment method, the Participant
would deliver 800 shares of Stock (worth
$20,000) to actually exercise the Qualified
Stock Option and receive, in return, 800 shares
of Stock plus a Qualifying Gain (in this case,
in the form of an unfunded and unsecured promise
to pay money or property in the future) equal to
$5,000 (i.e., the current value of the remaining
200 shares of Stock).
1.43 Restricted Stock shall mean
unvested shares of restricted stock selected by
the Committee in its sole discretion and awarded
to the Participant under any McWhorter
Technologies, Inc. stock incentive plan.
1.44 Restricted Stock Account shall
mean (i) the sum of the Participant s Annual
Restricted Stock Amounts, plus (ii) amounts
credited/debited in accordance with all the
applicable crediting/debiting provisions of this
Plan that relate to the Participant s Restricted
Stock Account, less (iii) all distributions made
to the Participant or his or her Beneficiary
pursuant to this Plan that relate to the
Participant s Restricted Stock Account.
1.45 "Retirement", "Retire(s)" or
"Retired" shall mean, with respect to an
Employee, severance from employment from all
Employers for any reason other than a leave of
absence, death or Disability on or after the
earlier of the attainment of (a) age sixty-five
(65) or (b) age fifty-five (55) with ten (10)
Years of Service.
1.46 "Retirement Benefit" shall mean the
benefit set forth in Article 5.
1.47 "Short-Term Payout" shall mean the
payout set forth in Section 4.1.
1.48 Stock shall mean McWhorter
Technologies, Inc. common stock, $0.01 par
value, or any other equity securities of the
Company designated by the Committee.
<PAGE>
1.49 Stock Option Deferral Account
shall mean the sum of (i) the Participant s
Annual Stock Option Deferral Amounts, plus (ii)
amounts credited/debited in accordance with all
the applicable crediting/debiting provisions of
this Plan that relate to the Participant s Stock
Option Deferral Account, less (iii) all
distributions made to the Participant or his or
her Beneficiary pursuant to this Plan that
relate to the Participant s Stock Option
Deferral Account.
1.50 "Termination Benefit" shall mean the
benefit set forth in Article 7.
1.51 "Termination of Employment" shall
mean the severing of employment with all
Employers, voluntarily or involuntarily, for any
reason other than Retirement, Disability, death
or an authorized leave of absence.
1.52 "Trust" shall mean the trust
established pursuant to that certain Master
Trust Agreement, dated as of ________ 1, 199_
between the Company and the trustee named
therein, as amended from time to time.
1.53 "Years of Service" shall mean the
total number of full years in which a
Participant has been employed by one or more
Employers. For purposes of this definition, a
year of employment shall be a 365 day period (or
366 day period in the case of a leap year) that,
for the first year of employment, commences on
the Employee's date of hiring and that, for any
subsequent year, commences on an anniversary of
that hiring date. Any partial year of
employment shall not be counted.
ARTICLE 2
Selection, Enrollment, Eligibility
2.1 Selection by Committee.
Participation in the Plan shall be limited to a
select group of management or highly compensated
Employees of the Employers, as determined by the
Committee in its sole discretion. From that
group, the Committee shall select, in its sole
discretion, Employees to participate in the
Plan.
2.2 Enrollment Requirements. As a
condition to participation, each selected
Employee shall complete, execute and return to
the Committee a Plan Agreement, an Election Form
and a Beneficiary Designation Form, all within
the later of (a) September 27, 1996 or (b) 30
days after he or she is selected to participate
in the Plan. In addition, the Committee shall
establish from time to time such other
enrollment requirements as it determines in its
sole discretion are necessary.
2.3 Eligibility; Commencement of
Participation. Provided an Employee selected to
participate in the Plan has met all enrollment
requirements set forth in this Plan and required
by the Committee, including returning all
required documents to the Committee within the
specified time period, that Employee shall
commence participation in the Plan on the first
day of the month following the month in which
the Employee completes all enrollment
requirements. If an Employee fails to meet all
such requirements within the
<PAGE>
period required in accordance with Section 2.2, that Employee shall
not be eligible to participate in the Plan until
the first day of the Plan Year following the
delivery to and acceptance by the Committee of
the required documents.
2.4 Termination of Participation and/or
Deferrals. If the Committee determines in good
faith that a Participant no longer qualifies as
a member of a select group of management or
highly compensated employees, as membership in
such group is determined in accordance with
Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, the Committee shall have the right, in
its sole discretion, to (i) terminate any
deferral election the Participant has made for
the remainder of the Plan Year in which the
Participant's membership status changes, (ii)
prevent the Participant from making future
deferral elections and/or (iii) immediately
distribute the Participant's then Account
Balance as a Termination Benefit and terminate
the Participant's participation in the Plan.
ARTICLE 3
Deferral Commitments/Company
Contributions/Crediting/Debiting/Taxes
3.1 Minimum Deferral.
(a) Minimum. For each Plan Year,
a Participant may elect to defer, as his or her
Base Annual Salary Amount or Annual Bonus
Amount, Base Annual Salary and/or Annual Bonus
in the following minimum amounts:
<TABLE>
Deferral Minimum
Amount
<C> <C>
Base Annual Salary $2,000
Annual Bonus $2,000
</TABLE>
If any election is made for less than the stated minimum
amounts, or if no election is made for a Plan Year, the amount
deferred for such Plan Year shall be zero.
(b) Short Plan Year. Notwithstanding the foregoing,
in the case of the First Plan Year, or if a Participant
first becomes a Participant after the first day of a
Plan Year, the minimum Base Annual Salary
deferral shall be an amount equal to the minimum
set forth above, multiplied by a fraction, the
numerator of which is the number of complete
months remaining in the Plan Year and the
denominator of which is 12.
(c) Stock Option Deferral Amount. For each Qualified Stock Option,
a Participant may elect to defer, as his or her Stock Option
Deferral Amount, the following minimum
percentage of the Qualifying Gain with respect
to such Qualified Stock Option:
<TABLE>
Deferral Minimum
<S> <C>
Qualifying Gain 10%
</TABLE>
<PAGE>
provided, however, that the Annual
Stock Option Deferral Amount shall be no less
than the lesser of $20,000 or 100% of the Qualifying Gain.
(d) Restricted Stock Amount. For Restricted Stock, a Participant
may elect to defer, as his or her Restricted Stock Amount,
the following minimum percentage of the
Participant s Restricted Stock:
<TABLE>
Deferral Minimum
<C> <S>
Restricted Stock 10%
</TABLE>
provided, however, that the Annual Restricted Stock
Amount shall be no less than the lesser of $20,000 or
100% of the Participant's Restricted Stock.
3.2 Maximum Deferral
(a) Maximum. For each Plan Year, a Participant may
elect to defer, as his or her Base Annual Salary and
Annual Bonus Amounts, Base Annual Salary and Annual
Bonus up to the following maximum percentages:
<TABLE>
Deferral Maximum
Amount
<S> <C>
Base Annual Salary 50%
Annual Bonus 100%
</TABLE>
(b) Notwithstanding the foregoing, in the case of the
First Plan Year, or if a Participant first becomes
a Participant after the first day of a Plan Year,
the maximum annual deferral, with respect to Base
Annual Salary and Annual Bonus shall be limited to
the amount of compensation not yet earned by the
Participant as of the date the Participant submits
a Plan Agreement and Election Form to the Committee for
acceptance.
(c) For each Qualified Stock Option, a Participant
may elect to defer, as his or her Stock Option
Deferral Amount, Qualifying Gain with respect to
such Qualified Stock Option up to the following
maximum percentage:
<TABLE>
Deferral Maximum
Percentage
<S> <C>
Qualifying Gain 100%
</TABLE>
(d) Stock Option Deferral Amounts
may also be limited by other terms or conditions
set forth in the McWhorter Technologies, Inc.
stock incentive plan or the agreement under
which such Qualified Stock Option is granted.
(e) A Participant may elect to defer up to 100% of his or her
Restricted Stock.
<PAGE>
3.3 Election to Defer; Effect of Election Form.
(a) First Plan Year. In connection with
a Participant's commencement of
participation in the Plan, the Participant shall
make an irrevocable deferral election for the
Plan Year in which the Participant commences
participation in the Plan, along with such other
elections as the Committee deems necessary or
desirable under the Plan. For these elections
to be valid, the Election Form must be completed
and signed by the Participant, timely delivered
to the Committee in accordance with Section 2.2,
and accepted by the Committee.
(b) Subsequent Plan Years. For each succeeding Plan Year,
an irrevocable deferral election for that Plan Year,
and such other elections as the Committee deems necessary
or desirable under the Plan, shall be made by
timely delivering to the Committee, in
accordance with its rules and procedures, before
the end of the Plan Year preceding the Plan Year
for which the election is made, a new Election
Form. If no such Election Form is timely
delivered for a Plan Year, the Base Annual
Salary Amount and Annual Bonus Amount shall be
zero for that Plan Year.
(c) Stock Option Deferral. For an
election to defer gain upon a Qualified Stock
Option exercise to be valid: (i) a separate
irrevocable Election Form must be completed and
signed by the Participant with respect to the
Qualified Stock Option; (ii) such Election Form
must be timely delivered to the Committee and
accepted by the Committee at least six (6)
months prior to the date the Participant elects
to exercise the Qualified Stock Option; (iii)
the Qualifying Stock Option must be exercised
using a cashless or Stock-for-Stock payment
method; and (iv) the Stock constructively or
actually delivered by the Participant to
exercise the Qualifying Stock Option must have
been owned by the Participant during the entire
six (6) month period prior to its delivery.
(d) Restricted Stock. For an
election to defer Restricted Stock Amounts to be
valid: (i) a separate irrevocable Election Form
must be completed and signed by the Participant,
with respect to such Restricted Stock; and (ii)
such Election Form must be timely delivered to
the Committee and accepted by the Committee at
least six (6) months prior to the date such
Restricted Stock vests under the terms of the
McWhorter Technologies, Inc. stock incentive plan.
3.4 Base Annual Salary Amount. For each
Plan Year, the Base Annual Salary Amount shall
be withheld from each regularly scheduled Base
Annual Salary payroll in equal amounts, as
adjusted from time to time for increases and
decreases in Base Annual Salary.
3.5 Annual Bonus Amount. For each Plan
Year, the Annual Bonus Amount shall be withheld
at the time the Annual Bonus is or otherwise
would be paid to the Participant, whether or not
this occurs during the Plan Year itself.
<PAGE>
3.6 Annual Company Contribution Amount.
Except as otherwise provided in this Section
3.6, for each Plan Year, an Employer shall
credit an amount to each Participant s Company
Contribution Account under this Plan, which
amount shall be equal to the sum of (i) the
Participant s Annual Excess 401(k) Match Amount,
plus (ii) the Participant s Annual ESOP
Restoration Benefit Amount and (iii) the
Discretionary Company Contribution Amount. The
Annual Company Contribution Amount shall be
credited/debited as of the last day of the Plan
Year. If a Participant is not employed by an
Employer as of the last day of a Plan Year other
than by reason of his or her Retirement or
death, the Annual Company Contribution Amount
shall be zero.
3.7 Restricted Stock Amount. Subject to
any terms and conditions imposed by the
Committee, Participants may elect to defer,
under the Plan, Restricted Stock Amounts.
Restricted Stock Amounts shall be
credited/debited to the Participant on the books
of the Employer in connection with such an
election at the time the Restricted Stock would
otherwise vest under the terms of the McWhorter
Technologies, Inc. stock incentive plan, but for
the election to defer.
3.8 Stock Option Deferral Amount.
Subject to any terms and conditions imposed by
the Committee, Participants may elect to defer,
under the Plan, Qualifying Gains attributable to
a Qualified Stock Option exercise. Stock Option
Deferral Amounts shall be credited/debited to
the Participant on the books of the Employer at
the time Stock would otherwise have been
delivered to the Participant pursuant to the
Qualified Stock Option exercise, but for the
election to defer.
3.9 Vesting.
(a) A Participant shall at all
times be 100% vested in his or her Base Annual
Salary Account, Annual Bonus Account, Restricted
Stock Account and Stock Option Deferral Account.
(b) A Participant shall be vested
in his or her Company Contribution Account in
accordance with the following schedule:
<TABLE>
Years of Service on Date Vested Percentage of
of Termination of Employment Company Contribution Account
<S> <C>
Less than 5 years 0%
5 years or more 100%
(c) Notwithstanding anything to the contrary contained in
this Section 3.9, in the event of (i) a Change in Control,
(ii) death while an Employee, (iii) Disability, (iv)
Termination of Employment after the Participant's 60th
birthday, or (v) the Participant s 65th
birthday, a Participant s Company Contribution
Account shall immediately become 100% vested.
(d) Notwithstanding subsection (c) above, the vesting
schedule for a Participant's Company Contribution
Account shall not be accelerated to the extent that the
<PAGE>
Committee determines that such acceleration would cause
the deduction limitations of Section 280G of the
Code to become effective. In the event that all
of a Participant's Company Contribution Account
is not vested pursuant to such a determination,
the Participant may request independent
verification of the Committee s calculations
with respect to the application of Section 280G.
In such case, the Committee must provide to the
Participant within 15 business days of such a
request an opinion from a nationally recognized
accounting firm selected by the Participant (the
Accounting Firm ). The opinion shall state the
Accounting Firm s opinion that any limitation in
the vested percentage hereunder is necessary to
avoid the limits of Section 280G and contain
supporting calculations. The cost of such
opinion shall be paid for by the Company.
3.10 Crediting/Debiting of Account
Balances Prior to Distribution. In accordance
with, and subject to, the rules and procedures
that are established from time to time by the
Committee, in its sole discretion, amounts shall
be credited or debited to a Participant's
Account Balance prior to any distribution of
benefits under Articles 4, 5, 6, 7 or 8 in
accordance with the following rules:
(a) Measurement Funds. As provided below,
the Participant s Account
Balance shall be deemed invested in one or more
of the following measurement funds (the
"Measurement Funds") for the purpose of
crediting/debiting additional amounts to his or
her Account Balance:
(i) Moody s Bond Index Measurement Fund. Amounts
deemed invested in the Moody s Bond Index Measurement
Fund shall be credited with interest at 100% of the
Moody's Crediting Rate. The Moody s Crediting Rate for
a Plan Year shall be a fixed rate, stated as an
annual rate, determined and announced by the
Committee before the Plan Year for which it is
to be used that (i) is published in Moody s
Bond Record under the heading of Moody s
Corporate Bond Yield Averages -- Av. Corp. and
(ii) is equal to the average corporate bond
yield calculated for the month of October that
immediately precedes the Plan Year for which the
rate is to be used.
(ii) Company Stock Measurement Fund. Amounts deemed
invested in the Company Stock Measurement Fund
shall be credited or debited, based on the performance
of the Company s common stock, as if 100% of any
such amounts had been invested in Stock, with
any dividends declared on such Stock deemed to
be reinvested in additional Stock.
(b) Measurement Funds for Base Annual Salary Account,
Annual Bonus Account, Discretionary Company Contribution
Subaccount and Excess 401(k) Match Subaccount. A
Participant's Base Annual Salary Account, Annual
Bonus Account, Discretionary Company
Contribution Subaccount and Excess 401(k)
<PAGE>
Match Subaccount shall be deemed invested in the Moody's
Bond Index Fund at all times prior to any distribution
of benefits under Articles 4, 5, 6, 7 or 8.
(c) Measurement Funds for Stock Option Deferral Account,
Restricted Stock Account and ESOP Restoration Subaccount.
A Participant s Stock Option Deferral Account
balance, Restricted Stock Account balance and
ESOP Restoration Subaccount balance shall be
deemed invested in the Company Stock Measurement
Fund at all times prior to any distribution of
benefits under Articles 4, 5, 6, 7 or 8.
(c) Crediting or Debiting Method. The performance of each
Measurement Fund (either positive or negative) will be
determined by the
Committee, in its sole discretion, based on the
performance of the Measurement Funds themselves.
A Participant's Account Balance shall be
credited or debited on a monthly basis based on
the performance of each Measurement Fund, as
determined by the Committee in its sole
discretion, as though (i) the Annual Base
Annual Salary Amounts were invested no later
than the close of business on the first business
day of the month after the month in which such
amounts are actually deferred from the
Participant's Base Annual Salary through
reductions in his or her payroll; (ii) the
Annual Company Contribution Amounts were
invested as of the close of business on the last
business day of the Plan Year; (iii) the Annual
Bonus, Annual Restricted Stock Amount and Annual
Stock Option Deferral Amounts were invested as
of the first day of the month after the month in
which such amounts would have been received by
the Participant but for the election to defer;
and (iv) any distribution made to a Participant
that decreases such Participant's Account
Balance ceased being invested in the Measurement
Fund(s) no earlier than the last day of the
month prior to the month of the distribution, at
the closing price on such date.
3.11 No Actual Investment. Notwithstanding any other
provision of this Plan that may be interpreted to
the contrary, the Measurement Funds are to be used
for measurement purposes only, and the allocation to his or her
Account Balance to such Measurement Fund(s), the
calculation of additional amounts and the
crediting or debiting of such amounts to a
Participant's Account Balance shall not be
considered or construed in any manner as an
actual investment of his or her Account Balance
in any such Measurement Fund(s). In the event
that the Company or the Trustee (as that term is
defined in the Trust), in its own discretion,
decides to invest funds in any or all of the
Measurement Funds, no Participant shall have any
rights in or to such investments themselves.
Without limiting the foregoing, a Participant's
Account Balance shall at all times be a
bookkeeping entry only and shall not represent
any investment made on his or her behalf by the
Company or the Trust; the Participant shall at
all times remain an unsecured creditor of the
Company.
3.12 Interest Crediting for Installment
Distributions. If a Participant s benefits
under this Plan are to be paid in substantially
equal monthly installments, such payments shall
be determined by amortizing the Participant s
specified benefit over the number of months
elected, using the interest rate specified below
and treating the first installment payment as
all principal and each subsequent installment
payment, first as interest accrued for the
<PAGE>
applicable installment period on the unpaid
Account Balance and second as a reduction in the
Account Balance. The interest rate to be used
to calculate installment payment amounts shall
be a fixed interest rate that is determined by
averaging 100% of the Moody s Rates for the Plan
Year in which installment payments commence and
the two (2) preceding Plan Years. This rate
shall be treated as the nominal rate for making
such calculations. If a Participant has
completed fewer than three (3) Years of Plan
Participation, this average shall be determined
using 100% of the Moody s Rates for the Plan
Years during which the Participant participated
in the Plan.
3.13 FICA, Withholding and Other Taxes.
For each Plan Year in which a Base Annual Salary
or Annual Bonus Amount is being withheld or an
Annual Company Contribution Amount, Annual
Restricted Stock Amount or Annual Stock Option
Deferral Amount is credited to a Participant,
the Participant's Employer(s) shall withhold
from that portion of the Participant's Base
Annual Salary or Annual Bonus that is not being
deferred, in a manner determined by the
Employer(s), the Participant's share of FICA and
other employment taxes. If necessary, the
Committee shall reduce the Base Annual Salary
Amount, Annual Bonus Amount, Restricted Stock
Amount, Stock Option Deferral Amount or Company
Contribution Amount in order to comply with this
Section 3.13. In addition, the Participant's
Employer(s) or the Trust shall withhold from any
payments made to a Participant under this Plan
all federal, state and local income, employment
and other taxes required to be withheld in
connection with such payments, in amounts and in
a manner to be determined in the sole discretion
of the Employer(s) or the Trust.
3.14 Sources of Stock: Limitation on
Amount of Stock- Denominated Deferrals. If
amounts are credited under the Plan in the Trust
in connection with a deferral of Qualifying
Gains or Restricted Stock, the amounts so
credited shall be deemed to have originated
under such other plan, program or arrangement.
The number of shares of Restricted Stock or
Qualified Stock Options elected in connection
with such deferral shall be counted against the
total number of shares reserved under such other
plan, program or arrangement.
ARTICLE 4
Short-Term Payout; Withdrawal Election
4.1 Short-Term Payout. In connection
with each election to defer a Base Annual Salary
Amount or Annual Bonus Amount, a Participant may
irrevocably elect to receive a future
"Short-Term Payout" from the Plan with respect
to that Base Annual Salary Amount or Annual
Bonus Amount. Subject to the Deduction
Limitation, the Short-Term Payout shall be a
lump sum payment in an amount that is equal to
the Base Annual Salary Amount or Annual Bonus
Amount plus amounts credited or debited in the
manner provided in Section 3.10 above on that
amount, determined at the time that the
Short-Term Payout becomes payable (rather than
the date of a Termination of Employment).
Subject to the Deduction Limitation and the
other terms and conditions of this Plan, each
Short-Term Payout elected shall be paid within
60 days of the first day of any Plan Year
designated by the Participant that is (i) at
least three years after the last day of the Plan
Year in which the
<PAGE>
Base Annual Salary Amount or
Annual Bonus Amount is actually deferred and
(ii) not later than the first day of the Plan
Year in which the Participant will attain age
sixty-five (65). By way of example, if a three
year Short-Term Payout is elected for Base
Annual Salary Amounts that are deferred in the
Plan Year commencing January 1, 1997, the three
year Short-Term Payout would become payable
within 60 days of January 1, 2001.
4.2 Other Benefits Take Precedence Over
Short-Term. Should an event occur that triggers
a benefit under Articles 5, 6, 7 or 8, any Base
Annual Salary Amount or Annual Bonus Amount,
plus amounts credited or debited thereon, that
is subject to a Short-Term Payout election under
Section 4.1 shall not be paid in accordance with
Section 4.1 but shall be paid in accordance with
the other applicable Article.
4.3 Withdrawal Election. A Participant
(or, after a Participant s death, his or her
Beneficiary) may elect, at any time, to withdraw
all of his or her vested Account Balance,
calculated as if there had occurred a
Termination of Employment as of the day of the
election, less a withdrawal penalty equal to 10%
of such amount (the net amount shall be referred
to as the "Withdrawal Amount"). This election
can be made at any time, before or after
Retirement, Disability, death or Termination of
Employment, and whether or not the Participant
(or Beneficiary) is in the process of being paid
pursuant to an installment payment schedule. If
made before Retirement, Disability or death, a
Participant's Withdrawal Amount shall be his or
her Account Balance calculated as if there had
occurred a Termination of Employment as of the
day of the election. No partial withdrawals of
the Withdrawal Amount shall be allowed. The
Participant (or his or her Beneficiary) shall
make this election by giving the Committee
written notice of the election in a form
determined from time to time by the Committee.
The Participant shall be paid the Withdrawal
Amount within 60 days of his or her election.
Once the Withdrawal Amount is paid, the
Participant's participation in the Plan shall
terminate and the Participant shall not become
re-eligible to participate in the Plan for a
period of at least three (3) years from such
date. The payment of this Withdrawal Amount
shall not be subject to the Deduction
Limitation.
ARTICLE 5
Retirement Benefit
5.1 Retirement Benefit. Subject to the
Deduction Limitation, a Participant who Retires
shall receive, as a Retirement Benefit, 100% of
his or her Account Balance.
5.2 Payment of Retirement Benefit. A
Participant, in connection with his or her
commencement of participation in the Plan, shall
elect on an Election Form to receive the
Retirement Benefit in a lump sum or
installments over a period of 60, 120 or 180
months. The Participant may annually change his
or her election to an allowable alternative
payout period by submitting a new Election Form
to the Committee, provided that any such
Election Form is submitted at least 1 year prior
to the Participant's Retirement and is accepted
by the Committee in its sole discretion. The
Election Form most recently accepted by the
Committee shall govern the payout of the
Retirement Benefit. If a Participant does not
make any election with respect to the payment of
the Retirement
<PAGE>
Benefit, then such benefit shall
be payable in a lump sum. The lump sum payment
shall be made, or installment payments shall
commence, no later than 60 days after the date
the Participant Retires. Any payment made shall
be subject to the Deduction Limitation.
5.3 Death Prior to Completion of
Retirement Benefit. If a Participant dies after
Retirement but before the Retirement Benefit is
paid in full, the Participant's unpaid
Retirement Benefit payments shall continue and
shall be paid to the Participant's Beneficiary
(a) over the remaining number of months and in
the same amounts as that benefit would have been
paid to the Participant had the Participant
survived, or (b) in a lump sum, if requested by
the Beneficiary and allowed in the sole
discretion of the Committee, that is equal to
the Participant's unpaid remaining Account
Balance.
ARTICLE 6
Pre-Retirement Survivor Benefit
6.1 Pre-Retirement Survivor Benefit.
Subject to the Deduction Limitation, and except
as provided in Section 6.2 below, the
Participant's Beneficiary shall receive a
Pre-Retirement Survivor Benefit equal to the
Participant's Account Balance if the Participant
dies while employed by the Participant s
Employer.
6.2 Payment of Pre-Retirement Survivor
Benefit. The Pre- Retirement Survivor Benefit
shall be paid in a lump sum. The lump sum
payment shall be made no later than 60 days
after the date the Committee is provided with
proof that is satisfactory to the Committee of
the Participant's death. Any payment made shall
be subject to the Deduction Limitation.
ARTICLE 7
Termination Benefit
7.1 Termination Benefit. Subject to the
Deduction Limitation, the Participant shall
receive a Termination Benefit, which shall be
equal to the Participant's vested Account
Balance if a Participant experiences a
Termination of Employment prior to his or her
Retirement, death or Disability.
7.2 Payment of Termination Benefit. The
Participant s Termination Benefit shall be paid
in a lump sum. The lump sum payment shall be
made no later than 60 days after the date the
Committee is provided with proof that is
satisfactory to the Committee of the
Participant's death. Any payment made shall be
subject to the Deduction Limitation.
<PAGE>
ARTICLE 8
Disability Waiver and Benefit
8.1 Disability Waiver.
(a) Waiver of Deferral. A
Participant who is determined by the Committee
to be suffering from a Disability shall be (i)
excused from fulfilling that portion of the Base
Annual Salary Amount and Annual Bonus Amount
commitment that would otherwise have been
withheld from a Participant's Base Annual Salary
and Annual Bonus for the Plan Year during which
the Participant first suffers a Disability and
(ii) excused from fulfilling any existing
unvested Restricted Stock or unexercised Stock
Option Deferral Amount commitments. During the
period of Disability, the Participant shall not
be allowed to make any additional deferral
elections, but will continue to be considered a
Participant for all other purposes of this Plan.
(b) Return to Work. If a Participant returns to employment
with an Employer, after a Disability ceases, the
Participant may elect to defer a Base Annual
Salary Amount, Annual Bonus Amount, Restricted
Stock Amount or Stock Option Amount for the Plan
Year following his or her return to employment
or service and for every Plan Year thereafter
while a Participant in the Plan; provided such
deferral elections are otherwise allowed and an
Election Form is delivered to and accepted by
the Committee for each such election in
accordance with Section 3.3 above.
8.2 Continued Eligibility; Disability Benefit. A Participant
suffering a Disability shall, for benefit purposes under this Plan,
continue to be considered to be employed and shall be eligible for the
benefits provided for in Articles 4, 5, 6 or 7 in accordance with the
provisions of those Articles. Notwithstanding the above, the Committee
shall have the right to, in its sole and absolute discretion and for
purposes of this Plan only, and must in the case of a Participant who
is otherwise ineligible to Retire, deem the Participant to have experienced
a Termination of Employment, or in the case of a Participant who is eligible
to Retire, to have Retired, at any time (or in the case of a Participant
who is eligible to Retire, as soon as practicable) after such Participant is
determined to be suffering a Disability, in which case the Participant shall
receive a Disability Benefit equal to his or her Account Balance at the time
of the Committee's determination; provided, however, that should the
Participant otherwise have been eligible to Retire, he or she shall be paid
in accordance with Article 5. The Disability Benefit shall be paid in a
lump sum within 60 days of the Committee s exercise of such right in the
event the Participant was not otherwise eligible to Retire. Any payment
made shall be subject to the Deduction Limitation.
<PAGE>
ARTICLE 9
Beneficiary Designation
9.1 Beneficiary. Each Participant shall
have the right, at any time, to designate his or
her Beneficiary(ies) (both primary as well as
contingent) to receive any benefits payable
under the Plan to a beneficiary upon the death
of a Participant. The Beneficiary designated
under this Plan may be the same as or different
from the Beneficiary designation under any other
plan of an Employer in which the Participant
participates.
9.2 Beneficiary Designation; Change;
Spousal Consent. A Participant shall designate
his or her Beneficiary by completing and signing
the Beneficiary Designation Form, and returning
it to the Committee or its designated agent. A
Participant shall have the right to change a
Beneficiary by completing, signing and otherwise
complying with the terms of the Beneficiary
Designation Form and the Committee's rules and
procedures, as in effect from time to time. If
the Participant names someone other than his or
her spouse as a Beneficiary, a spousal consent,
in the form designated by the Committee, must be
signed by that Participant's spouse and returned
to the Committee. Upon the acceptance by the
Committee of a new Beneficiary Designation Form,
all Beneficiary designations previously filed
shall be canceled. The Committee shall be
entitled to rely on the last Beneficiary
Designation Form filed by the Participant and
accepted by the Committee prior to his or her
death.
9.3 Acknowledgment. No designation or
change in designation of a Beneficiary shall be
effective until received and acknowledged in
writing by the Committee or its designated
agent.
9.4 No Beneficiary Designation. If a
Participant fails to designate a Beneficiary as
provided in Sections 9.1, 9.2 and 9.3 above or,
if all designated Beneficiaries predecease the
Participant or die prior to complete
distribution of the Participant's benefits, then
the Participant's designated Beneficiary shall
be deemed to be his or her surviving spouse. If
the Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to
a Beneficiary shall be payable to the executor
or personal representative of the Participant's
estate.
9.5 Doubt as to Beneficiary. If the
Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this
Plan, the Committee shall have the right,
exercisable in its discretion, to cause the
Participant's Employer to withhold such payments
until this matter is resolved to the Committee's
satisfaction.
9.6 Discharge of Obligations. The
payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge
all Employers and the Committee from all further
obligations under this Plan with respect to the
Participant, and that Participant's Plan
Agreement shall terminate upon such full payment
of benefits.
<PAGE>
ARTICLE 10
Leave of Absence
10.1 Paid Leave of Absence. If a
Participant is authorized by the Participant's
Employer for any reason to take a paid leave of
absence from the employment of the Employer, the
Partici pant shall continue to be considered
employed by the Employer and the Base Annual
Salary Amount or Annual Bonus Amount shall
continue to be withheld during such paid leave
of absence.
10.2 Unpaid Leave of Absence. If a
Participant is authorized by the Participant's
Employer for any reason to take an unpaid leave
of absence from the employment of the Employer,
the Participant shall continue to be considered
employed by the Employer and the Participant
shall be excused from making deferrals until the
earlier of the date the leave of absence expires
or the Participant returns to a paid employment
status. Upon such expiration or return,
deferrals shall resume for the remaining portion
of the Plan Year in which the expiration or
return occurs, based on the deferral election,
if any, made for that Plan Year. If no election
was made for that Plan Year, no deferral shall
be withheld.
ARTICLE 11
Termination, Amendment or Modification
11.1 Termination. Although each Employer
anticipates that it will continue the Plan for
an indefinite period of time, there is no
guarantee that any Employer will continue the
Plan or will not terminate the Plan at any time
in the future. Accordingly, each Employer
reserves the right to discontinue its
sponsorship of the Plan and/or to terminate the
Plan at any time with respect to any or all of
its participating Employees, by action of its
board of directors. Upon the termination of the
Plan with respect to any Employer or
Participant, the Plan Agreements of the affected
Participants who are employed by that Employer
shall terminate and their Account Balances,
determined as if they had experienced a
Termination of Employment on the date of Plan
termination or, if Plan termination occurs after
the date upon which a Participant was eligible
to Retire, then with respect to that Participant
as if he or she had Retired on the date of Plan
termination, shall be paid to the Participants
as follows: Prior to a Change in Control, if
the Plan is terminated with respect to all of
its Participants, an Employer shall have the
right, in its sole discretion, and
notwithstanding any elections made by the
Participant, to pay such benefits in a lump sum
or installments over up to 15 years, with
amounts credited and debited during the
installment period as provided in Section 3.11
herein. If the Plan is terminated with respect
to less than all of its Participants, an
Employer shall be required to pay such benefits
in a lump sum. After a Change in Control, the
Employer shall be required to pay such benefits
in a lump sum. The termination of the Plan
shall not adversely affect any Participant or
Beneficiary who has become entitled to the
payment of any benefits under the Plan as of the
date of termination; provided however, that the
Employer shall have the right to accelerate
installment payments without a premium or
prepayment penalty by paying the Account Balance
in a lump sum or in installments using fewer
months (provided that the present value of all
<PAGE>
payments that will have been received by a
Participant at any given point of time under the
different payment schedule shall equal or exceed
the present value of all payments that would
have been received at that point in time under
the original payment schedule).
11.2 Amendment. Any Employer may, at any
time, amend or modify the Plan in whole or in
part with respect to that Employer by the action
of its board of directors; provided, however,
that no amendment or modification shall be
effective to decrease or restrict the value of a
Participant's Account Balance in existence at
the time the amendment or modification is made,
calculated as if the Participant had experienced
a Termination of Employment as of the effective
date of the amendment or modification, or, if
the amendment or modification occurs after the
date upon which the Participant was eligible to
Retire, the Participant had Retired as of the
effective date of the amendment or modification.
The amendment or modification of the Plan shall
not affect any Participant or Beneficiary who
has become entitled to the payment of benefits
under the Plan as of the date of the amendment
or modification; provided, however, that the
Employer shall have the right to accelerate
installment payments by paying the Account
Balance in a lump sum or in installments using
fewer months (provided that the present value of
all payments that will have been received by a
Participant at any given point of time under the
different payment schedule shall equal or exceed
the present value of all payments that would
have been received at that point in time under
the original payment schedule).
11.3 Plan Agreement. Despite the
provisions of Sections 11.1 and 11.2 above, if a
Participant's Plan Agreement contains benefits
or limitations that are not in this Plan
document, the Employer may only amend or
terminate such provisions with the consent of
the Participant.
11.4 Effect of Payment. The full payment
of the applicable benefit under Section 4.4 or
Articles 5, 6, 7 or 8 of the Plan shall
completely discharge all obligations to a
Participant and his or her designated
Beneficiaries under this Plan and the
Participant's Plan Agreement shall terminate.
ARTICLE 12
Administration
12.1 Committee Duties. This Plan shall
be administered by the Compensation Committee of
the Board, or such committee as the Board shall
appoint. Members of the Committee may be
Participants under this Plan. The Committee
shall also have the discretion and authority to
(i) make, amend, interpret, and enforce all
appropriate rules and regulations for the
administration of this Plan and (ii) decide or
resolve any and all questions including
interpretations of this Plan, as may arise in
connection with the Plan. Any individual
serving on the Committee who is a Participant
shall not vote or act on any matter relating
solely to himself or herself. When making a
determination or calculation, the Committee
shall be entitled to rely on information
furnished by a Participant or the Company.
12.2 Agents. In the administration of
this Plan, the Committee may, from time to time,
employ agents and delegate to them such
administrative duties as it sees fit (including acting
<PAGE>
through a duly appointed representative)
and may from time to time consult with counsel
who may be counsel to any Employer.
12.3 Binding Effect of Decisions. The
decision or action of the Committee with respect
to any question arising out of or in connection
with the administration, interpretation and
application of the Plan and the rules and
regulations promulgated hereunder shall be final
and conclusive and binding upon all persons
having any interest in the Plan.
12.4 Indemnity of Committee. All
Employers shall indemnify and hold harmless the
members of the Committee, and any Employee to
whom the duties of the Committee may be
delegated, against any and all claims, losses,
damages, expenses or liabilities arising from
any action or failure to act with respect to
this Plan, except in the case of willful
misconduct by the Committee or any of its
members or any such Employee.
12.5 Employer Information. To enable the
Committee to perform its functions, each
Employer shall supply full and timely
information to the Committee on all matters
relating to the compensation of its
Participants, the date and circum stances of the
Retirement, Disability, death or Termination of
Employment of its Participants, and such other
pertinent information as the Committee may
reasonably require.
ARTICLE 13
Other Benefits and Agreements
13.1 Coordination with Other Benefits.
The benefits provided for a Participant and
Participant's Beneficiary under the Plan are in
addition to any other benefits available to such
Participant under any other plan or program for
employees of the Participant's Employer. The
Plan shall supplement and shall not supersede,
modify or amend any other such plan or program
except as may otherwise be expressly provided.
ARTICLE 14
Claims Procedures
14.1 Presentation of Claim. Any
Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary
being referred to below as a "Claimant") may
deliver to the Committee a written claim for a
determination with respect to the amounts
distributable to such Claimant from the Plan.
If such a claim relates to the contents of a
notice received by the Claimant, the claim must
be made within 60 days after such notice was
received by the Claimant. All other claims must
be made within 180 days of the date on which the
event that caused the claim to arise occurred.
The claim must state with particularity the
determination desired by the Claimant.
14.2 Notification of Decision. The
Committee shall consider a Claimant's claim
within a reasonable time, and shall notify the
Claimant in writing:
<PAGE>
(a) that the Claimant's requested
determination has been made, and that the claim
has been allowed in full; or
(b) that the Committee has reached
a conclusion contrary, in whole or in part, to
the Claimant's requested determination, and such
notice must set forth in a manner calculated to
be understood by the Claimant:
(i) the specific reason(s)
for the denial of the claim, or any part of it;
(ii) specific reference(s) to
pertinent provisions of the Plan upon which such
denial was based;
(iii) a description of any
additional material or information necessary for
the Claimant to perfect the claim, and an
explanation of why such material or information
is necessary; and
(iv) an explanation of the
claim review procedure set forth in Section 14.3 below.
14.3 Review of a Denied Claim. Within 60
days after receiving a notice from the Committee
that a claim has been denied, in whole or in
part, a Claimant (or the Claimant's duly
authorized representative) may file with the
Committee a written request for a review of the
denial of the claim. Thereafter, but not later
than 30 days after the review procedure began,
the Claimant (or the Claimant's duly authorized
representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
14.4 Decision on Review. The Committee
shall render its deci sion on review promptly,
and not later than 60 days after the filing of a
written request for review of the denial, unless
a hearing is held or other special circumstances
require additional time, in which case the
Committee's decision must be rendered within 120
days after such date. Such decision must be
written in a manner calculated to be understood
by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(c) such other matters as the Committee deems relevant.
<PAGE>
14.5 Legal Action. A Claimant's
compliance with the foregoing provisions of this
Article 14 is a mandatory prerequisite to a
Claimant's right to commence any legal action
with respect to any claim for benefits under
this Plan.
ARTICLE 15
Trust
15.1 Establishment of the Trust. The
Company shall establish the Trust, and each
Employer shall at least annually transfer over
to the Trust such assets as the Employer
determines, in its sole discretion, are
necessary to provide, on a present value basis,
for its respective future liabilities created
with respect to the Base Annual Salary Amount or
Annual Bonus Amounts, Annual Company
Contribution Amounts, Annual Restricted Stock
Amounts and Annual Stock Option Deferral Amounts
for such Employer's Participants for all periods
prior to the transfer, as well as any debits and
credits to the Participants' Account Balances
for all periods prior to the transfer, taking
into consideration the value of the assets in
the trust at the time of the transfer.
15.2 Interrelationship of the Plan and
the Trust. The provisions of the Plan and the
Plan Agreement shall govern the rights of a
Participant to receive distributions pursuant to
the Plan. The provisions of the Trust shall
govern the rights of the Employers, Participants
and the creditors of the Employers to the assets
transferred to the Trust. Each Employer shall
at all times remain liable to carry out its
obligations under the Plan.
15.3 Distributions From the Trust. Each
Employer's obligations under the Plan may be
satisfied with Trust assets distributed pursuant
to the terms of the Trust, and any such
distribution shall reduce the Employer's
obligations under this Plan.
15.4 Stock Transferred to the Trust.
Notwithstanding any other provision of this
Plan, the Plan Agreement(s) or the Trust, any
Stock transferred to the Trust in accordance
with Sections 3.7 or 3.8 above shall not be
distributed or otherwise disposed of by the
Trustee until at least 6 months after the
date such Stock is transferred to the Trust.
ARTICLE 16
Miscellaneous
16.1 Status of Plan. The Plan is
intended to be a plan that is not qualified
within the meaning of Code Section 401(a) and
that is unfunded and is maintained by an
employer primarily for the purpose of providing
deferred compensation for a select group of
management or highly compensated employee
within the meaning of ERISA Sections 201(2),
301(a)(3) and 401(a)(1). The Plan shall be
administered and interpreted to the extent
possible in a manner consistent with that
intent.
16.2 Unsecured General Creditor.
Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or
equitable rights, interests or claims in any
property or assets
<PAGE>
of an Employer. For purposes of the payment of
benefits under this Plan, any and all of an Employer's
assets shall be, and remain, the general, unpledged
unrestricted assets of the Employer. An Employer's
obligation under the Plan shall be merely that
of an unfunded and unsecured promise to pay
money in the future.
16.3 Employer's Liability. An Employer's
liability for the payment of benefits shall be
defined only by the Plan and the Plan Agreement,
as entered into between the Employer and a
Participant. An Employer shall have no
obligation to a Participant under the Plan
except as expressly provided in the Plan and his
or her Plan Agreement.
16.4 Nonassignability. Neither a
Participant nor any other person shall have any
right to commute, sell, assign, transfer,
pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate, alienate or
convey in advance of actual receipt, the
amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are
expressly declared to be, unassignable and
non-transferable. No part of the amounts
payable shall, prior to actual payment, be
subject to seizure, attachment, garnishment or
sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed
by a Participant or any other person, nor be
transferable by operation of law in the event of
a Participant's or any other person's bankruptcy
or insolvency or be transferable to a spouse as
a result of a property settlement or otherwise.
16.5 Not a Contract of Employment. The
terms and conditions of this Plan shall not be
deemed to constitute a contract of employment
between any Employer and the Participant. Such
employment is hereby acknowledged to be an "at
will" employment relationship that can be
terminated at any time for any reason, or no
reason, with or without cause, and with or
without notice, unless expressly provided in a
written employment agreement. Nothing in this
Plan shall be deemed to give a Participant the
right to be retained in the service of any
Employer as an Employee or to interfere with the
right of any Employer to discipline or discharge
the Participant at any time.
16.6 Furnishing Information. A
Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any
and all information requested by the Committee
and take such other actions as may be requested
in order to facilitate the administration of the
Plan and the payments of benefits hereunder,
including but not limited to taking such
physical examinations as the Committee may deem
necessary.
16.7 Terms. Whenever any words are used
herein in the masculine, they shall be construed
as though they were in the feminine in all cases
where they would so apply; and whenever any
words are used herein in the singular or in the
plural, they shall be construed as though they
were used in the plural or the singular, as the
case may be, in all cases where they would so
apply.
16.8 Captions. The captions of the
articles, sections and paragraphs of this Plan
are for convenience only and shall not control
or affect the meaning or construction of any of
its provisions.
<PAGE>
16.9 Governing Law. Subject to ERISA,
the provisions of this Plan shall be construed
and interpreted according to the internal laws
of the State of Illinois without regard to its
conflicts of laws principles.
16.10 Notice. Any notice or filing
required or permitted to be given to the
Committee under this Plan shall be sufficient if
in writing and hand-delivered, or sent by
registered or certified mail, to the address
below:
Director of Human Resources
McWhorter Technologies, Inc.
400 East Cottage Place
Carpentersville, Illinois 60110
Such notice shall be deemed given as of
the date of delivery or, if delivery is made by
mail, as of the date shown on the postmark on
the receipt for registration or certification.
Any notice or filing required or permitted
to be given to a Participant under this Plan
shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last
known address of the Participant.
16.11 Successors. The provisions of this
Plan shall bind and inure to the benefit of the
Participant's Employer and its successors and
assigns and the Participant and the
Participant's designated Beneficiaries.
16.12 Spouse's Interest. The interest in
the benefits hereunder of a spouse of a
Participant who has predeceased the Participant
shall automatically pass to the Participant and
shall not be transferable by such spouse in any
manner, including but not limited to such
spouse's will, nor shall such interest pass
under the laws of intestate succession.
16.13 Validity. In case any provision of
this Plan shall be illegal or invalid for any
reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan
shall be construed and enforced as if such
illegal or invalid provision had never been
inserted herein.
16.14 Incompetent. If the Committee
determines in its discretion that a benefit
under this Plan is to be paid to a minor, a
person declared incompetent or to a person
incapable of handling the disposition of that
person's property, the Committee may direct
payment of such benefit to the guardian, legal
representative or person having the care and
custody of such minor, incompetent or incapable
person. The Committee may require proof of
minority, incompetence, incapacity or
guardianship, as it may deem appropriate prior
to distribution of the benefit. Any payment of
a benefit shall be a payment for the account of
the Participant and the Participant's
Beneficiary, as the case may be, and shall be a
complete discharge of any liability under the
Plan for such payment amount.
<PAGE>
16.15 Court Order. The Committee is
authorized to make any payments directed by
court order in any action in which the Plan or
the Committee has been named as a party. In
addition, if a court determines that a spouse or
former spouse of a Participant has an interest
in the Participant s benefits under the Plan in
connection with a property settlement or
otherwise, the Committee, in its sole
discretion, shall have the right,
notwithstanding any election made by a
Participant, to immediately distribute the
spouse's or former spouse's interest in the
Participant s benefits under the Plan to that
spouse or former spouse.
16.16 Distribution in the Event of Taxation.
(a) In General. If, for any
reason, all or any portion of a Participant's
benefits under this Plan becomes taxable to the
Participant prior to receipt, a Participant may
petition the Committee before a Change in
Control, or the trustee of the Trust after a
Change in Control, for a distribution of that
portion of his or her benefit that has become
taxable. Upon the grant of such a petition,
which grant shall not be unreasonably withheld
(and, after a Change in Control, shall be
granted), a Participant's Employer shall
distribute to the Participant immediately
available funds in an amount equal to the
taxable portion of his or her benefit (which
amount shall not exceed a Participant's unpaid
Account Balance under the Plan). If the
petition is granted, the tax liability
distribution shall be made within 90 days of the
date when the Participant's petition is granted.
Such a distribution shall affect and reduce the
benefits to be paid under this Plan.
(b) Trust. If the Trust terminates in accordance
with Section 3.6(e) of the Trust and benefits are
distributed from the Trust to a Participant in
accordance with that Section, the Participant's
benefits under this Plan shall be reduced to the
extent of such distributions.
16.17 Insurance. The Employers, on their
own behalf or on behalf of the trustee of the
Trust, and, in their sole discretion, may apply
for and procure insurance on the life of the
Participant, in such amounts and in such forms
as the Trust may choose. The Employers or the
trustee of the Trust, as the case may be, shall
be the sole owner and beneficiary of any such
insurance. The Participant shall have no
interest whatsoever in any such policy or
policies, and at the request of the Employers
shall submit to medical examinations and supply
such information and execute such documents as
may be required by the insurance company or
companies to whom the Employers have applied for
insurance.
16.18 Legal Fees To Enforce Rights After
Change in Control. The Company and each
Employer is aware that upon the occurrence of a
Change in Control, the Board or the board of
directors of a Participant s Employer (which
might then be composed of new members) or a
shareholder of the Company or the Participant s
Employer, or of any successor corporation might
then cause or attempt to cause the Company, the
Participant's Employer or such successor to
refuse to comply with its obligations under the
Plan and might cause or attempt to cause the
Company or the Participant's Employer to
institute, or may institute, litigation seeking
to deny Participants the benefits intended under
the Plan. In
<PAGE>
these circumstances, the purpose
of the Plan could be frustrated. Accordingly,
if, following a Change in Control, it should
appear to any Participant that the Company, the
Participant s Employer or any successor
corporation has failed to comply with any of its
obligations under the Plan or any agreement
thereunder or, if the Company, such Employer or
any other person takes any action to declare the
Plan void or unenforceable or institutes any
litigation or other legal action designed to
deny, diminish or to recover from any
Participant the benefits intended to be
provided, then the Company and the Participant s
Employer irrevocably authorize such Participant
to retain counsel of his or her choice at the
expense of the Company and the Participant s
Employer (who shall be jointly and severally
liable) to represent such Participant in
connection with the initiation or defense of any
litigation or other legal action, whether by or
against the Company, the Participant s Employer
or any director, officer, shareholder or other
person affiliated with the Company, the
Participant s Employer or any successor thereto
in any jurisdiction.
IN WITNESS WHEREOF, the Company has signed this Plan document as of
October 1, 1996.
McWhorter Technologies, Inc., a Delaware corporation
By: /s/ Mia Igyarto
Title: Director of Human Resources and Quality
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-78412 and 333-4540) pertaining to the McWhorter
Technologies, Inc. 1994 Stock Incentive Plan, McWhorter Technologies, Inc.
Employee 401(k) Savings Plan, McWhorter Technologies, Inc. 1996 Incentive
Stock Plan and McWhorter Technologies, Inc. 1996 Nonemployee Director Stock
Option and Award Plan of our report dated November 18, 1996, with respect to
the financial statements of McWhorter Technologies, Inc. included in the
Annual Report (Form 10-K) for the year ended October 31, 1996.
_______________________________________
ERNST & YOUNG LLP
Chicago, Illinois
January 27, 1997
