<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM ____ TO ____
COMMISSION FILE NUMBER 1-12854
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
CARPENTERSVILLE, ILLINOIS 60110 847-428-2657
(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:
Name of Exchange on
Title of Each Class 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 / /
As of August 31, 1999, 10,051,832 shares of common stock were outstanding.
1
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying interim financial statements of McWhorter Technologies,
Inc. (the Company or McWhorter) do not include all disclosures normally provided
in annual financial statements. These financial statements are unaudited but
include all adjustments that McWhorter's management considers necessary for a
fair presentation. These adjustments consist of normal recurring accruals.
Interim results are not necessarily indicative of the results expected for the
year. The financial statements and the accompanying discussion and analysis of
results of operations and financial condition should be read in conjunction with
the financial statements and notes contained in McWhorter's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998. All references to years
are to fiscal years ended October 31. Unless otherwise stated, per share
information is on a diluted basis.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
July 31, July 31,
--------------------------------- -------------------------------
1999 1998 1999 1998
(Note 1)
---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 117,857 $ 125,770 $ 327,586 $ 339,504
Costs and expenses:
Cost of sales (Note 2) 96,478 103,901 272,478 285,795
Research 3,187 2,777 9,165 8,172
Selling, general and administrative 6,703 7,523 22,232 22,024
Other (income) expense, net (Note 3) 973 744 950 268
---------------- ---------------- ---------------- --------------
Income from operations 10,516 10,825 22,761 23,245
Interest expense, net 2,002 2,330 6,008 5,751
---------------- ---------------- ---------------- --------------
Income before income taxes 8,514 8,495 16,753 17,494
Income tax expense (Note 4) 3,491 3,643 6,869 5,073
---------------- ---------------- ---------------- --------------
Net income $ 5,023 $ 4,852 $ 9,884 $ 12,421
---------------- ---------------- ---------------- --------------
---------------- ---------------- ---------------- --------------
Earnings per share - basic (Note 5) $ .50 $ .47 $ .97 $ 1.21
---------------- ---------------- ---------------- --------------
---------------- ---------------- ---------------- --------------
Earnings per share - diluted (Note 5) $ .50 $ .47 $ .97 $ 1.19
---------------- ---------------- ---------------- --------------
---------------- ---------------- ---------------- --------------
</TABLE>
See Notes to Consolidated Financial Statements
2
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CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
July 31, October 31, July 31,
1999 1998 1998
-------------------- --------------------- ---------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 5,438 $ 4,099 $ 3,558
Accounts receivable 81,643 82,765 86,155
Inventories (Note 6) 42,157 40,207 40,670
Other current assets 13,532 12,193 9,974
-------------------- --------------------- ---------------------
142,770 139,264 140,357
Property, plant and equipment 208,331 198,900 193,947
Accumulated depreciation (68,864) (58,384) (55,250)
-------------------- --------------------- ---------------------
Net property, plant and equipment 139,467 140,516 138,697
Intangibles, net 70,786 76,117 72,474
Other assets 2,982 6,568 7,415
-------------------- --------------------- ---------------------
$ 356,005 $ 362,465 $ 358,943
-------------------- --------------------- ---------------------
-------------------- --------------------- ---------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 20,220 $ 26,474 $ 25,501
Trade accounts payable 50,463 49,808 53,196
Accrued liabilities 17,794 17,812 20,075
-------------------- --------------------- ---------------------
88,477 94,094 98,772
Long-term debt, less current portion 131,407 130,128 128,724
Deferred income taxes 23,472 23,695 21,824
Accrued environmental liabilities 1,082 1,566 1,459
Other liabilities 4,773 5,538 5,482
Shareholders' equity:
Common stock (par value $.01 per share;
authorized 30,000,000 shares; issued
10,965,547 shares at July 31, 1999,
October 31, 1998, and July 31, 1998) 110 110 110
Additional paid-in capital 11,125 10,931 10,919
Retained earnings 115,708 105,824 105,401
Currency translation adjustments (4,555) 2,381 (2,193)
Treasury stock, at cost (913,715 shares at
July 31, 1999, 644,451 shares at October
31, 1998, and 612,737 shares at July 31,
1998) (14,329) (10,471) (9,828)
Other (1,265) (1,331) (1,727)
-------------------- --------------------- ---------------------
106,794 107,444 102,682
-------------------- --------------------- ---------------------
$ 356,005 $ 362,465 $ 358,943
-------------------- --------------------- ---------------------
-------------------- --------------------- ---------------------
</TABLE>
See Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Additional Currency Total
Common Paid-in Retained Translation Treasury Shareholders'
Stock Capital Earnings Adjustments Stock Other Equity
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance October 31, 1997 $ 110 $ 10,867 $ 92,980 $ (940) $ (9,716) $ (1,633) $ 91,668
Comprehensive income:
Net income 12,844 12,844
Foreign currency translation
adjustments 3,321 3,321
----------
Total comprehensive income 16,165
----------
Issuance of common stock for
restricted stock awards 55 100 (94) 61
Deferred compensation stock plan (322) 396 74
Exercise of stock options 9 139 148
Purchase of treasury shares (672) (672)
-------- --------- ---------- --------- ---------- --------- ----------
Balance October 31, 1998 $ 110 $ 10,931 $ 105,824 $ 2,381 $ (10,471) $ (1,331) $ 107,444
-------- --------- ---------- --------- ---------- --------- ----------
-------- --------- ---------- --------- ---------- --------- ----------
Comprehensive income:
Net income 9,884 9,884
Foreign currency translation
adjustments (6,936) (6,936)
----------
Total comprehensive income 2,948
----------
Issuance of common stock for
restricted stock awards 194 555 749
Deferred compensation stock plan (37) 66 29
Purchase of treasury shares (4,376) (4,376)
-------- --------- ---------- --------- ---------- --------- ----------
Balance July 31, 1999 $ 110 $ 11,125 $ 115,708 $ (4,555) $ (14,329) $ (1,265) $ 106,794
-------- --------- ---------- --------- ---------- --------- ----------
-------- --------- ---------- --------- ---------- --------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
4
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended July 31,
-----------------------------------------
1999 1998
(Note 1)
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income
$ 9,884 $ 12,421
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization 13,462 12,079
Deferred income taxes (507) (334)
Loss from sale of equity interest in joint venture 1,000
Other, net (703) (303)
Changes in working capital:
Accounts and notes receivable (2,527) (8,103)
Inventories (3,131) (4,586)
Trade accounts payable and accrued liabilities 5,126 4,905
Other current assets 402 255
------------------ ------------------
Net cash provided by operating activities 23,006 16,334
INVESTING ACTIVITIES
Acquisition spending, net of cash acquired (55,231)
Capital expenditures (16,148) (17,680)
Investment in and advances to joint ventures (2,449)
Sale of equity interest in joint venture 1,000
Other, net (45) (285)
------------------ ------------------
Net cash used by investing activities (15,193) (75,645)
FINANCING ACTIVITIES
Increase (decrease) in debt, net (2,098) 58,739
Purchase of treasury stock (4,376)
Proceeds from exercise of stock options 201
------------------ ------------------
Net cash provided (used) by financing activities (6,474) 58,940
Increase (decrease) in cash 1,339 (371)
Cash at beginning of period 4,099 3,929
------------------ ------------------
Cash at end of period $ 5,438 $ 3,558
------------------ ------------------
------------------ ------------------
</TABLE>
See Notes to Consolidated Financial Statements
5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. On April 1, 1998, the Company completed the acquisition of substantially
all of the assets of Accurate Coatings and Dispersions, Inc. (Accurate) for
approximately $39,400,000 and the assumption of $6,500,000 in debt. The
acquisition was accounted for using the purchase method. The excess of the
purchase price over the net book value of the assets acquired was
approximately $35,000,000, the largest component of which was allocated to
goodwill. The results of Accurate have been included in the consolidated
results of the Company since the date of acquisition. The pro forma
operating results, including Accurate for the full nine months ended July
31, 1998, would not have been materially different from the consolidated
results of the Company.
2. Nine month 1998 results included a pretax charge of approximately $500,000
($300,000 after taxes, or 3 cents per share) for costs related to the
one-time write-off of the excess of fair value over net book value
associated with inventories acquired as part of the purchase of Accurate.
3. Third quarter 1999 results included a pretax charge of approximately
$1,000,000 ($590,000 after taxes, or 6 cents per share) primarily for
losses associated with the sale of the equity interest in the Syntech Far
East joint venture. Third quarter 1998 results included a pretax charge of
$931,000 ($559,000 after taxes, or 5 cents per share) for costs related to
the relocation of the Minneapolis research facility to Carpentersville.
4. Nine month 1998 results included a reduction in income tax expense of
$2,311,000 (22 cents per share) related to the impact on deferred income
taxes of changes in the Italian income tax regulations.
5. Earnings per share is computed by dividing net income by the weighted
average number of shares of stock (basic) plus stock equivalents (diluted)
outstanding during the year. Stock equivalents consist primarily of stock
options and are included in the calculation of weighted average shares
outstanding using the treasury stock method. Basic weighted average shares
reconciles to diluted weighted average shares as follows:
<TABLE>
<CAPTION>
Quarter ended July 31, Nine months ended July 31,
1999 1998 1999 1998
------------------------------------ ----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Basic weighted
average shares outstanding 10,011,318 10,244,739 10,160,798 10,242,776
Dilutive effect of
common stock equivalents 32,284 181,409 47,177 167,570
------------------------------------ ----------------- ----------------- ------------------ ------------------
Diluted weighted
average shares outstanding 10,043,602 10,426,148 10,207,975 10,410,346
------------------------------------ ----------------- ----------------- ------------------ ------------------
------------------------------------ ----------------- ----------------- ------------------ ------------------
</TABLE>
6
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6. The major classes of inventories consist of the following:
<TABLE>
<CAPTION>
July 31, October 31,
DOLLARS IN THOUSANDS 1999 1998
------------------------------------------------------------ ------------------------ -------------------------
<S> <C> <C>
Manufactured products $ 27,789 $ 26,339
Raw materials, supplies and work-in-process 14,368 13,868
------------------------------------------------------------ ------------------------ -------------------------
$ 42,157 $ 40,207
------------------------------------------------------------ ------------------------ -------------------------
------------------------------------------------------------ ------------------------ -------------------------
</TABLE>
7. During the first quarter of 1999, the Company adopted Statement of
Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive
Income". In accordance with SFAS No. 130, the Company has reported
comprehensive income and its components in the Company's Consolidated
Statement of Shareholders' Equity. Adoption of this statement had no effect
on the Company's financial position, results of operations, or cash flows.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
McWhorter is a leading manufacturer of surface coating resins and colorants and
is a manufacturer of resins used in the reinforced fiberglass plastics industry.
Surface coating resins are a primary component of paint and coatings. Colorants
are used to disperse pigments in paints and coatings. Resins used for reinforced
fiberglass plastics are a primary component for various fiberglass products. On
April 1, 1998, the Company completed the acquisition of Accurate Coatings and
Dispersions, Inc. (Accurate). Accurate, located in South Holland, Illinois,
manufactures and distributes colorants for the coatings industry. The
acquisition of Accurate expands McWhorter's presence in the colorant market and
better enables the Company to serve its customers. McWhorter purchased Arizona
Chemical's customer list and technology related to its European alkyd resin
business in April 1998. The Company strengthened its global presence with the
purchase of the equity interests of its joint venture partners in McWhorter
Technologies Europe (McWhorter Europe) in the first quarter of 1998. As a
result, the Company increased its equity interest in McWhorter Europe from 33
percent to 100 percent.
RESULTS OF OPERATIONS
Net sales decreased 6 percent in the third quarter of 1999 to $117,857,000
compared to $125,770,000 in the same period of 1998. For the third quarter,
lower selling prices resulting from the pass through of lower raw material
prices were the primary reason for the net sales decline. For the first nine
months, net sales decreased 4 percent to $327,586,000 in 1999 compared to
$339,504,000 in 1998. For the first nine months, lower selling prices resulting
from the pass through of lower raw material prices and lower volumes in the
Company's European liquid coating resins and non-coating aminos businesses were
partially offset by improved volumes in the Company's composite polymers
business and the inclusion of Accurate for a full nine months in 1999.
7
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The Company's gross profit margin for the third quarter of 1999 was 18.1
percent compared to 17.4 percent in last year's third quarter. For the first
nine months, gross profit margin increased to 16.8 percent in 1999 from 15.8
percent in 1998. Margins were favorably impacted by lower raw material costs,
product mix, and internal process improvements in the U.S. 1998 margins were
unfavorably impacted by the one-time write-off of inventory acquired as part
of the Accurate purchase discussed in Note 2 of the Notes to Consolidated
Financial Statements.
Operating expenses (research, and selling, general and administrative) decreased
to $9,890,000 in the third quarter of 1999 from $10,300,000 in prior year third
quarter. Long-term incentive accrual reversals resulted in the decrease. For the
first nine months, operating expenses increased to $31,397,000 in 1999 from
$30,196,000 in 1998. The inclusion of Accurate for a full nine months in 1999
and higher professional services expense in the U.S. base businesses accounted
for the increase.
Net interest expense was $2,002,000 in the third quarter of 1999 compared to
$2,330,000 in the prior year's third quarter. The decrease in the quarter is the
result of overall debt paydowns and a lower average interest rate. For the first
nine months of 1999, net interest expense was $6,008,000 compared to $5,751,000
in the prior year. The year-to-date increase is due to debt borrowed to fund the
Accurate acquisition.
The effective tax rate for the third quarter and first nine months of 1999 was
41.0 percent versus 42.0 percent in the comparable periods a year ago excluding
the favorable adjustments to 1998 income tax expense discussed in Note 4 of the
Notes to Consolidated Financial Statements. The effective tax rate decreased as
a result of the mix of foreign and domestic earnings.
For the third quarter, net income was $5,613,000, or 56 cents per share in 1999
compared to the $5,411,000, or 52 cents per share in 1998, excluding
nonrecurring items in both periods. For the first nine months, net income was
$10,474,000, or $1.03 per share in 1999, compared to $10,969,000, or $1.05 per
share in 1998, excluding nonrecurring items for both periods. Refer to Notes 2,
3, and 4 of the Notes to Consolidated Financial Statements for a discussion of
the nonrecurring items.
For the third quarter, net income was $5,023,000, or 50 cents per share in 1999
compared to net income of $4,852,000, or 47 cents per share in 1998. For the
first nine months, net income was $9,884,000, or 97 cents per share in 1999
compared to $12,421,000, or $1.19 per share in 1998.
FINANCIAL CONDITION
At July 31, 1999 the Company's net working capital was $54,293,000 and the
current ratio was 1.6. At October 31, 1998, the Company's net working capital
was $45,170,000 and the current ratio was 1.5. At July 31, 1998, the Company's
net working capital was $41,585,000 and the current ratio was 1.4. In the first
nine months of 1999, cash provided by operations was $23,006,000 compared to
cash provided by operations of $16,334,000 in the comparable period a year ago.
Investing activities used cash of $15,193,000 in the first nine months of 1999
and $75,645,000 in
8
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the same period a year ago. The decrease resulted primarily from the purchase of
the equity interests of the Company's joint venture partners in McWhorter Europe
in the first quarter of 1998 and the acquisition of Accurate in the second
quarter of 1998. Capital expenditures of $16,148,000 in the first nine months of
1999 were primarily for implementation of an Enterprise Resource Planning (ERP)
package, productivity improvements, and capacity expansion. Capital expenditures
of $17,680,000 in the first nine months of 1998 were primarily for the
construction of the new research and development facility, capacity expansion,
productivity improvements, and the implementation of the ERP package. Capital
spending for the fiscal year 1999 is expected to be between $25,000,000 and
$28,000,000.
Financing activities used cash of $6,474,000 in the first nine months of 1999
compared to cash provided of $58,940,000 in the comparable period a year ago.
The decrease was primarily attributed to borrowings in the first quarter and
second quarter of 1998 to fund the purchase of the equity interests of the
Company's joint venture partners in McWhorter Europe and Accurate. Debt as a
percentage of invested capital was 58.7 percent at July 31, 1999 down from 59.3
percent at October 31, 1998 and 60.0 percent at July 31, 1998. Total debt
decreased to $151,627,000 at July 31, 1999 from $156,602,000 at October 31, 1998
and $154,225,000 at July 31, 1998.
The Company has a $150,000,000 unsecured revolving credit facility that
terminates on July 30, 2002. At July 31, 1999, approximately $24,445,000 was
available under this facility. The Company's European subsidiaries, primarily
the Italian subsidiary, have short-term lines of credit that are cancelable at
any time of approximately $25,158,000 of which approximately $12,819,000 is
available for future use at July 31, 1999. The credit facilities and internally
generated funds are expected to be adequate to finance McWhorter's capital
expenditures and other operating requirements.
The Company repurchased 302,700 shares at a cost of $4,376,000 during the first
nine months of 1999. Under a resolution adopted by the Board of Directors in May
1999, the Company is authorized to repurchase 500,000 shares of its common
stock. Under this resolution, which expires in May 2000, repurchases of 32,000
shares of common stock have been made.
With respect to environmental liabilities, management reviews each site, taking
into consideration the numerous factors that influence the costs that will
likely be incurred. 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 liabilities,
individually and in the aggregate, will not have a material adverse effect on
the Company's financial condition or results of operations.
IMPACT OF YEAR 2000
During 1999, the Company continued its program to prepare its information
technology (IT) and non-information technology (non-IT) systems for year 2000
compliance. The year 2000 issue relates to computer systems that use two digits
rather than four to define the applicable year and whether such systems will
properly process information when the year changes to 2000.
9
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The Company has completed an assessment of the impact of the year 2000 on its
purchased and internally developed IT systems. The current purchased and
internally developed software is year 2000 compliant. The Company is currently
in the process of modifying and testing its non-IT systems to ensure that these
systems will function properly with respect to dates in the year 2000. Non-IT
systems are expected to be compliant by October 1999. The Company has begun
formal communications with significant suppliers and customers to determine the
extent to which the Company's activities would be impacted by those third
parties' failure to remediate their own year 2000 issues.
The estimated costs related to testing and modifying existing systems for year
2000 compliance are approximately $495,000, of which $370,000 has been spent or
committed to date. Approximately $445,000 of the total compliance costs are
expected to be capital expenditures. No significant information systems projects
have been deferred to accommodate the year 2000 issues.
Year 2000 compliance is expected to be achieved no later than October 1999. The
Company believes that with the planned modifications, year 2000 issues will not
have a material impact on operations. However, if these modifications are not
made, or are not completed on a timely basis, year 2000 issues could result in
the temporary inability to process orders, send invoices, or engage in similar
business activities, which would have a material impact on the Company's
operations. Failure by significant suppliers and customers to be year 2000
compliant could also have a material impact on the Company. The amounts of
potential liability and lost revenue resulting from the failure to be year 2000
compliant cannot be reasonably estimated at this time. The Company's contingency
plans have been completed. These plans include the manual processes required to
perform critical business functions that could be affected by year 2000 issues.
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
Management's discussion and analysis contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such statements relate to, among other things, expenditures, cost
reductions, cash flow, operating improvements, and year 2000 compliance, and are
indicated by words such as "estimates", "expects", "anticipates", and similar
words and phrases. Such statements are subject to inherent uncertainties and
risks which could cause actual results to vary materially from expected results,
including but not limited to the following: levels of industrial activity and
economic conditions in the U.S. and other countries around the world, pricing
pressures and other competitive factors, and levels of capital spending in
certain industries, all of which could have a material impact on the Company's
order rates and product sale prices; McWhorter's ability to integrate and
operate acquired businesses on a profitable basis; the relationship of the U.S.
dollar to other currencies and its impact on pricing and cost competitiveness;
interest rates; utilization of McWhorter's capacity and the effect of capacity
utilization on McWhorter's costs; labor market conditions and raw material
costs; developments with respect to contingencies, such as environmental matters
and litigation; year 2000 compliance; and other risks detailed from time to time
in the Company's filings with the Securities and Exchange Commission.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in information relating to market risk since
the Company's disclosure included in Item 7A of Form 10-K as filed with the
Securities and Exchange Commission on January 26, 1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None.
ITEM 2. CHANGES IN SECURITIES. Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None
ITEM 5. OTHER INFORMATION. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.2.1 By-laws, as amended
4.2.2 Second Amendment to Rights Agreement
10.47 Change of Control Agreement dated February 17, 1999
between McWhorter Technologies, Inc. and Kevin W.
Brolsma
27.1 Financial Data Schedule for the third quarter of 1999
(b) No reports on Form 8-K were filed during the third quarter
of 1999.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
McWhorter Technologies, Inc.
/s/ Louise M. Tonozzi-Frederick
------------------------------------------
Louise M. Tonozzi-Frederick
Vice President and Chief Financial Officer
Date: August 31, 1999
12
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Exhibit 3.2.1
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 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.
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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 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 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.
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.
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<PAGE>
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 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
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.
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<PAGE>
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.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be 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.
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<PAGE>
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 PRESIDENT. The President 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. VICE PRESIDENTS. Each Vice President shall have such powers
and perform such duties as the President 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 4. 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 5. 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
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<PAGE>
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 President or any other officer of
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
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<PAGE>
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
President or a Vice President and the Treasurer or an Assistant Treasurer or the
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
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<PAGE>
the other Articles of these By-Laws, or any amendment thereto, and this Article
X, this Article X shall govern.
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
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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.
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<PAGE>
Exhibit 4.2.2
SECOND AMENDMENT TO RIGHTS AGREEMENT
SECOND AMENDMENT, dated June 28, 1999, to the Rights Agreement, dated as of
February 1, 1994 (the "Rights Agreement"), between McWhorter Technologies, Inc.,
a Delaware corporation (the "Company"), and Equiserve Trust Company, N.A. (as
successor to Wachovia Bank of North Carolina N.A., a North Carolina
corporation), as Rights Agent (the "Rights Agent").
WHEREAS, the Company and the Rights Agent are parties to the Rights
Agreement specifying the terms of the Rights (as defined therein);
WHEREAS, the parties amended the Rights Agreement as set forth in the
First amendment to Rights Agreement dated April 27, 1999;
WHERAS, the Company and the Rights Agent desire to further amend the
Rights Agreement in accordance with Section 27 of the Rights Agreement;
WHEREAS, the Board of Directors of the Company has voted in favor of
this Second Amendment pursuant to a unanimous written consent;
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth in the Rights Agreement and this Second Amendment, the parties hereby
agree as follows:
1. Section 1(a) of the Rights Agreement is hereby amended by adding the
following sentence at the end of such Section:
"Notwithstanding the foregoing provisions contained in this Section
1(a), with respect solely to Shapiro Capital Management Company, Inc.
("Shapiro") together with all its Affiliates and Associates, all
references to "seventeen and one half percent (17 1/2%)" shall be
replaced with "20%", so that all such provisions in this Section 1(a)
shall apply to Shapiro together with all its Affiliates and Associates
as so modified."
2. This Second Amendment shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
3. This Second Amendment may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
<PAGE>
4. Except as expressly set forth herein, this Second Amendment shall
not by implication or otherwise alter, modify, amend, or in any other way affect
any of the terms, conditions, obligations, covenants, or agreements contained in
the Rights Agreement, all of which are ratified and affirmed in all respects and
shall continue in full force and effect.
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Second Amendment to be
duly executed as of the first date above written.
McWHORTER TECHNOLOGIES, INC.
Attest:
By /s/ Louise M. Tonozzi-Frederick By /s/ Jeffrey M. Nodland
Its: Secretary Its: Chief Executive Officer
EQUISERVE TRUST COMPANY, N.A.
Attest:
By__________________ By /s/ Darlene Dio Dato
Its: Its: Senior Managing Director
<PAGE>
OFFICER'S CERTIFICATE
This Certificate is furnished pursuant to that certain Rights Agreement
(the "Rights Agreement"), dated as of February 1, 1994, between McWhorter
Technologies, Inc. (the "Company") and Equiserve Trust Company, N.A. (as
successor to Wachovia Bank of North Carolina, N.A., a North Carolina
corporation), as Rights Agent ("Rights Agent").
The undersigned hereby certifies that he is the duly appointed,
qualified, and acting Chief Executive Officer of the Company. In connection with
Section 27 of the Rights Agreement, the undersigned does hereby certify that the
proposed First Amendment to Rights Agreement attached hereto as Exhibit A is in
compliance with the terms of Section 27 of the Rights Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Officer's
Certificate as of June 21, 1999.
By /s/ Jeffrey M. Nodland
Chief Executive Officer
<PAGE>
MCWHORTER TECHNOLOGIES, INC.
UNANIMOUS WRITTEN CONSENT
IN LIEU OF A SPECIAL MEETING
OF THE BOARD OF DIRECTORS
The undersigned, being all the members of the
Board of Directors of McWhorter Technologies, Inc., a Delaware corporation (the
"Corporation"), in lieu of holding a special meeting, hereby take the following
actions and adopt the following resolution by unanimous written consent pursuant
to Section 141(f) of General Corporation Law of the State of Delaware:
WHEREAS, the Board of Directors desires to cause the
Corporation to amend the Rights Agreement, dated as of February 1, 1994
as previously amended (the "Rights Agreement"), between the Corporation
and Equiserve Trust Company, N.A. (as successor to Wachovia Bank of
North Carolina, N.A., a North Carolina corporation), as Rights Agent
(the "Rights Agent") in order to allow Shapiro Capital Management
Company, Inc. ("Shapiro") to acquire and hold up to 20% of the common
stock, par value $0.01 per share, of the Corporation without Shapiro
becoming an "Acquiring Person" under the terms of the Rights Agreement
and causing the Rights to be issued or issuable under the Rights
Agreement.
RESOLVED, that the Corporation be and hereby is
authorized to enter into, execute, deliver, and perform the Second Amendment to
the Rights Agreement (the "Second Amendment") with the Rights Agent, in
substantially the form attached hereto as Exhibit A, and that each officer of
the Corporation be and hereby is authorized and empowered, acting in the name of
and on behalf of the Corporation, to enter into, execute, and deliver the Second
Amendment and all related agreements, instruments, or documents and to take such
other action as such officer, in his or her sole discretion, deems necessary or
desirable in connection with the execution and delivery of the Second Amendment
and such other agreements, instruments, or documents, and the taking of such
action to be conclusive evidence of his or her authority pursuant thereto.
The actions taken by this consent shall have the same force
and effect as if taken at a special meeting of the Board of Directors of the
Corporation duly called and constituted pursuant to the By-Laws of the
Corporation and the laws of the State of
<PAGE>
Delaware.
This consent may be executed in two or more counterparts each
of which shall be deemed an original for all purposes and together shall
constitute one and the same consent.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed
this Consent of the members of the Board of Directors as of June 21, 1999.
/s/John R. Stevenson, Chairman
/s/David I. Barton
/s/Michelle L. Collins
/s/Edward M. Giles
/s/D. George Harris
/s/John G. Johnson, Jr.
/s/Jeffrey M. Nodland
/s/Heinn F. Tomfohrde, III
<PAGE>
Exhibit 10.47
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") is made as of
February 17, 1999 by and between McWhorter Technologies, Inc., a Delaware
corporation (the "Company") and Kevin W. Brolsma (the "Employee").
WHEREAS, Company considers the maintenance of a motivated
management group to be essential to protecting and enhancing the best interests
of Company and its stockholders and to that end Company has determined to
provide benefits to certain management employees in the event their employment
is terminated following a Change in Control of Company; and
WHEREAS, Employee is a member of Company's management group
and Company has determined that to reinforce and encourage the continued
attention and dedication of Employee to his duties, free from distractions which
could arise in anticipation of or subsequent to a Change in Control of Company,
it should enter into this Agreement with the Employee;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, Company and Employee agree as follows:
1. TERM AND NATURE OF AGREEMENT. This Agreement shall commence as of the
date hereof and shall continue in effect until February 17, 2002. As of February
17, 2002 and each third February 17th occurring thereafter, this Agreement shall
be automatically renewed for a term of three (3) years unless Company gives
written notice to Employee at least 90 days prior to the renewal date that this
Agreement will not be extended. Notwithstanding the foregoing, if a Change in
Control (as hereinafter defined) occurs during the last two (2) years of any
term of this Agreement, the term of this Agreement shall automatically be
extended for a period of twenty-four (24) months after the end of the month in
which the Change in Control occurs. Furthermore, Employee may terminate this
Agreement at any time by giving Company 30 days' advance written notice. This
Agreement shall be construed and enforced under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") as an unfunded welfare benefit plan.
The Agreement shall be administered by the Compensation Committee of the Board
of Directors of the Company (the "Committee").
2. SEVERANCE BENEFITS FOLLOWING A CHANGE IN CONTROL. If Employee's
employment with Company is terminated within twenty-four (24) months following a
Change in Control, Employee shall be entitled to the following severance
benefits (in addition to any non-severance compensation and benefits provided
for under any of Company's employee benefit plans, policies and practices or
under the terms of any other contracts, but in lieu of any severance pay under
any Company employee benefit plan, policy and practice or under the terms of any
other contract including any employment contract):
<PAGE>
(a) If Employee's employment is terminated by reason of Employee's
disability, retirement or death of by Employee other than for Good Reason, the
Company shall pay Employee his full base salary through the Date of Termination
at the rate in effect at the time of termination (or the date of death in the
case of Employee's death), plus any bonus or incentive compensation award which,
pursuant to the terms of any compensation or incentive plan, Employee is
entitled to receive but which has not yet been paid.
(b) If Employee's employment is terminated for Cause, Company shall pay
Employee his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given plus any bonus or incentive
compensation award which, pursuant to the terms of any compensation or incentive
plan, Employee is entitled to receive but which has not yet been paid.
(c) If Employee's employment is terminated by Company other than for Cause
or by Employee for Good Reason, then:
(i) Within five (5) days after the Date of Termination, Company shall
pay Employee his full base salary through the Date of Termination at the
greater of the rate in effect at the time the Change in Control occurred or
the rate in effect when the Notice of Termination was given plus an amount
equal to 100% of Employee's Target Annual Bonus (as defined below).
(ii) Company shall pay Employee a gross severance benefit equal to (i)
1 times Employee's Annual Base Salary at the greater of the rate in effect
at the time the Change in Control occurred or the rate in effect when
Notice of Termination was given plus (ii) 1 times Employee's Target Annual
Bonus. The severance benefit shall be paid in a lump sum within 30 days of
Employee's Termination. Employee's "Annual Base Salary" shall mean the
yearly salary rate established from time to time by Company as Employee's
regular salary for the next succeeding twelve (12) month period, payable
pursuant to the Company's payroll on a periodic basis and Employee's
"Target Annual Bonus" shall mean the maximum available normal bonus
Employee could earn under Company's bonus program for the year in which his
Date of Termination occurs.
(iii) Any outstanding options to purchase stock of Company held by
Employee shall immediately vest and become exercisable in full in
accordance with their terms and the provisions of the Company's 1994 Stock
Incentive Plan and 1996 Incentive Stock Plan and any other stock option
plan or arrangement of the Company.
(iv) The restrictions on any shares of restricted stock held by
Employee which have not yet terminated will terminate immediately.
(v) Company shall pay the costs of a reasonable outplacement service
until Employee is employed on a full time basis.
<PAGE>
(vi) For all purposes of Employee's participation in the Company's
Deferred Compensation Plan (the "Plan"): (a) the definition of Change in
Control contained in this Agreement shall govern and be deemed to be the
definition of "Change in Control" applicable to the Plan, notwithstanding
any provisions of the Plan, including Section 1.17, to the contrary, and
(b) the provisions of Section 3.9 (d) of the Plan and any similar successor
provisions shall not be applicable.
(vii) Until the earlier of the second anniversary of the Termination or
the date on which Employee becomes employed by a new employer, Company
shall, at its expense, provide Employee and Employee's family members with
medical, dental, life insurance, disability and accidental death and
dismemberment benefits at the highest level provided to Employee and
Employee's family members during the period beginning immediately prior to
the Change of Control and ending on the Date of Termination, PROVIDED,
HOWEVER, that if Employee become employed by a new employer which maintains
a major medical plan that either (i) does not cover Employee and Employee's
family members with respect to a pre-existing condition which was covered
under the Company's major medical plan, or (ii) does not cover Employee and
Employee's family members for a designated waiting period, Employee's
coverage under the Company's major medical plan shall continue (but shall
be limited in the event of noncoverage due to a preexisting condition, to
the preexisting condition itself) until the earlier of the end of the
applicable period of noncoverage under the new employer's plan or the
second anniversary of the Date of Termination.
3. EXCISE TAX 280G GROSS UP. In the event it shall be determined that any
payment or benefit provided under Paragraph 2(c) above together with any other
payments or benefits Employee is entitled to receive by reason of his
termination (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986 ("Code"), or any interest or penalties
are incurred by Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, hereinafter collectively referred
to as the "Excise Tax"), Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by Employee
of all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment. Payment of the Gross-Up Payment shall be subject
to the following:
(a) Subject to paragraph 3(b) below, the determination of whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment
shall be made by an accounting firm (the "Accounting Firm") selected by the
Company from among the following: Arthur Andersen & Co., KPMG Peat Marwick,
Price Waterhouse Coopers, and Deloitte & Touche. The Company will notify
Employee of the identity of the Accounting Firm within fifteen (15)
business days of Employee's Termination and the Accounting Firm shall
provide detailed supporting calculations to Company and Employee within
thirty (30) business days of being requested by Employee to make a Gross-Up
Payment determination. If the Accounting Firm determines that a Gross-Up
<PAGE>
Payment is required, the Gross-Up Payment so determined shall be paid
within five (5) days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is
payable by Employee, it shall so advise Employee in writing. The Accounting
Firm's determinations shall be binding upon Company and Employee. If,
following the exhaustion of Company's remedies under paragraphs (b) and (c)
below, Employee is required to pay an Excise Tax, the Accounting Firm shall
make a determination of the amount of any underpayment in any previous
Gross-Up Payment and any underpayment shall be paid promptly by Company to
Employee.
(b) Employee shall notify Company in writing of any claim by the
Internal Revenue Service that, if successful, would require Company to make
a Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten (10) business days after Employee is informed in
writing of such claim and shall apprise Company of the nature of such claim
and the date on which such claim is requested to be paid. Employee shall
not pay such claim prior to the expiration of the thirty (30) day period
following the date on which it give such notice to Company (or such shorter
period ending on the date that any payment of taxes with respect to such
claim is due). If Company notifies Employee in writing prior to the
expiration of such period that it desires to contest such claim, Employee
shall (i) give Company any information reasonably requested by Company
relating to such claim, (ii) take such action in connection with contesting
such claim as Company shall reasonably request in writing, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by Company, (iii) cooperate with
Company in good faith in order to effectively contest such claim and (iv)
permit Company to participate in any proceedings relating to such claim;
provided, however, that Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Employee
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect hereto) imposed as a result
of such representation and payment of costs and expenses.
(c) Without limitation on the foregoing provisions of this Section 3,
Company shall control all proceedings taken in connection with contesting a
claim by the Internal Revenue Service and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at
its sole option either direct Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Employee agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as Company shall determine; provided, however, that if Company
directs Employee to pay such claim and sue for a refund, Company shall
advance the amount of such payment to Employee on an interest-free basis,
and shall indemnify and hold Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided, further that if
Employee is required to extend the statute
<PAGE>
of limitations to enable Company to contest such claim, Employee may limit
this extension solely to such contested amount. Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by Employee of an amount advanced by Company
pursuant to paragraph 3(c) above, Employee becomes entitled to receive any
refund with respect to such claim, Employee shall (subject to Company's
complying with the requirements of paragraphs 3(b) and (c)) promptly pay to
Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).
(e) If, after the receipt by Employee of any amount advanced by Company
under paragraph 3(c), a determination is made that Employee shall not be
entitled to any refund with respect to such claim and Company does not
notify Employee in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
4. NON-SOLICITATION AND NON-COMPETITION. In consideration for the
severance benefits called for under paragraph 2(c) and Section 3 above, Employee
agrees that during the 12-month period following his Date of Termination (the
"Severance Period"), Employee:
(a) will not, without the prior written consent of Company, alone or in
association with others, solicit on behalf of Employee, or any other
person, firm, corporation or entity, any employee of Company, or any of its
operating divisions, subsidiaries or affiliates, for employment with a
person, firm, corporation or entity which competes with Company, or any of
its divisions, subsidiaries or affiliates.
(b) will not, without the prior written consent of Company, directly or
indirectly, engage or invest in, counsel or advise or be employed by any
other person, firm, corporation or entity engaged in or conducting business
which is the same as, or competing with, the business being conducted by
Company, or any of its operating divisions, subsidiaries or affiliates, in
any area or territory in which Company, or such operating divisions,
subsidiaries or affiliates, shall be conducting business during the
Severance Period. Notwithstanding the foregoing, Employee shall be entitled
to passively own not more than four and nine-tenths percent (4.9%) of any
publicly held entity engaged in any business in which Company, or any of
its operating divisions, subsidiaries or affiliates, shall be engaged
during said period.
Should Employee fail to comply with the non-solicitation and/or non-competition
restrictions contained in this Section 4, this Agreement shall immediately
terminate and Employee shall forfeit any remaining unpaid benefits under this
Agreement.
<PAGE>
5. OTHER EMPLOYMENT. Employee shall not be required to mitigate the
amount of any payment or benefit provided for under this Agreement by seeking
other employment or otherwise nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by
Employee as a result of other employment. Payment to Employee pursuant to
this Agreement shall constitute the entire obligation of Company for
severance pay and full settlement of any claim for severance pay under law or
in equity that Employee might otherwise assert against Company or any of its
employees, officers or directors on account of Employee's termination.
6. CHANGE IN CONTROL. For purposes of this Agreement a "Change in
Control" shall have occurred if:
(a) any "Person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended ("Exchange Act")) other
than Company, any corporation owned, directly or indirectly, by the
stockholders of Company in substantially the same proportions as their
ownership of stock of Company, and any trustee or other fiduciary holding
securities under a Company employee benefit plan or such proportionately
owned corporation, becomes the "beneficial owner" (as defined in rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Company
representing 20% or more of the combined voting power of Company's then
outstanding securities;
(b) during any period of not more than 24 months, 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 Company to effect a transaction
described in paragraph (a), (c), or (d) of this Section 6) whose election
by the board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directs 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 stockholders of Company approve a merger or consolidation of
Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 60% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of Company (or similar
transaction) in which no Person acquires more than 20% of the combined
voting power of Company's then outstanding securities; or
(d) the stockholders of Company approve a plan of compete liquidation
of Company or an agreement for sale or disposition by Company of all or
substantially all of its assets (or any transaction having a similar
effect).
<PAGE>
Company may also determine, in its discretion, that a sale of a substantial
portion of its assets or one of its businesses constitutes a "Change of Control"
with respect to Employee if Employee is employed in the affected operation.
7. TERMINATIONS FOR CAUSE AND GOOD REASON. Employee will be considered
to have been terminated for "Cause" if the termination is by reason of Employee
willfully engaging in conduct demonstrably and materially injurious to the
Company, Employee being convicted of or pleading guilty or nolo contendre to a
crime involving moral turpitude or Employee's willful and continued failure for
a significant period of time to perform Employee's duties after a demand for
substantial performance has been delivered to Employee by the Board of Directors
of Company which demand specifically identifies the manner in which the Boar
believes that Employee has not substantially performed his duties. Employee's
termination shall be considered to have been for "Good Reason" if Employee's
termination is by reason of the occurrence of any of the following events within
24 moths following a Change in Control without Employee's express written
consent:
(a) any change in Employee's authorities, duties, responsibilities
(including reporting responsibilities) or performance criteria or
objectives or a change of more than 20 miles in Employee's place of
employment which, in Employee's judgment, represents an adverse change; the
assignment to Employee of any duties or work responsibilities which, in his
reasonable judgment, are inconsistent with such authorities or
responsibilities; or any removal of Employee from, or failure to reappoint
or reelect him to any of such positions, except if any such changes are
because of disability, retirement or Cause;
(b) a reduction in or failure to pay any portion of Employee's Annual
Base Salary as in effect on the date of the Change in Control or as the
same may be increased from time to time thereafter;
(c) the failure by Company to provide Employee with compensation and
benefits (including, without limitation, incentive, bonus and other
compensation plans and any vacation, medical, hospitalization, life
insurance, dental or disability benefit plan), or cash compensation in lieu
thereof, which are, in the aggregate, no less favorable than those provided
by Company to Employee immediately prior to the occurrence of the Change in
Control;
(d) any breach by Company of any provision of this Agreement; and
(e) the failure of Company to obtain a satisfactory agreement from any
successor or assign of Company to assume and agree to perform this
Agreement, as required in Section 9 of this Agreement.
Employee's continued employment after the expiration of six months from any
action which would constitute Good Reason under paragraph 7(a) above shall
constitute a waiver of rights with respect to such action constituting Good
Reason under this Agreement.
<PAGE>
8. NOTICE OF TERMINATION. Any purported termination of employment by
Company or by Employee shall be communicated by a written Notice of Termination
to the other party which notice is given in accordance with Section 11 of this
Agreement. No termination shall be effective without such a Notice of
Termination. The Notice of Termination shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Employee's
employment and shall specify the Date of Termination. The "Date of Termination"
shall mean the date specified in the Notice of Termination provided that in no
case shall the date be less than thirty (30) days or more than sixty (60) days
after the date of Notice of Termination is given. If within thirty (30) days
after any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined wither by mutual written agreement of the parties, or by the
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been taken).
9. SUCCESSORS. Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Company to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
Company would be required to perform if no such succession or assignment had
taken place. As used in this Agreement, "Company" shall include any successor or
assign to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise. This Agreement shall inure to the
benefit of and be enforceable by Employee's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Employee should die while any amounts would still be payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Employee's named beneficiary and if there is no such named beneficiary, to
Employee's estate in a lump sum.
10. FEES AND EXPENSES. Company shall pay all reasonable legal fees and
related expenses (including the reasonable costs of experts, evidence and
counsel), when and as incurred by Employee, as a result of contesting or
disputing any termination of employment of Employee following a Change in
Control whether or not such contest or dispute is resolved in Employee's favor
but only if Employee was seeking in good faith to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under with Employee is or may be entitled to receive
benefits.
11. NOTICE. Any notice or other communication provided for or required
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or sent by certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses last given by
each party to the other or to such other address as either party may have
furnished to the other in writing.
<PAGE>
12. MODIFICATIONS, WAIVERS AND SURVIVAL OF OBLIGATIONS. No provision of
this Agreement may be modified, waived or discharged unless such modification,
waiver or discharge is agreed to in writing and signed by Employee and Company.
A waiver of any condition or provision of this Agreement shall be limited to the
terms an conditions of such waiver and shall not be construed as a waiver of any
similar or dissimilar provisions or conditions at any time. The obligations of
Company under Sections 2 and 3 shall survive the expiration of the term of this
Agreement.
13. CLAIMS PROCEDURE. Any claim for benefits under this Agreement by
Employee shall be made in writing.
14. GOVERNING LAW. The laws of Illinois shall be controlling in all
matters relating to this Agreement to the extent not preempted by ERISA.
15. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. ENTIRE AGREEMENT. The Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreement, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof.
17. ACTION BY COMPANY. Any action required of or permitted by Company
under this Agreement shall be by resolution of its Board of Directors, by
resolution of a duly authorized committee of its Board of Directors, or by a
person or persons authorized by resolutions of its Board of Directors or such
committee.
18. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
19. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or program provide by Company and for which Employee may
qualify, nor shall anything herein limit or reduce such rights as Employee may
have under any other agreements with Company. Amounts which are vested benefits
or which Employee is otherwise entitled to receive under any plan or program of
Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
McWHORTER TECHNOLOGIES, INC.
By: /s/ Jeffrey M. Nodland
Its: President and Chief Executive Officer
/s/ Kevin W. Brolsma
Employee
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 5,438
<SECURITIES> 0
<RECEIVABLES> 81,643
<ALLOWANCES> 0
<INVENTORY> 42,157
<CURRENT-ASSETS> 142,770
<PP&E> 208,331
<DEPRECIATION> 68,864
<TOTAL-ASSETS> 356,005
<CURRENT-LIABILITIES> 88,477
<BONDS> 131,407
0
0
<COMMON> 110
<OTHER-SE> 106,684
<TOTAL-LIABILITY-AND-EQUITY> 356,005
<SALES> 327,586
<TOTAL-REVENUES> 327,586
<CGS> 272,478
<TOTAL-COSTS> 272,478
<OTHER-EXPENSES> 32,347
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,008
<INCOME-PRETAX> 16,753
<INCOME-TAX> 6,869
<INCOME-CONTINUING> 9,884
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<EPS-BASIC> 0.97
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</TABLE>
