<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 27, 1999 Commission File No. 1-11261
SONOCO PRODUCTS COMPANY
----------------
Incorporated under the laws I.R.S. Employer Identification
of South Carolina No. 57-0248420
Post Office Box 160
Hartsville, South Carolina 29551-0160
Telephone: 843-383-7000
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock at August 1, 1999:
Common stock, no par value: 101,935,240
---------------------------------------
<PAGE> 2
SONOCO PRODUCTS COMPANY
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets - June 27, 1999 and
December 31, 1998
Condensed Consolidated Statements of Income - Three Months and
Six Months Ended June 27, 1999 and June 28, 1998
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 27, 1999 and June 28, 1998
Notes to Condensed Consolidated Financial Statements
Report of Independent Accountants
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
<PAGE> 3
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
(unaudited)
June 27, December 31,
1999 1998*
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 44,845 $ 57,249
Trade and other accounts receivable, net of allowances 368,404 352,147
Inventories:
Finished and in process 105,541 93,829
Materials and supplies 124,427 123,432
Prepaid expenses and other 30,738 29,465
Net assets held for sale -- 5,294
----------- -----------
673,955 661,416
PROPERTY, PLANT AND EQUIPMENT, NET 995,550 1,013,843
COST IN EXCESS OF FAIR VALUE OF ASSETS PURCHASED, NET 172,141 170,361
OTHER ASSETS 259,554 237,363
----------- -----------
Total Assets $ 2,101,200 $ 2,082,983
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to suppliers $ 156,456 $ 174,218
Accrued expenses and other 148,352 149,467
Notes payable and current portion of long-term debt 76,123 96,806
Taxes on income 2,772 15,578
----------- -----------
383,703 436,069
LONG-TERM DEBT 699,184 686,826
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 41,074 43,689
DEFERRED INCOME TAXES AND OTHER 121,889 94,807
SHAREHOLDERS' EQUITY
Common stock, no par value
Authorized 300,000 shares
101,895 and 101,683 shares issued and outstanding
at June 27, 1999 and December 31, 1998, respectively 7,175 7,175
Capital in excess of stated value 435,133 431,465
Accumulated other comprehensive loss (118,674) (95,139)
Retained earnings 531,716 478,091
----------- -----------
Total Shareholders' Equity 855,350 821,592
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,101,200 $ 2,082,983
=========== ===========
</TABLE>
* The year-end condensed consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles.
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 4
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars and shares in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -----------------------------
June 27, June 28, June 27, June 28,
1999 1998 1999 1998
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 611,754 $ 637,609 $ 1,172,233 $ 1,310,924
Cost of sales 466,632 489,708 892,534 1,007,766
Selling, general and administrative expenses 64,245 61,854 120,015 129,191
Gain on assets held for sale 3,500 85,360 3,500 85,360
--------- --------- ----------- -----------
Income before interest and taxes 84,377 171,407 163,184 259,327
Interest expense 11,846 12,878 24,316 27,234
Interest income (1,692) (1,963) (2,730) (2,771)
--------- --------- ----------- -----------
Income before income taxes 74,223 160,492 141,598 234,864
Provision for income taxes 28,575 88,095 53,166 117,100
--------- --------- ----------- -----------
Income before equity in earnings of affiliates/
Minority interest in subsidiaries 45,648 72,397 88,432 117,764
Equity in earnings of affiliates/Minority
interest in subsidiaries 1,716 1,544 2,879 2,672
--------- --------- ----------- -----------
Net income before extraordinary loss 47,364 73,941 91,311 120,436
Extraordinary loss from early extinguishment
of debt, net of income tax benefit -- 11,753 -- 11,753
--------- --------- ----------- -----------
Net income $ 47,364 $ 62,188 $ 91,311 $ 108,683
========= ========= =========== ===========
Average common shares outstanding:
Basic 101,867 103,104 101,842 103,503
Assuming exercise of options 975 3,183 987 3,111
--------- --------- ----------- -----------
Diluted 102,842 106,287 102,829 106,614
========= ========= =========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 5
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited), continued
(Dollars and shares in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -------------------
June 27, June 28, June 27, June 28,
1999 1998 1999 1998
------- ------- ------ -------
<S> <C> <C> <C> <C>
Per common share
Net income:
Basic, before extraordinary loss $ .46 $ .71 $ .90 $ 1.16
Extraordinary loss, net of income tax benefit -- (.11) -- (.11)
------- ------- ------ -------
Basic $ .46 $ .60 $ .90 $ 1.05
======= ======= ====== =======
Diluted, before extraordinary loss $ .46 $ .70 $ .89 $ 1.13
Extraordinary loss, net of income tax benefit -- (.11) -- (.11)
------- ------- ------ -------
Diluted $ .46 $ .59 $ .89 $ 1.02
======= ======= ====== =======
Dividends per common share $ .19 $ .18 $ .370 $ .344
======= ======= ====== =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 6
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
June 27, June 28,
1999 1998
--------- ---------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 67,476 $ 87,645
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (64,437) (101,153)
Cost of acquisitions, exclusive of cash (25,770) (46,524)
Proceeds from non-operating notes receivable 34,000 --
Proceeds from the sale of assets 15,433 295,861
Other, net (933) (1,614)
--------- ---------
Net cash (used) provided by investing activities (41,707) 146,570
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 46,040 97,069
Principal repayment of debt (64,796) (111,614)
Net increase (decrease) in commercial paper borrowings 17,000 (62,500)
Cash dividends (37,686) (35,414)
Common shares acquired (217) (138,524)
Common shares issued 2,854 26,398
--------- ---------
Net cash used by financing activities (36,805) (224,585)
--------- ---------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (1,368) (246)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (12,404) 9,384
Cash and cash equivalents at beginning of period 57,249 53,600
--------- ---------
Cash and cash equivalents at end of period $ 44,845 $ 62,984
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 7
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1: BASIS OF INTERIM PRESENTATION
In the opinion of the management of Sonoco Products Company (the
"Company"), the accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the consolidated financial
position, results of operations, and cash flows for the interim periods
reported hereon. Operating results for the three and six months ended
June 27, 1999, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999. These condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included in
the Company's annual report for the fiscal year ended December 31,
1998.
NOTE 2: DIVIDEND DECLARATIONS
On April 21, 1999, the Board of Directors declared a regular quarterly
dividend of $.19 per share. This dividend was paid June 10, 1999, to
all shareholders of record May 21, 1999.
On July 21, 1999, the Board of Directors declared a regular quarterly
dividend of $.19 per share payable September 10, 1999, to all
shareholders of record August 20, 1999.
NOTE 3: ACQUISITIONS/DISPOSITIONS
During the first quarter of 1999, Sonoco completed the acquisition of
Wood Composite Technology, a manufacturer of composite (i.e. wood and
plastic) reels serving the wire and cable markets. The acquisition is
expected to add approximately $10 million of sales annually. Sonoco
also acquired tube and core operations in Brazil and Taiwan from
Conitex, a wholly owned subsidiary of Texpack, a joint venture partner.
In July 1999, Sonoco received regulatory approval to proceed with the
purchase of the composite can assets of Crown Cork & Seal, Inc. The
purchase, when completed, will consist of three manufacturing
facilities in the United States with annual sales of approximately $32
million.
Also in July 1999, the Company signed a definitive agreement to
purchase the flexible packaging division of Graphic Packaging
Corporation, a wholly owned subsidiary of ACX Technologies, Inc. for
approximately $105 million. Completion of the all-cash purchase, which
is subject to regulatory approval, is expected in the third quarter of
1999.
Also, in the first quarter of 1999, Sonoco completed the sale of its
labels and label machinery businesses in the United Kingdom and a label
machinery business in the United States. These operations had sales of
approximately $34 million in 1998 and $4.4 million in 1999. The
completion of the sale of these operations resulted in the recognition
of a $3.5 million gain.
<PAGE> 8
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
NOTE 4: COMPREHENSIVE INCOME
The following table provides a reconciliation from net income to
comprehensive income (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- -----------------------
June 27, June 28, June 27, June 28,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 47,364 $ 62,188 $ 91,311 $108,683
Other comprehensive income:
Foreign currency translation
adjustments 957 9,413 (23,535) 3,791
-------- -------- -------- --------
Comprehensive income $ 48,321 $ 71,601 $ 67,776 $112,474
======== ======== ======== ========
</TABLE>
The following table summarizes the components of the current period
change in the accumulated other comprehensive income balances (dollars
in thousands):
<TABLE>
<CAPTION>
Foreign Minimum Accumulated
Currency Pension Other
Translation Liability Comprehensive
Adjustments Adjustment Income
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1, 1999 $ (88,228) $ (6,911) $ (95,139)
Current period change (23,535) -- (23,535)
--------- --------- ---------
Balance at June 27, 1999 $(111,763) $ (6,911) $(118,674)
========= ========= =========
</TABLE>
NOTE 5: NEW ACCOUNTING PRONOUNCEMENT
On June 15, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). FAS 133 is
effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000 and requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated
as part of a hedge transaction and, if it is, the type of hedge
transaction. Management of the Company anticipates that, due to its
limited use of derivative instruments, the adoption of FAS 133 will not
have a significant effect on the Company's results of operations or its
financial position.
<PAGE> 9
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
NOTE 6: FINANCIAL SEGMENT INFORMATION
Sonoco reports its results in two primary segments, Industrial
Packaging and Consumer Packaging. The Industrial Packaging segment
includes the following businesses: engineered carriers (tubes and
cores); molded plugs and related products and services; injection
molded and extruded plastics; paper manufacturing; recovered paper
operations; designed interior packaging; wood, plywood, and metal reels
for wire and cable packaging; adhesives; converting machinery; and
forest products. The Consumer Packaging segment includes the following
businesses: composite cans; plastic and fibre cartridges; capseals;
flexible packaging; high density film products; folding cartons;
packaging services; and coasters and glass covers.
FINANCIAL SEGMENT INFORMATION (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 27, 1999 June 28, 1998 June 27, 1999 June 28, 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales
Industrial Packaging $ 338,381 $ 343,002 $ 646,271 $ 645,577
Consumer Packaging 271,613 259,858 517,289 510,717
Other* 1,760 34,749 8,673 154,630
----------- ----------- ----------- -----------
Consolidated $ 611,754 $ 637,609 $ 1,172,233 $ 1,310,924
=========== =========== =========== ===========
Operating Profit
Industrial Packaging $ 47,969 $ 53,993 $ 91,404 $ 103,341
Consumer Packaging 36,460 32,550 68,204 63,194
Other* (52) (496) 76 7,432
Net gain on sales of divested assets -- 85,360 3,500 85,360
Interest, net (10,154) (10,915) (21,586) (24,463)
----------- ----------- ----------- -----------
Consolidated $ 74,223 $ 160,492 $ 141,598 $ 234,864
=========== =========== =========== ===========
</TABLE>
* Includes net sales and operating profits of divested businesses and entities
previously consolidated which have been contributed to joint ventures and are
no longer consolidated by Sonoco.
<PAGE> 10
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of Sonoco Products Company
We have reviewed the accompanying condensed consolidated balance sheet of Sonoco
Products Company as of June 27, 1999, and the related condensed consolidated
statements of income for each of the three-month and six-month periods ended
June 27, 1999 and June 28, 1998, and the condensed consolidated statements of
cash flows for the six-month periods ended June 27, 1999 and June 28, 1998.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1998, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the year then ended (not presented herein), and in our report dated
January 27, 1999, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1998, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Charlotte, North Carolina
August 9, 1999
<PAGE> 11
SONOCO PRODUCTS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED)
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations that are not historical in nature, are
intended to be, and are hereby identified as "forward looking statements" for
purposes of the safe harbor provided by section 21E of the Securities Exchange
Act of 1934, as amended. The Company cautions readers that forward looking
statements, including without limitation those relating to the Company's future
business prospects, revenues, working capital, liquidity, capital needs,
interest costs, income, and successful implementation of the Year 2000 Plan, are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those indicated in the forward looking statements.
SECOND QUARTER 1999 COMPARED WITH SECOND QUARTER 1998
RESULTS OF OPERATIONS
Consolidated net sales for the second quarter of 1999 were $611.8 million,
compared with $637.6 million in the second quarter of 1998. Last year's second
quarter included sales from divested operations including the Company's former
labels and label machinery businesses in North America and the United Kingdom,
and the Industrial Containers business. It also included sales from the
Company's paper cone and roll wrap operations, both of which were subsequently
contributed to joint ventures in which Sonoco is a minority or equal owner. The
second quarter of 1998 also included sales of corrugating medium to
Georgia-Pacific. Beginning in July 1998, corrugating medium was sold to
Georgia-Pacific under a new cost-plus fixed management fee arrangement under
which Sonoco no longer reports sales. On a comparable basis, excluding divested
businesses and entities previously consolidated which have been contributed to
joint ventures and are no longer consolidated by Sonoco, sales for the second
quarter of 1999 from ongoing operations were $610.0 million, versus $602.9
million in the second quarter of 1998.
Reported net income for the quarter was $47.4 million versus $62.2 million in
the second quarter of 1998, which included certain one-time transactions.
Excluding the one-time transactions, net income for the second quarter of 1998
was $47.4 million. These one-time transactions in 1998 included an after-tax
gain of $40 million resulting from the sale of Sonoco's fibre drum and plastic
drum operations and a $13.5 million after-tax charge in the second quarter
relating to the disposition of former Engraph operations. Net income in 1998
also included the effect of an extraordinary, after-tax loss of $11.8 million
resulting from the repurchase of $58.7 million of 9.2% notes. Sonoco reported
second quarter earnings of $.46 per diluted share versus $.59 in 1998 including
the impact of these one-time transactions. Excluding these one-time
transactions, earnings per diluted share were $.45 for the second quarter of
1998. In addition, reported earnings per diluted share for the second quarter of
1999 reflect reduced interest expense from lower debt levels and the reduction
in the number of outstanding shares of common stock resulting from $169.1
million of stock repurchases during 1998.
<PAGE> 12
SONOCO PRODUCTS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED), CONTINUED
SECOND QUARTER 1999 COMPARED WITH SECOND QUARTER 1998, CONTINUED
CONSUMER PACKAGING SEGMENT
The consumer packaging segment in the second quarter of 1999 included composite
cans; plastic and fibre cartridges; capseals; flexible packaging; high density
film products; folding cartons; packaging services; and coasters and glass
covers.
Second quarter sales were $273.4 million, compared with $271.5 million in the
same quarter of 1998. Last year's sales included the North American labels
operations, which were sold at the beginning of the second quarter of 1998, and
sales from the labels operations in the United Kingdom and label machinery
operations in the United Kingdom and the United States, which were sold in the
second quarter of 1999. On a comparable basis, second quarter 1999 sales were
$271.6 million, versus $259.9 million in the same quarter last year. Reported
operating profits in this segment were $36.4 million, compared with $30.7
million in the second quarter of 1998. On a comparable basis, operating profits
were $36.5 million in the second quarter of 1999, versus $32.6 million in the
same quarter last year.
The increase in second quarter sales in this segment resulted primarily from
increased volume in flexible packaging operations and the European composite can
operations. The Company's co-extruded, laminated flexible packaging operations
saw increases in internal sales to the Company's consumer products businesses,
as well as from new confectionery product introductions by a major customer. New
introductions in the snack food market in Europe helped boost composite can
volume. The increase in operating profit reflects improved productivity in the
domestic composite can, high density film and flexible packaging operations,
plus a gain of $1.4 million from the sale of real estate.
In the domestic composite can operations, sales in the nuts and powdered
beverage product lines were strong, while sales volume in the snack,
refrigerated dough and frozen concentrate lines declined during the quarter. The
rate of sales decline in frozen concentrates lessened, reflecting the conversion
of a previous self-manufacturer. The Company opened a new composite can plant in
Mexico during the second quarter, primarily to serve the powdered infant formula
market.
<PAGE> 13
SONOCO PRODUCTS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED), CONTINUED
SECOND QUARTER 1999 COMPARED WITH SECOND QUARTER 1998, CONTINUED
INDUSTRIAL PACKAGING SEGMENT
The industrial packaging segment for the second quarter of 1999 included
engineered carriers (tubes and cores); molded plugs and related products and
services; injection molded and extrusion molded plastics; paper manufacturing;
recovered paper operations; designed interior packaging; wood, plywood, and
metal reels for wire and cable packaging; adhesives; converting machinery; and
forest products.
Second quarter sales for the industrial packaging segment were $338.4 million,
compared with $366.1 million in the second quarter of 1998. The Company's paper
cone and roll wrap businesses, both of which were included in last year's second
quarter sales, were contributed to joint ventures in 1998, affecting second
quarter sales comparisons. Last year's second quarter also included sales of
corrugating medium which, beginning in July 1998, is sold under a cost-plus
fixed management fee arrangement under which Sonoco no longer reports sales. On
a comparable basis, excluding these items and sales from divested operations,
sales in 1998 would have been $343.0 million. Operating profits for this segment
were $48.0 million, compared with $55.3 million in the same period of 1998.
Included in 1999 results is a $2.4 million charge related to the shutdown of a
paper mill in the United Kingdom and associated redundancies. Excluding this
charge in 1999, and excluding operating profits from divested businesses and
previously consolidated entities which have been contributed to joint ventures
and are no longer consolidated by Sonoco, comparable operating profits were
$50.4 million and $54.0 million, in 1999 and 1998, respectively.
Volumes improved in virtually all of the industrial businesses globally,
including the paper operations that are currently operating near capacity. The
profit impact from volume gains was more than offset, however, by an unfavorable
price/cost ratio reflecting increasing raw material costs during the quarter,
including recovered paper (OCC) costs. In response, the company announced a
7-1/2% - 9% increase in U.S. prices for its paper-based engineered carriers in
July, as well as price increases for Asia, Europe, Latin America, Canada and
Mexico. The Company had not announced a general price increase for its
engineered carriers since August 1997.
Historically, full implementation of price increases for engineered carriers
lags increased paper prices. Therefore, a positive impact from the price
increase in the third quarter is not expected. There has been a steady,
month-over-month increase in demand for engineered carriers since February of
this year. In addition, paperboard volume, both internally and from paper
supplied under contract to our joint venture partners, improved throughout the
quarter as did capacity utilization in our paper mills. These improvements are
expected to continue throughout the balance of 1999.
<PAGE> 14
SONOCO PRODUCTS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED), CONTINUED
JUNE 1999 YEAR-TO-DATE COMPARED WITH JUNE 1998 YEAR-TO-DATE
Consolidated net sales for the first six months of 1999 were $1.17 billion,
compared with $1.31 billion in the first six months of 1998. Last year's sales
included approximately $131.7 million from the following divested operations:
the North American labels operation and the fibre and plastic drum portions of
the industrial containers business, both divested at the beginning of the second
quarter of 1998; and the roll wrap and paper cone operations which were
contributed to separate joint ventures during 1998. In addition, 1998 results
included sales of corrugating medium which, beginning in July 1998, is sold
under a cost-plus fixed management fee arrangement under which Sonoco no longer
reports sales. Comparable net sales were $1.16 billion in 1999, even with $1.16
billion in 1998. Net income for the first half of 1999, including a gain of $3.5
million from the sale of the Company's labels business in the United Kingdom and
its label machinery businesses in the United Kingdom and the United States, was
$91.3 million compared to $108.7 million in 1998,which included numerous special
one-time transactions discussed earlier. Excluding these transactions,
comparable net income was $87.1 million, a 7.2% decrease from the $93.9 reported
during the first half of 1998.
CONSUMER PACKAGING SEGMENT
Trade sales for the consumer packaging segment in the first six months of 1999
were $526.0 million, compared with $567.4 million in the first half of 1998. On
a comparable basis, trade sales for the first six months of 1998 were $510.7
million, as last year's sales included approximately $56.7 million from the
North American labels operations, divested at the beginning of the second
quarter of 1998. Operating profits in this segment were $68.3 million for the
first half of 1999, compared with $64.1 million during the same period last
year. On a comparable basis, excluding divested operations, operating profits
increased 7.9% to $68.2 million from 1998's $63.2 million.
The company's global composite can operations remain strong. Volume increases in
the powdered beverage and nuts markets were offset by weakness in the frozen
concentrate, snacks, and dough market.
Volume increased in Sonoco's high density film products operations led by
increases in both the grocery and retail markets. Sales prices, however,
declined over last year, but were more than offset by lower resin costs.
Volume increased in the company's flexible packaging operations in both the
confectionery and liners markets. Productivity improvements and favorable raw
material price changes also contributed to this group's improved performance
over the first half of 1998.
<PAGE> 15
SONOCO PRODUCTS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED), CONTINUED
JUNE 1999 YEAR-TO-DATE COMPARED WITH JUNE 1998 YEAR-TO-DATE
INDUSTRIAL PACKAGING SEGMENT
Trade sales for the industrial packaging segment for the first six months of
1999 were $646.3 million, compared with $743.5 million in the first half of
1998. The Company's paper cone and roll wrap businesses, both of which were
included in last year's sales, were contributed to joint ventures in 1998,
affecting second quarter sales comparisons. Last year's first half also included
sales of corrugating medium which, beginning in July 1998, is sold under a
cost-plus fixed management fee arrangement under which Sonoco no longer reports
sales. On a comparable basis, excluding these items and sales from divested
operations, sales in 1998 would have been $645.6 million. Operating profits for
this segment in the first half of 1999 were $91.4 million, compared with the
$109.9 million reported in the same period of 1998. On a comparable basis,
excluding divested operations and entities previously consolidated which have
been contributed to joint ventures and are no longer consolidated by Sonoco,
1998 profit was $103.3 million.
Volume in the global tube and core operations remained strong compared with a
year ago. Selling prices declined across all segments, more than offsetting
small declines in raw material prices.
CORPORATE
General corporate expenses have been allocated as operating costs to each of the
segments. Year to date interest expense was lower in the first six months of
1999 compared with the same period last year due to higher debt levels in the
first quarter of 1998 associated with the share repurchase program completed
that year.
In July 1999, Sonoco received regulatory approval to proceed with the purchase
of the composite can assets of Crown Cork & Seal, Inc. The purchase, when
completed, will consist of three manufacturing facilities in the United States
with annual sales of approximately $32 million. Also in July 1999, the Company
signed a definitive agreement to purchase the flexible packaging division of
Graphic Packaging Corporation, a wholly owned subsidiary of ACX Technologies,
Inc. for approximately $105 million. Completion of the all-cash purchase, which
is subject to regulatory approval, is expected in the third quarter of 1999.
Both purchases will become part of the Consumer Packaging segment.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remained strong through the first half of 1998.
The debt-to-capital ratio, after adjusting debt levels for excess cash related
to the issuance of restricted purpose bonds, decreased slightly to 46.3% at June
27, 1999, from 46.7% at December 31, 1998.
<PAGE> 16
SONOCO PRODUCTS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED), CONTINUED
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES, CONTINUED
Working capital increased $64.9 million to $290.3 million during the first half
of 1999, driven mainly by lower payables and decreases in short-term debt.
The Company expects internally generated cash flows, along with borrowings
available under its commercial paper and other existing credit facilities, to be
sufficient to meet operating and normal capital expenditure requirements.
YEAR 2000 READINESS DISCLOSURE AND EURO COMPLIANCE
The "Year 2000 issue" relates to the inability of certain computerized
information and production systems to properly recognize and process date
sensitive information. This is because most of the world's computer hardware and
software have historically used only two digits to identify the year, resulting
in the computers' inability to distinguish between dates in the 1900's and dates
in the 2000's.
In May 1997, the Company adopted a Year 2000 Plan ("Plan") to identify and
address the Company's various Year 2000 issues throughout its domestic and
international operations, including financial and administrative systems,
process control and operating systems and information systems infrastructure.
The Plan provides for six phases: (i) an inventory of all systems that might be
affected by the Year 2000; (ii) assessment of Year 2000 readiness of each
application identified in the inventory; (iii) planning for corrective action,
which includes reviewing and prioritizing the various corrective actions based
on their relative impact on the Company's operations and profitability; (iv)
initiation of corrective actions to replace or repair systems that are not Year
2000 compliant; (v) testing the new, upgraded or repaired systems; and (vi)
implementation of tested systems and post-implementation support, including
contingency plans for those systems most critical to the Company's ongoing
operations and/or most at risk to fail. The Plan is being implemented on a
Company-wide basis under the direction of the Information Services Department in
cooperation with senior management and with the review of the Board of
Directors' Audit Committee.
The Company has completed the inventory, assessment, planning and correction
phases for all of its material systems that may involve a Year 2000 issue. In
approximately 90% of its operations, final testing and implementation have also
been completed. Testing of material systems in the remaining operations is
scheduled to be completed in the third quarter of 1999. Based on the information
developed from the work performed to date, of the total system-related
expenditures, the Company estimates that the total cost of achieving Year 2000
compliance in substantially all of its information technology and production
systems will be approximately $30 million, of which approximately $28.5 million
has been spent through June 27, 1999, a portion of which was capitalized and
will be amortized to earnings in future periods. The funds were spent primarily
on the correction
<PAGE> 17
SONOCO PRODUCTS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED), CONTINUED
YEAR 2000 READINESS DISCLOSURE AND EURO COMPLIANCE, CONTINUED
and implementation phases. Management anticipates that the remainder will be
spent in the third quarter of 1999, and believes that the total cost of
achieving Year 2000 compliance will not have a material impact on the Company's
financial condition, results of operations, or cash flows. However, the Company
currently is in the process of completing corrective actions and testing the
new, upgraded or repaired systems. The Company may need to take additional
corrective action arising out of the results of the testing, the costs of which
it cannot yet predict.
The Company is deploying its internal and external resources to install and test
new or upgraded equipment necessary to address the Year 2000 issues in its
operations. Management believes its existing personnel and outside resources are
sufficient to implement the Plan on a timely basis, assuming that no
unanticipated delays are encountered.
The Company's facilities utilize various control systems to monitor and regulate
production operations. Although the production impact of a Year 2000 related
failure varies significantly among the facilities, any such failure could cause
manufacturing delays or similar inefficiencies. Due to the decentralized nature
of its operations, however, management believes the potential impact of such a
failure would be isolated to the affected facility. In most cases, production
could be shifted to other Company facilities that have similar production
capabilities and capacity until the Year 2000 issue is remedied. It is not
possible to predict the reasonable likelihood of such an event occurring or the
related financial impact. Based on information developed to date, the Company
does not believe it has a significant amount of software imbedded in its
production equipment that is date dependent.
The Company intends to have contingency plans for its administration functions,
production facilities, and equipment finalized by the third quarter of 1999. The
Company's contingency plans will assume a worst-case scenario that includes
short-term power outages, short-term transportation and supply shortages, and
short-term voice and data communication failures. Mitigation plans vary somewhat
between business units, but share a common focus on safety, asset and revenue
protection, and supply chain management. Specific contingency options include
manual procedures, alternate site production capability, and increased raw
material inventories.
The Company also maintains a wide variety of administrative and financial
applications that require corrective actions to handle Year 2000 dates. The
Company has installed and tested new, more centralized software systems
throughout its North American operations that are designed to address Year 2000
issues. Such
<PAGE> 18
SONOCO PRODUCTS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED), CONTINUED
YEAR 2000 READINESS DISCLOSURE AND EURO COMPLIANCE, CONTINUED
applications generally are decentralized in the Company's international
operations. Consequently, any Year 2000 failure would be isolated to a single
facility or operation. In most instances, the Company has the ability to run
these applications off-line with the assistance of additional Company personnel,
if necessary.
The Company relies on third party suppliers for certain raw materials,
utilities, transportation and other key services. Under the Plan, the Company
has initiated efforts to evaluate the Year 2000 readiness of its key suppliers
so that it can make contingency plans to reduce risks of disruption in its
production and delivery processes. Paper, the Company's primary raw material, is
produced internally; therefore, the Company believes it will not be subject to
many of the risks attendant to companies that are substantially dependent on
third party suppliers for raw materials. To date, approximately 80% of those
suppliers that the Company has contacted have responded to the surveys. All have
indicated that they are, or believe they will be, Year 2000 compliant with
respect to operations that impact the Company.
Although possible Year 2000 interruptions in customers' operations could result
in reduced sales, increased inventory or receivable levels and reduction in cash
flow, the Company believes that its customer base is broad enough to minimize
the effects of such occurrences. Nevertheless, the Company is actively
communicating with each of its more significant customers in order to devise
adequate contingency plans where necessary.
There is a risk that the Company's plans for achieving Year 2000 compliance may
not be completed on time, particularly in certain of the Company's European
operations that are more dependent on third parties. However, the Company
anticipates that if one or more of the milestones are not met with respect to
any system, the Plan timetable will provide adequate advance notice to permit
the Company to take those steps necessary to implement contingency plans, which
could include taking the systems off-line temporarily, stockpiling inventories
of raw materials or finished goods, or devoting additional Company personnel to
resolve or substantially mitigate the issues.
<PAGE> 19
SONOCO PRODUCTS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED), CONTINUED
YEAR 2000 READINESS DISCLOSURE AND EURO COMPLIANCE, CONTINUED
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies and the
Euro and adopted the Euro as their common legal currency (the "Euro
Conversion"). The impact of the Euro Conversion has not been material to the
Company in the first six months of 1999. The Company is currently unsure of the
future impact that the Euro Conversion will have, particularly as it relates to
its European operations. However, the Company does not anticipate that the Euro
Conversion will have a material adverse effect on its future business, financial
condition, results of operations, or cash flows. The corrective actions that the
Company is taking to address Year 2000 issues with respect to its European
operations already include changes in its administrative and financial
applications necessary to deal with the Euro Conversion at an immaterial
incremental cost.
The estimates and conclusions herein contain forward-looking statements and are
based on management's best estimates of future events. Risks to completing the
Plan include the availability of resources, the Company's ability to discover
and correct the potential Year 2000-sensitive problems that could have a serious
impact on specific systems or facilities, and the ability of suppliers to bring
their systems into Year 2000 compliance. All statements made herein regarding
our Year 2000 efforts are "Year 2000 Readiness Disclosures" made pursuant to the
Year 2000 Information and Readiness Disclosures Act, and to the extent
applicable, are entitled to the protections of such act.
<PAGE> 20
SONOCO PRODUCTS COMPANY
PART I. FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about the Company's exposure to market risk was
disclosed in its 1998 Annual Report on Form 10-K which was filed
with the Securities and Exchange Commission on March 26, 1999.
There have been no material changes in market risk exposures
since the date of that filing.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Incorporated by reference to the information set forth under
Item 4 of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 28, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3-1 - Articles of Incorporation (as amended)
Exhibit 3-2 - Bylaws (as amended)
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) No Current Reports on Form 8-K were filed by the Company
during the second quarter of 1999.
<PAGE> 21
S O N O C O P R O D U C T S C O M P A N Y
SIGNATURE
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.
SONOCO PRODUCTS COMPANY
-----------------------
(Registrant)
Date: August 9, 1999 By:/s/ F. Trent Hill, Jr.
------------------------- --------------------------
F. T. Hill, Jr.
Vice President and
Chief Financial Officer
<PAGE> 22
SONOCO PRODUCTS COMPANY
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation (as amended)
3.2 Bylaws (as amended)
27 Financial Data Schedule for the second
quarter of 1999 (for SEC use only)
<PAGE> 1
EXHIBIT 3.1
[The following is an unofficial Restatement
of the Restated Articles of Incorporation,
filed on October 7, 1988, with the Secretary
of State of South Carolina, as subsequently
amended on April 28, 1989, November 2, 1993,
May 4, 1994, and August 4, 1999, and as
corrected on August 10, 1995]
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
(RESTATED) ARTICLES OF INCORPORATION
OF
SONOCO PRODUCTS COMPANY
-----------------------------------------
(File this Form in
Duplicate Originals) This Space for Use
by
(Section 33-7-30 of 1976 Code) Secretary of State
1. The name of the corporation is SONOCO PRODUCTS COMPANY, originally known as
SOUTHERN NOVELTY COMPANY as filed on May 10, 1899.
2. The initial registered office of the corporation is North Second Street
-------------------
Street & Number
Hartsville Darlington S.C. 29550
-----------------------------------------------------------------------
City County Zip Code
and the initial registered agent at such address is Harris E. DeLoach, Jr.
3. The period of duration of the corporation shall be perpetual ( years).
4. The corporation is authorized to issue shares of stock as follows:
<TABLE>
<CAPTION>
Class of Shares Authorized No. of Each Class Par Value
- ----- -- ------ ---------- --- -- ---- ----- --- -----
<S> <C> <C>
Common 300,000,000 None
Preferred 30,000,000 None
</TABLE>
If shares are divided into two or more classes or if any class of shares is
divided into series within a class, the relative rights, preferences, and
limitations of the shares of each class, and of each series within a class, are
as follows:
(a) Preferred Stock. The Board of Directors is authorized, subject
to limitations prescribed by law and the provisions of this Article 4, to
provide for the issuance of the shares of Preferred Stock (including any shares
of Preferred Stock restored to the status of authorized but unissued Preferred
Stock, undesignated as to series pursuant to this Article 4(a) in one or more
series, and to establish, from time to time, the number of shares to be included
in each such series and to fix the designations, voting powers, if any,
preferences, limitations, and relative, participating, optional or other special
rights, as shall be stated and expressed in the articles of amendment providing
for the issue of such series adopted by the Board of Directors and filed with
the Secretary of State. The authority of the Board of Directors with respect to
each series of Preferred Stock shall include, but not be limited to,
determination of the following:
(i) the distinctive serial designations and the division of
shares of Preferred Stock into one or more series and the number
of shares of a particular series, which may be increased or
decreased (but not below the number of shares thereof then
outstanding) by articles of amendment authorized, executed and
filed as required by law;
(ii) the rate or amount (or the method of determining the
rate or amount) and times at which, and the preferences and
conditions under which, dividends shall be payable on shares of a
particular series, the status of such dividends as cumulative,
partially cumulative, or noncumulative, the date or dates from
which dividends, if cumulative, shall accumulate, and the status
of such series as participating or nonparticipating with shares
of other classes or series of stock;
(iii) the price or prices at which, the nature of the
consideration for which, the period or periods within which and
the terms and conditions, if any, upon which the shares of a
particular series may be redeemed, in whole or in part,
<PAGE> 2
at the option of the corporation;
(iv) the amount or amounts and rights and preferences, if
any, to which the holders of shares of a particular series are
entitled or shall have in the event of any involuntary or
voluntary liquidation, dissolution or winding up of the
corporation;
(v) the right, if any, of the holders of a particular series
or the corporation to convert or cause conversion of shares of
such series into shares of other classes or series of stock or
other securities or other property or to exchange or cause
exchange of such shares for shares of other classes or series of
stock or other securities for other property, and the terms and
conditions, if any, including the price or prices or the rate or
rates of conversion and exchange, and the terms and conditions of
adjustments, if any, at which such conversion or exchange may be
made or caused;
(vi) the obligation, if any, of the corporation to redeem,
purchase or otherwise acquire, in whole or in part, shares of a
particular series for a sinking fund or otherwise, and the terms
and conditions thereof, if any, including the price or prices and
the nature of the consideration payable for such shares so
redeemed, purchased or otherwise acquired;
(vii) the voting rights, if any, of the shares of a particular
series (in addition to those that may be required by law),
whether special, conditional, limited or unlimited, including the
number of votes per share and any requirement for the approval by
the holders of shares of all series of Preferred Stock, or of the
shares of one or more series thereof, or of both, in an amount
greater than a majority up to such amount as is in accordance
with applicable law, as a condition to specified corporation
action or amendments to the Articles of Incorporation; and,
(viii) any other relative rights, limitations and preferences
which may be so determined by the Board of Directors to the
fullest extent permitted by the laws of the State of South
Carolina.
All shares of any particular series of Preferred Stock shall rank equally and
shall be identical as to preferences, limitations and relative rights, except as
to the date or dates from and after which dividends, if cumulative or partially
cumulative, shall accumulate. All series of Preferred Stock shall rank equally
and shall be identical as to preferences, limitations and relative rights,
except insofar as, to the extent permitted by law, they may vary with respect to
the matters which the Board of Directors is hereby expressly authorized to
determine in the articles of amendment providing for any
<PAGE> 3
particular series of Preferred Stock.
All shares of Preferred Stock shall rank senior and prior to the Common
Stock in respect of the right to receive dividends and the right to receive
payments out of the net assets of the corporation upon any involuntary or
voluntary liquidation, dissolution or winding up of the corporation. All shares
of Preferred Stock redeemed, purchased or otherwise acquired by the corporation
(including shares surrendered for conversion or exchange) shall be cancelled and
thereupon restored to the status of authorized but unissued shares of Preferred
Stock undesignated as to series.
1. DESIGNATION OF THE SERIES; RANK. The shares of such series shall be
designated as "$2.25 Series A Cumulative Convertible Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting such series
shall be 3,450,000. The Series A Preferred Stock shall be without par value.
Such number of shares may be decreased, at any time and from time to time, by
resolution of the Board of Directors; provided that no decrease shall reduce the
number of shares of Series A Preferred Stock to a number less than that of the
shares then outstanding. The Series A Preferred Stock shall rank senior to the
common stock of the Company (the "Common Stock") and any other capital stock of
the Company ranking junior to the Series A Preferred Stock as to dividends and
upon liquidation, dissolution or winding up.
2. DIVIDENDS. (a) The holders of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available therefor, cumulative annual cash dividends of $2.25 per
share, payable in arrears on the first day of February, May, August and
November, commencing February 1, 1994 (the "Dividend Payment Date"), with
respect to the quarterly period ending on the day immediately preceding such
dividend payment date. The amount of dividends payable per share for each full
dividend period shall be computed by dividing by four the $2.25 annual rate.
Dividends payable for any period other than a full dividend period shall be
calculated on the basis of a year of 360 days consisting of twelve 30-day
months. The dividends will be payable to holders of record as they appear on the
stock register of the Company on a record date fixed by the Board of Directors,
which shall in no event be more than fifty (50) days nor less than ten (10) days
prior to the Dividend Payment Date. Dividends on the Series A Preferred Stock
shall be cumulative from the date of original issuance of the Series A Preferred
Stock. Holders of the Series A Preferred Stock shall not be entitled to any
dividends,
<PAGE> 4
whether payable in cash, property or securities, in excess of the full
cumulative dividends.
Any dividend which shall not be paid on the Dividend Payment Date on
which it shall become due shall be deemed to be "past due" until such dividend
shall be paid or until the share of Series A Preferred Stock with respect to
which such dividend became due shall no longer be outstanding, whichever is the
earlier to occur. No interest or sum of money in lieu of interest shall be
payable in respect of any dividend payment or payments which are past due.
Dividends paid on shares of Series A Preferred Stock in an amount less than the
total amount of such dividends at the time accumulated and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares of Series A Preferred Stock at the time outstanding.
Unless full cumulative dividends on all outstanding shares of the Series
A Preferred Stock have been paid or declared and set aside for payment for all
past dividend periods: (i) no dividends -- in cash, stock or other property --
may be declared or any other distribution made upon the Common Stock or on any
other stock of the Company ranking junior to the Series A Preferred Stock as to
dividends (other than dividends or distributions in Common Stock or any other
stock of the Company ranking junior to the Series A Preferred Stock as to
dividends and upon liquidation, dissolution of winding up, dividends or
distributions of Rights (as defined in Section 7 hereof), or the issuance of
such Rights in connection with any other stock of the Company ranking junior to
or on a parity with the Series A Preferred Stock as to dividends and upon
liquidation, dissolution or winding up); (ii) no Common Stock, or any other
stock of the Company ranking junior to the Series A Preferred Stock as to
dividends or upon liquidation, dissolution or winding up, may be redeemed
pursuant to a sinking fund or otherwise or purchased or otherwise acquired for
any consideration by the Company (except by conversion of such junior stock
into, or exchange of such stock for, stock of the Company ranking junior to the
Series A Preferred Stock as to dividends and upon liquidation, dissolution or
winding up, or by redemption of the Rights for cash), provided that unless
-------- ----
prohibited by the terms of any other outstanding series of preferred stock, any
monies theretofore deposited in any sinking fund with respect to any preferred
stock of the Company in compliance with paragraph (a) of this Section 2 and the
provisions of such sinking fund may thereafter be applied to the purchase or
redemption of such preferred stock in accordance with the terms of such sinking
fund, regardless of whether at the time of such application full cumulative
dividends on all
<PAGE> 5
outstanding shares of Series A Preferred Stock through the most recent Dividend
Payment Date shall have been paid in full or declared and a sufficient sum set
apart for payment thereof.
If a dividend upon any shares of Series A Preferred Stock or any other
outstanding preferred stock of the Company ranking on a parity with the Series A
Preferred Stock as to dividends is in arrears, all dividends or other
distributions on account of such arrearage (other than dividends paid in Common
Stock or any other stock of the Company ranking junior to the Series A Preferred
Stock as to dividends and upon liquidation, dissolution or winding up) will be
declared pro rata so that the amounts of dividends per share declared on the
Series A Preferred Stock and such other series shall in all cases bear to each
other the same ratio that full cumulative dividends per share at the time on the
shares of Series A Preferred Stock and on such other series bear to each other.
(b) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company if the Company could not, under paragraph (a) of this Section 2,
purchase or otherwise acquire such shares at such time and in such manner.
3. GENERAL, CLASS AND SERIES VOTING RIGHTS. Except as provided in this
Section 3 and in Section 4 hereof, or as otherwise from time to time required by
law, the Series A Preferred Stock shall have no voting rights.
So long as any shares of Series A Preferred Stock remain outstanding,
the consent of the holders of at least two-thirds of the shares of Series A
Preferred Stock outstanding at the time (voting separately as a class together,
as to clause (i) below, with all other series of preferred stock ranking on a
parity with the Series A Preferred Stock either as to dividends or the
distribution of assets upon liquidation, dissolution or winding up and upon
which like voting rights have been conferred and are exercisable) given in
person or by proxy, either in writing or at any special or annual meeting called
for the purpose, shall be necessary to permit, effect or validate any one or
more of the following:
(i) The authorization, creation, issuance or reclassification of
authorized stock of the Company into, or authorization, creation or
issuance of any obligation or security convertible into or evidencing a
right to purchase, any shares of any class of stock of the Company
(including any class or series of preferred
<PAGE> 6
stock) ranking prior to the Series A Preferred Stock or to any other series
of preferred stock which ranks on a parity with the Series A Preferred
Stock as to dividends or upon liquidation, dissolution or winding up; or
(ii) The amendment, alteration or repeal of any of the provisions of
this Amendment or of these resolutions, whether by merger, consolidation or
otherwise, which would materially and adversely affect the preferences,
rights, powers or privileges, qualification, limitations and restrictions
of the Series A Preferred Stock; provided, however, that the
-------- -------
authorization, creation, issuance or increase in the amount of shares of
any other class or series of capital stock ranking on a parity with or
junior to the Series A Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such
preferences, rights, powers or privileges, qualifications, limitations and
restrictions.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of Series A Preferred Stock shall have
been redeemed or sufficient funds shall have been deposited in trust to effect
such redemption.
4. DEFAULT VOTING RIGHTS. Whenever at any time dividends payable on the
shares of Series A Preferred Stock shall be in arrears in an amount equal to at
least six full quarterly dividends payable on shares of the Series A Preferred
Stock at the time outstanding, whether or not consecutive quarterly dividend
payment periods, the holders of the outstanding shares of Series A Preferred
Stock shall have the exclusive right (voting separately as a class together with
holders of shares of any one or more other series of preferred stock ranking on
a parity with the Series A Preferred Stock either as to dividends or the
distribution of assets upon liquidation, dissolution or winding up and upon
which like voting rights have been conferred and are exercisable) to elect two
directors of the Company for terms at the Company's next annual meeting of
shareholders (the "Preferred Stock Directors"). If the right to elect Preferred
Stock Directors shall have accrued to the holders of the Series A Preferred
Stock more than 90 days prior to the date established for the next annual
meeting of shareholders and if immediately prior to the accrual of that right
there are at least two vacancies on the full Board of Directors of the Company,
the Chairman of the Board or the President of the Company shall, within 20 days
after
<PAGE> 7
delivery to the Company at its principal office of a written request for a
special meeting signed by the holders of at least 15 percent of all outstanding
shares of the Series A Preferred Stock, call a special meeting of the holders of
Series A Preferred Stock to be held within 60 days after the delivery of such
request for the purpose of electing such additional directors. At elections for
such Preferred Stock Directors, each holder of Series A Preferred Stock shall be
entitled to one vote for each share held (the holders of shares of any other
series of preferred stock ranking on a parity as aforesaid with the Series A
Preferred Stock and upon which like voting rights have been conferred and are
exercisable being entitled to such number of votes, if any, for each share of
stock held as may be granted to them).
The Preferred Stock Directors to be elected by the holders of Series A
Preferred Stock (together with any series of preferred stock ranking on a parity
as aforesaid with the Series A Preferred Stock and upon which like Voting rights
have been conferred and are exercisable) shall be in addition to the number of
directors constituting the Board of Directors of the Company immediately prior
to the accrual of that right, unless the Board of Directors is then at its
maximum size, in which case such holders shall be entitled to elect two of such
Directors at the Company's next annual meeting of shareholders. Unless the
voting rights of the holders of such stock have terminated as provided below,
such Preferred Stock Directors shall serve until their successors are elected
and qualified by the holders of Series A Preferred Stock and any other holders
of shares of preferred stock ranking as aforesaid on a parity with the Series A
Preferred Stock and upon which like voting rights have been conferred and are
exercisable.
Each Preferred Stock Director elected by the holders of shares of Series
A Preferred Stock (together with any other series of preferred stock ranking as
aforesaid on a parity with the Series A Preferred Stock and upon which like
voting rights have been conferred and are exercisable) shall continue to serve
as such director until such time as all dividends accumulated on the Series A
Preferred Stock have been paid in full, at which time, subject to the
requirements of the South Carolina Business Corporation Act of 1988, as amended,
the term of office of all persons elected
<PAGE> 8
as Preferred Stock Directors by the holders of Series A Preferred Stock
(together with any other series of preferred stock ranking on a parity with the
Series A Preferred Stock and upon which like voting rights have been conferred
and are exercisable) shall forthwith terminate and the number of members of the
Board of Directors shall be reduced accordingly. If the office of any Preferred
Stock Director elected by the holders of Series A Preferred Stock voting as a
class becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise (other than termination upon
the payment in full of all accumulated dividends as aforesaid), the remaining
Preferred Stock Director elected by the holders of Series A Preferred Stock
(together with any other series of preferred stock ranking on a parity with the
Series A Preferred Stock and upon which like voting rights have been conferred
and are exercisable) voting as a class may choose a successor who shall hold
office for the unexpired term in respect of which such vacancy occurred. Any
Preferred Stock Director may be removed by, and shall not be removed otherwise
than by, a majority of the votes to which the holders of the outstanding shares
of Series A Preferred Stock and all other such series of preferred stock ranking
on a parity with the Series A Preferred Stock and upon which like voting rights
have been conferred and are exercisable are entitled. Whenever the term of
office of the Preferred Stock Directors elected by the holders of Series A
Preferred Stock voting as a class shall end and the special voting powers vested
in the holders of Series A Preferred Stock as provided in this Section 4 shall
have expired, the number of directors shall be such number as may be provided
for in the By-Laws or in a resolution of the Board of Directors adopted in
accordance with the By-laws.
5. REDEMPTION. The outstanding shares of Series A Preferred Stock shall
not be redeemable prior to November 8, 1996. On or after November 8, 1996, the
Series A Preferred Stock may be redeemed at the option of the Company
----------------------------
at any time, in whole or in part, at a price of $51.575 per share, plus accrued
and unpaid dividends, if any, if redeemed prior to November 1, 1997 and at the
prices indicated below, plus in each case accrued and unpaid dividends, if any,
if redeemed during the 12-month period beginning November 1 of the years
indicated below:
<PAGE> 9
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
- ------------- ------------- ------------ ------------
<S> <C> <C> <C>
1997......... $51.350 2001........ $50.450
1998......... $51.125 2002........ $50.225
1999......... $50.900 2003 and
2000......... $50.675 thereafter.. $ 50.00
</TABLE>
in each case plus accrued and unpaid dividends, if any, up to but excluding the
date fixed for redemption (subject to the right of the holder of record of
shares of Series A Preferred Stock on a record date for the payment of a
dividend on the Series A Preferred Stock to receive the dividend due on such
shares of Series A Preferred Stock on the corresponding Dividend Payment Date).
No sinking fund, mandatory redemption or other similar provision shall
apply to the Series A Preferred Stock.
If fewer than all the outstanding shares of Series A Preferred Stock are
to be redeemed, the Company will determine those to be redeemed pro rata as
nearly as practicable, by lot, or by such other method as the Board of Directors
may determine to be fair and appropriate.
Notice of any proposed redemption of shares of Series A Preferred Stock
shall be mailed by means of first class mail, postage paid, addressed to the
holders of record of the shares of Series A Preferred Stock to be redeemed, at
their respective addresses then appearing in the stock register of the Company,
not less than thirty (30) nor more than sixty (60) days prior to the date fixed
for such redemption (herein referred to as the "Redemption Date"). Each such
notice shall specify (i) the Redemption Date, (ii) the Redemption Price, (iii)
the place for payment and for delivering the stock certificate(s) and transfer
instrument(s) in order to collect the Redemption price; (iv) the shares of
Series A Preferred Stock to be redeemed and (v) the then effective Conversion
Price (as defined below) and that the right of holders of shares of Series A
Preferred Stock being redeemed to exercise their conversion right shall
terminate as to such shares at the close of business on the second business day
next preceding the Redemption Date (provided that no default by the Company in
the payment of the applicable Redemption Price (including any accrued and unpaid
dividends) shall have occurred and be continuing). Any notice mailed in such
manner shall be conclu-
<PAGE> 10
sively deemed to have been duly given whether or not such notice is in fact
received.
The holder of any shares of Series A Preferred Stock redeemed upon any
exercise of the Company's redemption right shall not be entitled to receive
payment of the Redemption Price for such shares until such holder shall cause to
be delivered to the place specified in the notice given with respect to such
redemption (i) the certificate(s) representing such shares of Series A Preferred
Stock and (ii) transfer instrument(s) satisfactory to the Company and sufficient
to transfer such shares of Series A Preferred Stock to the Company free of any
adverse interest. No interest shall accrue or be paid on the Redemption Price of
any share of Series A Preferred Stock.
On and after the Redemption Date for any share of Series A Preferred
Stock, such share shall (provided the Redemption (including any accrued and
unpaid dividends up to but excluding the Redemption Date) of such share has been
paid or properly provided for) be deemed to cease to be outstanding and all
rights of any person other than the Company in such share shall be extinguished
on the Redemption Date for such share (including all rights to receive future
dividends with respect to such share) except for the right to receive the
Redemption Price (including any accrued and unpaid dividends up to but excluding
the Redemption Date), without interest, for such share in accordance with the
provisions of this Section 5, subject to applicable escheat laws. Any interest
accrued on such funds shall be paid to the Company from time to time.
If any such notice of redemption shall have been duly given or has been
given to a bank or trust company hereinafter referred to in Section 8 with
irrevocable written instruction to promptly give or complete such notice, and if
on or before the Redemption Date all funds necessary for such redemption shall
have been deposited with such a bank or trust company, in trust for the benefit
of the holders of the shares so called for redemption, then, notwithstanding the
certificate or certificates for shares so called for redemption shall not have
been surrendered for redemption, from and after the time of such deposit all
shares so called for redemption shall be deemed to be no longer outstanding, and
all rights with respect to such shares shall forthwith terminate, except only
the right of the holders thereof to receive from such bank or trust company at
any time after the time of such deposit the funds so deposited, without
interest, on or before the date fixed for redemption, and to exercise all
privileges of conversion, if any, not theretofore expired, subject to applicable
escheat laws. Any interest accrued on such funds so held by such bank or trust
company shall be paid to the Company from time to time.
<PAGE> 11
In the event that any shares of Series A Preferred Stock shall be
converted into Common Stock pursuant to Section 7 hereof, then (i) the Company
shall not have the right to redeem such shares and (ii) any funds which shall
have been deposited for the payment of the Redemption Price for such shares
shall be returned to the Company immediately after such conversion (subject to
declared dividends payable to holders of shares of Series A Preferred Stock on
the record date for such dividends being so payable, to the extent set forth in
Section 7 hereof).
Subject to Section 2 hereof and to the following paragraph, the Company
shall have the right to purchase shares of Series A Preferred Stock in the
public market at such prices as may from time to time be available in the public
market for such shares and shall have the right at any time to acquire any
shares of Series A Preferred Stock from the owner of such shares on such terms
as may be agreeable to such owner. Shares of Series A Preferred Stock may be
acquired by the Company from any shareholder pursuant to this paragraph without
offering any other shareholder an equal opportunity to sell his stock to the
Company, and no purchase by the Company from any shareholder pursuant to this
paragraph shall be deemed to create any right on the part of any shareholder to
sell any shares of Series A Preferred Stock (or any other stock) to the Company.
Notwithstanding the foregoing provisions of this Section 5, and subject
to the provisions of Section 2 hereof, if a dividend upon any shares of Series A
Preferred Stock is past due, (i) no shares of the Series A Preferred Stock may
be redeemed, except (A) by means of a redemption pursuant to which all
outstanding shares of the Series A Preferred Stock are simultaneously redeemed,
or pursuant to which the outstanding shares of the Series A Preferred Stock are
redeemed on a pro rata basis or (B) by conversion of shares of Series A
Preferred Stock into, or exchange of such shares for, Common Stock or any other
stock of the Company ranking junior to the Series A Preferred Stock as to
dividends and upon liquidation, dissolution or winding up, and (ii) neither the
Company nor any subsidiary of the Company shall purchase or otherwise acquire
any shares of the Series A Preferred Stock, except (A) pursuant to a purchase or
exchange offer made on the same terms to all holders of the Series A Preferred
Stock or (B) by conversion of shares of Series A Preferred Stock into, or
exchange of such shares for, Common Stock or any other stock of the Company
ranking junior to the Series A Preferred Stock as to dividends and upon
liquidation, dissolution or winding up.
<PAGE> 12
6. LIQUIDATION. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the Company (for the purposes of this
Section 6, a "Liquidation"), before any distribution of assets shall be made to
the holders of Common Stock or the holders of any other stock of the Company
that ranks junior to the Series A Preferred Stock upon liquidation, dissolution
or winding up, the holder of each share of Series A Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Company
available for distribution to its shareholders, an amount equal to $50 per share
plus all dividends accrued and unpaid on such share up to the date of
distribution of the assets of the Company to the holders of Series A Preferred
Stock, and the holders of any class or series of stock ranking on a parity with
the Series A Preferred Stock as to liquidation, dissolution or winding up shall
be entitled to receive the full respective liquidation preferences (including
any premium), to which they are entitled and shall receive all accrued and
unpaid dividends with respect to their respective shares through and including
the date of distribution.
If upon any Liquidation of the Company, the assets available for
distribution to the holders of Series A Preferred Stock and any other stock of
the Company ranking on a parity with the Series A Preferred Stock upon
Liquidation which shall then be outstanding shall be insufficient to pay the
holders of all outstanding shares of Series A Preferred Stock and all other such
parity stock the full amounts (including all dividends accrued and unpaid) of
the liquidating distribution to which they shall be entitled, then the holders
of each series of such stock will share ratably in any such distribution of
assets first in proportion to their respective liquidation preferences until
such preferences are paid in full, and then in proportion to their respective
amounts of accrued but unpaid dividends. After payment of any such liquidating
preference and accrued dividends, the holders of shares of the Series A
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company.
For purposes of this Section 6, a Liquidation shall not include (i) any
consolidation or merger of the Company with or into any other corporation, (ii)
any liquidation, dissolution, winding up or reorganization of the Company
immediately followed by reincorporation of another corporation or (iii) a sale
or other disposition of all or substantially all of the Company's assets to
another corporation unless in connection therewith the Liquidation of the
Company is specifically approved.
<PAGE> 13
The holder of any shares of Series A Preferred Stock shall not be
entitled to receive any payment owed for such shares under this Section 6 until
such holder shall cause to be delivered to the Company (i) the certificate(s)
representing such shares of Series A Preferred Stock and (ii) transfer
instrument(s) satisfactory to the Company and sufficient to transfer such shares
of Series A Preferred Stock to the Company free of any adverse interest. As in
the case of the Redemption Price, no interest shall accrue on any payment upon
Liquidation after the due date thereof.
7. CONVERSION PRIVILEGE. The holder of any share of Series A Preferred
Stock shall have the right, at such holder's option (but if such share is called
for redemption, then in respect of such share only to and including but not
after the close of business on the second business day preceding the date fixed
for such redemption, provided that no default by the Company in the payment of
the applicable Redemption Price (including any accrued and unpaid dividends)
shall have occurred and be continuing on the date fixed for such redemption), to
convert such share into that whole number of fully paid and nonassessable shares
of Common Stock equal to a fraction, the numerator of which is the liquidation
preference specified in Section 6 above (excluding accrued but unpaid dividends,
if any) of such share of Series A Preferred Stock surrendered for conversion,
and the denominator of which is the current Conversion Price per share of Common
Stock. The Conversion Price shall initially be $25.3125 per share of Common
Stock and shall be subject to adjustment as set forth below.
In order to exercise the conversion privilege, the holder of shares of
Series A Preferred Stock shall surrender the certificate(s) representing such
shares, accompanied by transfer instrument(s) satisfactory to the Company and
sufficient to transfer the Series A Preferred Stock being converted to the
Company free of any adverse interest, at any of the offices or agencies
maintained for such purpose by the Company ("Conversion Agent") and shall give
written notice to the Company at such Conversion Agent that the holder elects to
convert such shares. Such notice shall also state the name(s), together with
address(es), in which the certificate(s) for shares of Common Stock which shall
be issuable on such conversion shall be issued. As promptly as practicable after
the surrender of such shares of Series A Preferred Stock as aforesaid, the
Company shall issue and shall deliver at such Conversion Agent to such holder,
or upon such holder's written order, a certificate(s) for the number of full
shares of Common Stock issuable upon the conversion of such shares in accordance
with the provisions hereof, and any fractional interest in respect of a share of
<PAGE> 14
Common Stock arising upon such conversion shall be settled as provided below.
Balance certificates will be issued for the remaining shares of Series A
Preferred Stock in any case in which fewer than all of the shares of Series A
Preferred Stock represented by a certificate are converted. Each conversion
shall be deemed to have been effected immediately prior to the close of business
on the date on which shares of Series A Preferred Stock shall have been so
surrendered and such notice received by the Company as aforesaid, and the
person(s) in whose name(s) any certificate(s) for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder(s) of
record of the Common Stock represented thereby at such time, unless the stock
transfer books of the Company shall be closed on the date on which shares of
Series A Preferred Stock are so surrendered for conversion, in which event such
conversion shall be deemed to have been effected immediately prior to the close
of business on the next succeeding day on which such stock transfer books are
open, and such person(s) shall be deemed to have become such holder(s) of record
of the Common Stock at the close of business on such later day. In either
circumstance, such conversion shall be at the Conversion Price in effect on the
date upon which such share shall have been surrendered and such notice received
by the Company.
In the case of any share of Series A Preferred Stock which is converted
after any record date with respect to the payment of a dividend on the Series A
Preferred Stock and on or prior to the next succeeding Dividend Payment Date,
the dividend due on such next succeeding Dividend Payment Date shall be payable
on such Dividend Payment Date to the holder of record of such share as of such
preceding record date notwithstanding such conversion, except that holders of
shares called for redemption on a Redemption Date between the record date and
the Dividend Payment Date will not be entitled to receive such dividend.
However, shares of Series A Preferred Stock surrendered for conversion during
the period between the close of business on any record date with respect to the
payment of a dividend on the Series A Preferred Stock next preceding any
Dividend Payment Date and the opening of business on such Dividend Payment Date
must (except in the case of shares of Series A Preferred Stock which have been
called for redemption on a Redemption Date within such period) be accompanied by
payment in funds acceptable to the Company of an amount equal to the dividend
payable on such next succeeding Dividend Payment Date on the shares of Series A
Preferred Stock being surrendered for conversion. A holder of shares of Series A
Preferred Stock on a dividend record date who (or whose transferee) tenders any
such shares for conversion
<PAGE> 15
into shares of Common Stock on the corresponding Dividend Payment Date will
receive the dividend payable by the Company on such shares of Series A Preferred
Stock on such Dividend Payment Date, and the converting holder need not include
payment of the amount of such dividend upon surrender of shares of Series A
Preferred Stock for conversion. Except as provided in this paragraph, no payment
or adjustment shall be made upon any conversion on account of any dividends
accrued on shares of Series A Preferred Stock surrendered for conversion or on
account of any dividends on the Common Stock issued upon conversion.
No fractional shares of Common Stock will be issued, but in lieu
thereof, in the sole discretion of the Board of Directors, either (i) such
fractional interest shall be rounded up to the next whole share, or (ii) an
appropriate amount will be paid in cash by the Company, as described in Section
10 hereof. If more than one certificate representing shares of Series A
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Series A Preferred Stock represented by, such certificates, or the specified
portions thereof to be converted, so surrendered.
The Conversion Price shall be adjusted from time to time as follows:
(a) In case the Company shall pay or make a dividend or other
distribution on Common Stock of the Company in Common Stock, the Conversion
Price in effect at the opening of business on the day following the date
fixed for the determination of shareholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination and the denominator shall be the sum of such
number of shares and the total number of shares constituting such dividend
or other distribution, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this subsection (a), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any
<PAGE> 16
distribution on shares of Common Stock held in the treasury of the Company.
(b) In case the Company shall issue rights or warrants to all holders
of its Common Stock entitling them (for a period expiring within 45 days
after the record date fixed for a distribution of such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share
less than the current market price per share (determined as provided in
subsection (g) below) of Common Stock on the date fixed for the
determination of shareholders entitled to receive such rights or warrants
(other than pursuant to a dividend reinvestment plan), the Conversion Price
in effect at the opening of business on the day following the date fixed
for such determination shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase at such
current market price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this subsection (b), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not issue any rights or warrants in respect
of shares of Common Stock held in the treasury of the Company. To the
extent that shares of Common Stock are not delivered after the expiration
of such rights or warrants, the Conversion Price shall be readjusted to the
Conversion Price which would then be in effect had the adjustments made in
respect of the issuance of such rights or warrants been made on the basis
of delivery of only the number of shares of Common Stock actually
delivered.
(c) In case the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day
<PAGE> 17
upon which such subdivision becomes effective shall be proportionately
reduced, and, conversely, in case the outstanding shares of Common Stock
shall each be combined into a smaller amount of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case may be,
to become effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock (i) evidences of its indebtedness and/or
(ii) cash or other assets (including securities, but excluding Common Stock
and any rights or warrants referred to in subsection (b) above, dividends
or distributions in connection with the liquidation, dissolution or winding
up of the Company, dividends payable solely in cash that may from time to
time be fixed by the Board of Directors of the Company and dividends or
distributions referred to in subsection (a) above), then in each case
(unless the Company elects to reserve such evidences of indebtedness,
securities or other assets for distribution to the holders of Series A
Preferred Stock upon the conversion thereof so that any such holder
converting such shares will receive upon such conversion, in addition to
the shares of the Common Stock to which such holder is entitled, the amount
and kind of such evidences of indebtedness, securities or other assets
which such holder would have received if such holder had, immediately prior
to the record date for the distribution of the evidences of indebtedness,
securities or other assets, converted such shares of Series A Preferred
Stock into Common Stock) the Conversion Price shall be adjusted so that the
sum shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on such record date by a
fraction of which the numerator shall be the current market price per share
(determined as provided in subsection (g) below) of the Common Stock on
such record date less the then fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and shall be
described in a statement filed with any Conversion Agent) of the portion of
the cash or other assets, evidences of indebtedness or securities so
distributed (and for which an adjustment to the Conversion Price has not
previously been made pursuant to the terms of this
<PAGE> 18
Section 7) applicable to one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock, such
adjustment to become effective immediately prior to the opening of business
on the day following such record date. However, in the event the then fair
market value (as so determined) of the portion of the evidences of
indebtedness, securities or other assets so distributed applicable to one
share of Common Stock is equal to or greater than the current market price
of the Common Stock on such record date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of shares
of Series A Preferred Stock shall have the right to receive upon conversion
thereof the amount and kind of evidences of indebtedness, securities or
other assets such holder would have received had he converted such shares
on such record date. If the Board of Directors determines the fair market
value of any distribution for purposes of this subparagraph by reference to
the actual or when issued trading market for any securities comprising a
distribution of securities, it shall in doing so consider the price in such
market over the period used in computing the current market price of the
Common Stock.
The occurrence of a distribution or the occurrence of any other event
as a result of which holders of shares of Series A Preferred Stock
converting such shares into Common Stock hereunder will not be entitled to
receive rights issued pursuant to any shareholders protective rights
agreement that may be adopted by the Company (the "Rights") in the same
amount and manner as if such holders had converted such shares immediately
prior to the occurrence of such event shall be deemed a distribution of
Rights for the purposes of conversion adjustments pursuant to this
subparagraph. In lieu of making any adjustment to the Conversion Price
under this subparagraph as a result of such a distribution of Rights, the
Company may, at its option, provide that Rights shall be issuable in the
same amount and manner upon conversion of the Series A Preferred Stock
without regard to whether the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock were issued before or after such
distribution or other event.
(e) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (excluding (i) any cash
dividends on the Common Stock to the extent that the aggregate cash
dividends per share of Common Stock in any consecutive 12-month period do
not exceed the greater of (a)
<PAGE> 19
the amount per share of Common Stock of the cash dividends paid on the
Common Stock in the next preceding 12-month period, to the extent that such
dividends for the preceding 12-month period did not require an adjustment
to the Conversion Price pursuant to this subparagraph (as adjusted to
reflect subdivisions or combinations of the Common Stock) and (b) 15% of
the average daily Closing Prices (as hereinafter defined) of the Common
Stock for the ten consecutive Trading Days (as hereinafter defined)
immediately prior to the date of declaration of such dividend, (ii) any
dividend or distribution in connection with the liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, and (iii) any
redemption of Rights issued under a rights agreement) then, in each such
case, unless the Company elects to reserve such an amount of cash for
distribution to the holders of the Series A Preferred Stock so that any
such holder converting such shares will receive upon such conversion, in
addition to the shares of the Common Stock to which such holder is
entitled, the amount of cash which such holder would have received if such
holder had, immediately prior to the record date for such distribution of
cash, converted its shares of Series A Preferred Stock into Common Stock,
the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect at the close
of business on such record date by a fraction of which the numerator shall
be the last reported sales price of the Common Stock on such record date
less the amount of cash so distributed (to the extent not excluded as
provided above) applicable to one share of Common Stock, and the
denominator shall be such last reported sales price of the Common Stock,
such reduction to become effective immediately prior to the opening of
business on the day following such record date; provided, however, that in
-------- -------
the event the portion of the cash so distributed applicable to one share of
Common Stock is equal to or greater than the last reported sales price of
the Common Stock on such record date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of shares of Series A
Preferred Stock shall thereafter have the right to receive upon conversion
the amount of cash such holder would have received had such holder
converted each share of Series A Preferred Stock on such record date. If
any adjustment is required to be made as set forth in this subparagraph as
a result of a distribution which is a dividend described in subclause (i)
of this subparagraph, such adjustment would be based upon the
<PAGE> 20
amount by which such distribution exceeds the amount of the dividend
permitted to be excluded pursuant to such subclause (i) of this
subparagraph. If an adjustment is required to be made pursuant to this
subparagraph as a result of a distribution which is not such a dividend,
such adjustment would be based upon the full amount of such distribution.
(f) In case of the consummation of a tender or exchange offer (other
than an odd-lot tender offer) made by the Company or any subsidiary of the
Company for all or any portion of the Common Stock to the extent that the
cash and value of any other consideration included in such payment per
share of Common Stock exceeds the first reported sales price per share of
Common Stock on the Trading Day next succeeding the Expiration Time (as
defined below), the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the last time tenders or exchanges may be made
pursuant to such tender or exchange offer (the "Expiration Time") by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) on the
Expiration Time multiplied by the first reported sales price of the Common
Stock on the Trading Day next succeeding the Expiration Time, and the
denominator shall be the sum of (A) the fair market value (determined by
the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) of the aggregate
consideration payable to shareholders based on the acceptance (up to any
maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the Expiration
Time (the shares deemed so accepted, up to any such maximum, being referred
to as the "Purchased Shares") and (B) the product of the number of shares
of Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the first reported sales price of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the
Expiration Time.
(g) For the purpose of any computation under this Section 7, the
current market price per share of Common Stock on any day shall be deemed
to be the average of the daily Closing Prices (as hereinafter defined) per
share of Common Stock for the ten consecutive Trading Days prior to and
including the date in question;
<PAGE> 21
provided, however, that (1) if the "ex" date (as hereinafter defined) for
-------- -------
any event (other than the issuance, distribution or Fundamental Change
requiring such computation) that requires an adjustment to the Conversion
Price pursuant to this Section 7 occurs during such ten consecutive Trading
Days and prior to the "ex" date for the issuance, distribution or
Fundamental Change requiring such computation, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be adjusted
by multiplying such Closing Price by the same fraction by which the
Conversion Price is so required to be adjusted as a result of such other
event, (2) if the "ex" date for any event (other than the issuance,
distribution or Fundamental Change requiring such computation) that
requires an adjustment to the Conversion Price pursuant to such
subparagraphs hereof occurs on or after the "ex" date for the issuance,
distribution or Fundamental Change requiring such computation and on or
prior to the date in question, the Closing Price for each Trading Day on
and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a result of such
other event (provided that in the event that such fraction is required to
be determined at a date subsequent to the date in question and with
reference to events taking place subsequent to the date in question, the
Board of Directors of the Company or, to the extent permitted by applicable
law, a duly authorized committee thereof, whose determination shall be
conclusive and described in a resolution of the Board of Directors or such
duly authorized committee thereof, as the case may be, shall estimate such
fraction based on assumptions it deems reasonable regarding such events
taking place subsequent to the date in question, and such estimated
fraction shall be used for purposes of such adjustment until such time as
the actual fraction by which the Conversion Price is so required to be
adjusted as a result of such other event is determined), and (3) if the
"ex" date for the issuance, distribution or Fundamental Change requiring
such computation is on or prior to the date in question, after taking into
account any adjustment required pursuant to clause (1) or (2) of this
proviso, the Closing Price for each Trading Day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair
market value (as determined by the Board of Directors or, to the extent
permitted by applicable law, a duly authorized committee thereof in a
manner consistent with any
<PAGE> 22
determination of such value for purposes of the subparagraphs of this
Section 7, whose determination shall be conclusive and described in a
resolution of the Board of Directors or such duly authorized committee
thereof, as the case may be) of the evidences of indebtedness, shares of
capital stock or assets being distributed applicable to one share of Common
Stock as of the close of business an the day before such "ex" date. For
purposes of this paragraph, the term "ex" date, (1) when used with respect
to any issuance, distribution or Fundamental Change, means the first date
on which the Common Stock trades regular way on the relevant exchange or in
the relevant market from which the Closing Price was obtained without the
right to receive such issuance, such distribution or the cash, securities,
property or other assets distributable in such Fundamental Change to
holders of the Common Stock, (2) when used with respect to any subdivision
or combination of shares of Common Stock, means the first date on which the
Common Stock trades regular way on such exchange or in such market after
the time at which such subdivision or combination becomes effective, and
(3) when used with respect to any tender or exchange offer means the first
date on which the Common Stock trades regular way on such exchange or in
such market after the Expiration Time of such offer.
(h) No adjustment in the Conversion Price shall be required pursuant
to this Section 7 unless the adjustment would require a change of at least
1% of such price; provided, however, that any adjustments which by reason
-------- -------
of this subsection are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations shall be
made to the nearest cent or to the nearest 1/100th of a share, as the case
may be. The Board of Directors of the Company from time to time may, to the
extent permitted by law, reduce the Conversion Price by any amount for any
period of at least 20 days, in which case the Company shall give at least
15 days' notice of such reduction. In addition, the Company may, at its
option, make such reductions in the Conversion Price in addition to those
set forth in this Section 7, as it considers to be advisable in order to
avoid or diminish any income tax to any holders of shares of Common Stock
resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as
such for income tax purposes or for any other reasons. The Company shall
have the power to resolve any ambiguity or
<PAGE> 23
correct any error with regard to the preceding sentence and its actions in
so doing shall be final and conclusive. Notwithstanding anything to the
contrary within this Section 7, the Conversion Price shall not be less than
the greater of $1.00 or the par value, if any, per share of the Common
Stock. In the event an adjustment provided for herein would result in a
Conversion Price of less than $1.00 or the par value, if any, such adjusted
Conversion Price shall be such greater amount per share.
Whenever the Conversion Price is adjusted as herein provided, (i) the
Company shall promptly file with any Conversion Agent a Certificate of a
duly authorized officer of the Company or of a firm of independent public
accountants setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment, and
the manner of computing the same, which certificate, if of a firm of
independent public accountants, shall be conclusive evidence of the
correctness of such adjustment, and (ii) a notice stating that the
Conversion Price has been adjusted and setting forth the adjusted
Conversion Price shall forthwith be given by the Company to any Conversion
Agent and mailed by the Company to each holder of shares of Series A
Preferred Stock at such holder's last address as the same appears on the
books of the Company.
In any case in which this Section 7 provides that an adjustment shall
become effective immediately after a record date for an event, the Company
may defer until the occurrence of such event (A) issuing to the holder of
any share of Series A Preferred Stock converted after such record date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such
event over and above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (B) paying to such holder any amount
in cash in lieu of any fractional shares pursuant to this Section 7.
For purposes of this Section 7, "Common Stock" includes any stock of
any class of the Company which has no preference in respect of dividends or
of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company and which is not
subject to redemption by the Company. However, subject to the provisions of
this Section 7,
<PAGE> 24
shares issuable on conversion of shares of Series A Preferred Stock shall
include only shares of the class designated as Common Stock of the Company
on the date of the initial issuance of Series A Preferred Stock by the
Company, or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference
in respect of dividends or of amounts payable in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Company and
which are not subject to redemption by the Company; provided that if at any
time there shall be more than one such resulting class, the shares of each
such class then so issuable shall be substantially in the proportion which
the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
In case:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock that would cause an adjustment to
the Conversion Price of the Series A Preferred Stock pursuant to the
terms of any of the subsections above (including such an adjustment
that would occur but for the terms of the first sentence of subsection
(h) above); or
(ii) the Company shall authorize the granting to the holders of
its Common Stock generally of rights or warrants (for a period
expiring within 45 days after the record date fixed for a distribution
of such rights and warrants) to subscribe for or purchase any shares
of capital stock of any class or of any other rights; or
(iii) the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock or combined into a
smaller number of shares of Common Stock; or
(iv) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation, merger or share exchange to
which the Company is a party and for which approval of any
shareholders of the Company is required, or of the sale or transfers
of all or
<PAGE> 25
substantially all of the assets of the Company or a compulsory share
exchange; or
(v) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with any Conversion Agent, and
shall cause to be mailed to all holders of shares of Series A Preferred
Stock at each such holder's last address as the same appears on the books
of the Company, at least 20 days prior to the applicable record or
effective date hereinafter specified, a notice stating (A) the date on
which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined, or
(B) the date on which such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up. Neither the failure to
give such notice nor any defect therein shall affect the legality or
validity of the proceedings described in clauses (i) through (v) above.
The Company will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock on conversions of shares of Series A Preferred Stock pursuant hereto;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the holder of the shares of
Series A Preferred Stock to be converted and no such issue or delivery shall be
made unless and until the person requesting such issue or delivery has paid to
the Company the amount of any such tax or has established, to the satisfaction
of the Company, that such tax has been paid.
The Company covenants that all shares of Common Stock which may be
delivered upon conversions of shares of Series A Preferred Stock will upon
delivery be duly and
<PAGE> 26
validly issued and fully paid and nonassessable, free of all liens and charges
and not subject to any preemptive rights.
The Company covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock, a sufficient number of shares of Common
Stock for the purpose of effecting conversions of shares of Series A Preferred
Stock not theretofore converted. For purposes of this reservation of Common
Stock, the number of shares of Common Stock which shall be deliverable upon the
conversion of all outstanding shares of Series A Preferred Stock shall be
computed as if at the time of computation all outstanding shares of Series A
Preferred Stock were held by a single holder. The issuance of shares of Common
Stock upon conversion of shares of Series A Preferred Stock is hereby authorized
in all respects.
If any shares of Common Stock required to be reserved for purposes of
conversion of the Series A Preferred Stock hereunder require registration with
or approval of any governmental authority under any Federal or State law before
such shares may be issued upon conversion, the Company will in good faith and as
expeditiously as possible endeavor to cause such shares to be duly registered or
approved, as the case may be. If the Common Stock is listed on the New York
Stock Exchange, the NASDAQ Stock Market ("Nasdaq") or any other national
securities exchange, the Company will, in good faith and as expeditiously as
possible, endeavor, if permitted by the rules of such exchange or system, to
list and keep listed on such exchange or system, upon official notice of
issuance, all shares of Common Stock issuable upon conversion of the Series A
Preferred Stock.
Notwithstanding the provisions in this Section 7, the issuance of any
shares of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under any such plan
(whether any such plan is now or hereafter authorized), or the issuance of any
shares of Common Stock or options or rights to purchase such shares pursuant to
any employee benefit plan or program of the Company or any subsidiary (whether
any such plan or program is now or hereafter authorized), or pursuant to any
option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Series A Preferred Stock was first designated,
shall not be deemed to constitute an issuance of Common
<PAGE> 27
Stock or exercisable, exchangeable or convertible securities by the Company to
which any of the adjustment provisions described above applies. There shall be
no adjustment of the Conversion Price in case of the issuance of any stock (or
securities convertible into or exchangeable for stock) of the Company except as
described in this Section 7. Except as expressly set forth in this Section 7, if
any action would require adjustment of the Conversion Price pursuant to more
than one of the provisions described above, only one adjustment shall be made
and such adjustment shall be the amount of adjustment which has the highest
absolute value.
In the event that the Company shall be a party to any transaction
constituting a recapitalization, reclassification, consolidation, merger, sale,
transfer of all or substantially all of its assets or share exchange (including
without limitation any (i) recapitalization or reclassification of shares of the
Common Stock (other than a change from no par value to par value, or from par
value to no par value, or as a result of a subdivision or combination of the
Common Stock)), (ii) any consolidation of the Company with, or merger of the
Company into, any other corporation, any merger of another corporation into the
Company as a result of which holders of Common Stock shall be entitled to
receive securities or other property or assets (including cash) with respect to
or in exchange for the Common Stock (other than a merger which does not result
in a reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Company), (iii) any sale or transfer of all or
substantially all of the assets of the Company, or (iv) any compulsory share
exchange, pursuant to any of which the holders of Common Stock shall be entitled
to receive other securities, cash or other property), then appropriate provision
shall be made as part of the terms of such transaction so that the holder of
each share of Series A Preferred Stock then outstanding shall have the right
thereafter to convert such share only into (1) in the case of a Non-Stock
Fundamental Change (as hereinafter defined) and subject to funds being legally
available for such purpose under applicable law at the time of such conversion,
the kind and amount of securities, cash and other property that would have been
receivable upon such recapitalization, reclassification, consolidation, merger,
sale, transfer or share exchange by a holder of the number of shares of Common
Stock into which such share of Series A Preferred Stock might have been
converted immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange, after giving effect to
any adjustment in the Conversion Price required by the provisions which follow,
and (2) in the case of a Common
<PAGE> 28
Stock Fundamental Change (as hereinafter defined), common stock of the kind
received by holders of Common Stock as a result of such Common Stock Fundamental
Change in an amount determined pursuant to the provisions of this Section 7. The
company formed by such consolidation or resulting from such merger or which
acquires such assets or which acquires the Company's shares, as the case may be,
shall make provisions in its certificate or articles of incorporation or other
constituent document to establish such right. Such certificate or articles of
incorporation or other constituent document shall provide for adjustments which,
for events subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 7. The above
provisions shall similarly apply to successive recapitalizations,
reclassifications, consolidations, mergers, sales, transfer or share exchanges.
Notwithstanding any other provisions in this Section 7 to the contrary,
if any Fundamental Change (as hereinafter defined) occurs, then the Conversion
Price in effect will be adjusted immediately following such Fundamental Change
as described below. In addition, in the event of a Common Stock Fundamental
Change, each share of Series A Preferred Stock shall be convertible solely into
Common Stock of the kind received by holders of Common Stock as the result of
such Common Stock Fundamental Change.
For purposes of calculating any adjustment to be made pursuant to this
Section 7 in the event of a Fundamental Change, immediately following such
Fundamental Change (and for such purposes a Fundamental Change shall be deemed
to occur on the earlier of (a) the occurrence of such Fundamental Change and (b)
the date, if any, fixed for determination of shareholders entitled to receive
the cash, securities, property or other assets distributable in such Fundamental
Change to holders of the Common Stock):
(i) in the case of a Non-Stock Fundamental Change, the Conversion
Price per share of Common Stock shall be the lower of (A) the Conversion
Price in effect immediately prior to such Non-Stock Fundamental Change, but
after giving effect to any other adjustments effected pursuant to this
Section 7, and (B) the product of (1) the greater of the Applicable Price
(as hereinafter defined) and the applicable Reference Market Price (as
hereinafter defined) and (2) a fraction, the numerator of which shall be
$50 and the denominator of which shall be the amount at which one share of
Series A Preferred Stock would be redeemed by
<PAGE> 29
the Company if the redemption date were the date of such Non-Stock
Fundamental Change (such denominator being the sum of (1) the redemption
price set forth in the table contained in Section 5(a) above, or if the
Non-Stock Fundamental Change occurs during the period commencing on the
date of original issue of the Series A Preferred Stock and ending October
31, 1994, and for the 12-month periods commencing November 1, 1994 and
November 1, 1995, and for the period commencing November 1, 1996 and ending
November 7, 1996, $52.250, $52.025, $51.800 and $51.575, respectively, and
(2) any accrued and unpaid dividends on the Series A Preferred Stock,
whether or not declared, to but excluding the date of such Non-Stock
Fundamental Change); and
(ii) in the case of a Common Stock Fundamental Change, the Conversion
Price per share of Common Stock shall be the Conversion Price in effect
immediately prior to such Common Stock Fundamental Change, but after giving
effect to any other adjustments effected pursuant to this Section 7,
multiplied by a fraction, the numerator of which is the Purchaser Stock
Price (as hereinafter defined) and the denominator of which is the
Applicable Price; provided, however, that in the event of a Common Stock
-------- -------
Fundamental Change in which (A) 100% of the value of the consideration
received by a holder of Common Stock is common stock of the successor,
acquiror or other third party (and cash, if any, paid with respect to any
fractional interests in such common stock resulting from such Common Stock
Fundamental Change and (B) all of the Common Stock shall have been
exchanged for, converted into or acquired for common stock (and cash, if
any, with respect to fractional interests) of the successor, acquiror or
other third party, the Conversion Price per share of Common Stock
immediately following such Common Stock Fundamental Change shall be the
Conversion Price in effect immediately prior to such Common Stock
Fundamental Change multiplied by a fraction, the numerator of which is one
(1) and the denominator of which is the number of shares of common stock of
the successor, acquiror, or other third party received by a holder of one
share of Common Stock as a result of such Common Stock Fundamental Change.
The following definitions shall apply to terms used in this Section 7:
(a) "Applicable Price" shall mean (i) in the event of a Non-Stock
Fundamental Change in which the
<PAGE> 30
holders of the Common Stock receive only cash, the amount of cash received
by the holder of one share of Common Stock and (ii) in the event of any
other Non-Stock Fundamental Change or any Common Stock Fundamental Change,
the average of the Closing Prices for one share of the Common Stock during
the ten Trading Days immediately prior to the record date for the
determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Non-Stock
Fundamental Change or Common Stock Fundamental Change or, if there is no
such record date, prior to the date upon which the holders of the Common
Stock shall have the right to receive such cash, securities, property or
other assets. The Closing Price on any Trading Day may be subject to
adjustment as provided in this Section 7.
(b) "Closing Price" with respect to any securities on any day shall
mean the closing sale price, regular way, on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and
asked prices, regular way, in each case on Nasdaq or, if such security is
not listed or admitted to trading on such Exchange, on the principal
national securities exchange or quotation system on which such security is
quoted or listed or admitted to trading or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation
system, the average of the closing bid and asked prices of such security on
the over-the-counter market on the date in question as reported by the
National Quotation Bureau Incorporated, or a similarly generally accepted
reporting service, or if not so available, in such manner as furnished by
any New York Stock Exchange member firm selected from time to time by the
Board of Directors of the Company for that purpose or a price determined in
good faith by the Board of Directors of the Company. The Closing Price on
any Trading Day may be subject to adjustment as provided in this Section 7.
(c) "Common Stock Fundamental Change" shall mean any Fundamental
Change in which more than 50% of the value (as determined in good faith by
the Board of Directors of the Company or, to the extent permitted by
applicable law, a duly authorized committee thereof) of the consideration
received by the holders of Common Stock pursuant to such transaction
consists of common stock that, for the ten consecutive Trading Days
immediately prior to such Fundamental Change, has been admitted for listing
or admitted for listing subject to
<PAGE> 31
notice of issuance on a national securities exchange or quoted on
Nasdaq; provided, however, that a Fundamental Change shall not be a
-------- -------
Common Stock Fundamental Change unless either (i) the Company continues to
exist after the occurrence of such Fundamental Change and the outstanding
shares of Series A Preferred Stock continue to exist as outstanding shares
of Series A Preferred Stock, or (ii) not later than the occurrence of such
Fundamental Change, the outstanding shares of Series A Preferred Stock are
converted into or exchanged for shares of convertible preferred stock of a
corporation succeeding to the business of the Company, which convertible
preferred stock has powers, preferences and relative, participating,
optional or other rights, and qualifications, limitations and restrictions
substantially similar to those of the Series A Preferred Stock.
(d) "Fundamental Change" shall mean the occurrence of any transaction
or event or series of transactions or events pursuant to which all or
substantially all of the Common Stock shall be exchanged for, converted
into, acquired for or constitutes solely the right to receive cash,
securities, property or other assets (whether by means of an exchange
offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise); provided, however, in the
-------- -------
case of a plan involving more than one such transaction or event, for
purposes of adjustment of the Conversion Price, such Fundamental Change
shall be deemed to have occurred when substantially all of the Common Stock
of the Company has been exchanged for, converted into, or acquired for or
constitutes solely the right to receive cash, securities, property or other
assets, but the adjustment shall be based upon the consideration which the
holders of Common Stock received in such transaction or event as a result
of which more than 50% of the Common Stock of the Company shall have been
exchanged for, converted into, or acquired for or shall constitute solely
the right to receive cash, securities, property or other assets; provided,
--------
further, that such term does not include (i) any transaction or event in
-------
which the Company and/or any of its subsidiaries are the issuers of all the
cash, securities, property or other assets exchanged, acquired or otherwise
issued in such transaction or event, or (ii) any transaction or event in
which the holders of Common Stock receive securities of an issuer other
than the Company if, immediately following such transaction or event, those
holders hold a majority of the securities having the power to vote
<PAGE> 32
normally in the election of directors of such other issuer outstanding
immediately following such transaction or other event.
(e) "Non-Stock Fundamental Change" shall mean any Fundamental Change
other than a Common Stock Fundamental Change.
(f) "Purchaser Stock Price" shall mean, with respect to any Common
Stock Fundamental Change, the average of the Closing Prices for one share
of the common stock received by holders of Common Stock in such Common
Stock Fundamental Change during the ten Trading Days immediately prior to
the record date for the determination of the holders of Common Stock
entitled to receive such common stock or, if there is no such record date,
prior to the date upon which the holders of the Common Stock shall have the
right to receive such common stock. The Closing Price on any Trading Day
may be subject to adjustment as provided in this Section 7.
(g) "Reference Market Price" shall initially mean $13.50 (which is an
amount equal to 66 2/3% of the last reported sales price for the Common
Stock on Nasdaq on October 26, 1993) and, in the event of any adjustment to
the Conversion Price other than as a result of a Fundamental Change, the
Reference Market Price shall also be adjusted so that the ratio of the
Reference Market Price to the Conversion Price after giving effect to any
such adjustment shall always be the same as the ratio of $13.50 to the
initial Conversion Price set forth in this Section 7.
(h) "Trading Day" shall mean (A) if the applicable security is listed
or admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such
other national securities exchange is open for business or (B) if the
applicable security is quoted on Nasdaq, a day on which trades may be made
on such National Market System or (C) if the applicable security is not
otherwise listed, admitted for trading or quoted, any day other than a
Saturday or Sunday or on a day on which banking institutions in the State
of New York are authorized or obligated by law or executive order to close.
8. PAYMENTS. The Company may provide funds for any payment of the
--------
Redemption Price prior to the Redemption Date for any shares of Series A
Preferred Stock or any
<PAGE> 33
amount distributable with respect to any Series A Preferred Stock under Section
6 hereof by depositing such funds with a bank or trust company selected by the
Company having a net worth of at least $100,000,000 and having its principal
place of business in New York, New York, Charlotte or Winston-Salem, North
Carolina, or Atlanta, Georgia, in trust for the benefit of the holders of such
shares of Series A Preferred Stock under arrangements providing irrevocably for
payment upon satisfaction of any conditions to such payment by the holders of
such shares of Series A Preferred Stock which shall reasonably be required by
the Company. Except as otherwise provided in Section 5 (seventh paragraph), the
Company shall be entitled to make any deposit of funds contemplated by this
Section 8 under arrangements designed to permit such funds to generate interest
or other income for the Company, and the Company shall be entitled to receive
all interest and other income earned by any funds while they shall be deposited
as contemplated by this Section 8, provided that the Company shall maintain on
deposit funds sufficient to satisfy all payments which the deposit arrangement
shall have been established to satisfy. If the conditions precedent to the
disbursement of any funds deposited by the Company pursuant to Section 5 or this
Section 8 shall not have been satisfied within two years after the establishment
of such funds, then (i) such funds shall be returned to the Company upon its
request; (ii) after such return, such funds shall be free of any trust which
shall have been impressed upon them; (iii) the person entitled to the payment
for which such funds shall have been originally intended shall have the right to
look only to the Company for such payment, subject to applicable escheat laws;
and (iv) the trustee which shall have held such funds shall be relieved of any
responsibility for such funds upon the return of such funds to the Company.
Any payment which may be owed for the payment of the Redemption Price
for any shares of Series A Preferred Stock pursuant to Section 5 hereof or the
payment of any amount distributable with respect to any shares of Series A
Preferred Stock under Section 6 hereof shall be deemed to have been "paid or
properly provided for" upon the earlier to occur of: (i) the date upon which
funds sufficient to make such payment shall be deposited in a manner
contemplated by the preceding paragraph or (ii) the date upon which a check
payable to the person entitled to receive such payment shall be delivered to
such person or mailed to such person at either the address of such person then
appearing on the books of the Company or such other address as the Company shall
deem reasonable.
<PAGE> 34
9. STATUS OF REACQUIRED SHARES OF SERIES A PREFERRED STOCK. Shares of
-------------------------------------------------------
Series A Preferred Stock issued and reacquired by the Company (including,
without limitation, shares of Series A Preferred Stock which have been redeemed
pursuant to the terms of Section 5 hereof and shares of Series A Preferred Stock
which have been converted into shares of Common Stock) shall have the status of
authorized and unissued shares of preferred stock, undesignated as to series,
subject to later issuance.
10. FRACTIONAL SHARES. In the event the holder of Series A Preferred
-----------------
Stock shall be entitled to receive a fractional interest in a share of Series A
Preferred Stock or a fractional interest in a share of Common Stock, except as
otherwise provided herein, the Company shall either, in the sole discretion of
the Board of Directors, (i) round such fractional interest up to the next whole
share of Series A Preferred Stock or Common Stock, as the case may be, or (ii)
deliver cash in the amount of the fair market value (as determined by the Board
of Directors or in any manner prescribed by the Board of Directors) of such
fractional interest.
11. PREEMPTIVE RIGHTS. The Series A Preferred Stock is not entitled to
-----------------
preemptive or subscription rights in respect of any securities of the Company.
12. LEGAL HOLIDAYS. In any case where any Dividend Payment Date, any
--------------
Redemption Date or the last date on which a holder of Series A Preferred Stock
has the right to convert such holder's shares of Series A Preferred Stock shall
not be a Business Day (as defined below), then (notwithstanding any other
provision of these resolutions or of the Series A Preferred Stock) payment of a
dividend due or a Redemption Price or conversion of the shares of Series A
Preferred Stock need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Dividend Payment Date or Redemption Date or last day for conversion, provided
--------
that, for purposes of computing such payment, no interest shall accrue for the
period from and after such Dividend Payment Date or Redemption Date, as the case
may be. As used in this Section 12, "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in New York, New York, Charlotte or Winston-Salem, North Carolina, or Atlanta,
Georgia, are authorized or obligated by law or executive order to close.
<PAGE> 35
(b) Common Stock. The Common Stock shall be entitled to unlimited
voting rights as provided by law, and together with the Preferred Stock, but
subject to the prior rights of the Preferred Stock, shall be entitled to receive
the net assets of the corporation upon any involuntary or voluntary liquidation,
dissolution or winding up of the corporation.
(c) Certain Dividends. Shares of one class or series (including,
without limitation, rights, options or warrants for the purchase or other
acquisition of shares) may be issued by the Board of Directors as a dividend in
respect of shares of any class or series.
5. Total authorized capital stock is 0 .
---
6. The existence of the corporation began as of the filing date with the
Secretary of State or to be effective May 10, 1899.
7. The number of directors constituting the board of directors of the
corporation is 15 and the names and addresses of the persons who are to serve
as directors until the first annual meeting of shareholders or until their
successors be elected and qualify are as follows:
Name Address
(a) SEE ATTACHMENT
----------------------- -------------------------
(b)
----------------------- -------------------------
(c)
----------------------- -------------------------
(d)
----------------------- -------------------------
8. The general nature of the business for which the corporation is organized
is as follows: (It is not necessary to set forth the powers enumerated in
Section 33-3-10 of 1976 Code) Manufacturing and selling articles made of
wood, paper, iron, cloth, or other materials, buying and selling
merchandise of all kinds, and such other business as is properly connected
with the conduct of these undertakings, including the buying, selling and
holding of real estate, erection of power plant stations.
9. Additional provisions included in the articles of incorporation are as
follows:
(a) Board of Directors. Notwithstanding anything in Item 7 of the
Restated Articles of Incorporation, the number of directors of the corporation
shall be (i) the number fixed from time to time by the Board of Directors, which
shall not be less than nine, plus (ii) any directors elected exclusively by the
holders of Preferred Stock as provided in these articles. Except for any
director elected exclusively by the holders of Preferred Stock, the directors
shall continue to be divided into three classes of as nearly equal size as
possible. Each class shall be elected to serve a term of three years. At each
Annual Meeting of Shareholders, directors shall be elected to fill any vacancies
in any class of the Board of Directors. Directors so elected shall serve until
the Annual Meeting of Shareholders in the year in which their terms expire. No
person who is not then already a director of the corporation shall be eligible
to be elected as a director at the Annual Meeting of Shareholders unless such
person shall have been nominated in writing, with such notice delivered to the
Secretary of the corporation, not less than sixty days prior to such Annual
Meeting.
(b) Noncumulative Voting. Shareholders shall not have the right to
cumulate their votes in the election of Directors.
(c) No Preemptive Rights. The corporation elects not to have preemptive
rights with respect to its shares, whether now or hereafter authorized.
(d) Removal of Directors. Directors may be removed only for cause.
Removal of a Director or the entire Board of Directors for cause shall only be
accomplished by a vote of the
<PAGE> 36
holders of at least a majority of the outstanding shares then entitled to
vote at an election for such Directors, subject to the provisions of the
laws of the State of South Carolina.
(e) Liability of Directors. No Director of the corporation shall be
personally liable to the corporation or to its shareholders for monetary
damages for breach of fiduciary duty as a Director, except to the extent
such exemption from liability or limitation thereof is not permitted under
the laws of South Carolina, as presently in effect or as the same may
hereafter be amended. No amendment, modification or repeal of this Article
9(e) shall adversely affect any right or protection that exists at the time
of such amendment, modification, or repeal.
(f) Quorum or Voting Requirement for Shareholders. The shareholders
are authorized to adopt or amend a by-law that fixes a greater quorum or
voting requirement for shareholders (or voting groups of shareholders) than
is required by the laws of the State of South Carolina.
<PAGE> 37
10. The name and address of each incorporator is as follows: Not necessary
for Restated Articles.
Name Street & Res. No. City County State
These Restated Articles of Incorporation are executed and filed pursuant to
Resolution of the Board of Directors of Sonoco Products Company duly adopted on
July 20, 1988, and in accordance with Section 33-15-80, Code of Laws of South
Carolina (1976); it is hereby expressly recited that they purport merely to
restate, but not to change the provisions of the original Articles (that is the
Charter of the Corporation, originally named Southern Novelty Company, dated May
10, 1899) as heretofore amended and supplemented, and that there is no
discrepancy between such provisions and the provisions of these Restated
Articles.
/s/ Charles W. Coker
------------------------- -------------------------
Signature of Incorporator Type or Print Name
/s/ Harris E. DeLoach
------------------------- -------------------------
Signature of Incorporator Type or Print Name
Date: September 1, 1988*
-----------------
STATE OF SOUTH CAROLINA
COUNTY OF DARLINGTON
The undersigned Charles W. Coker and Harris E. DeLoach, Jr.
---------------- ----------------------
do hereby certify that they are the President and Assistant Secretary of
Sonoco Products Company and are authorized to execute this verification; that
each of the undersigned does hereby certify that he or she has read the
foregoing document, understands the meaning and purport of the statements
therein contained and the same are true to the best of his or her information
and belief.
/s/ Charles W. Coker
------------------------- ------------------------
Signature of Incorporator President
/s/ Harris E. DeLoach
------------------------- ------------------------
Signature of Incorporator Asst. Secretary
CERTIFICATE OF ATTORNEY
I, Harriet E. Wilmeth, an attorney licensed to practice in the State of South
Carolina, certify that the corporation, to whose articles of incorporation
this certificate is attached, has complied with the requirements of Chapter 7
of Title 33 of the Code of Laws of South Carolina (1976) relating to the
organization of corporations, and that in my opinion, the corporation is
organized for a lawful purpose.
Date: September 1, 1988* /s/ Harriet E. Wilmeth
------------------------
Signature
Harriet E. Wilmeth
------------------------
Type or Print Name
Wilmeth & Jones
------------------------
Post Office Box 1139
-------------------------
Address
Hartsville, SC 29550
----------------------------
City State Zip Code
* As amended on April 28, 1989, November 2, 1993, and May 4, 1994.
<PAGE> 38
SCHEDULE OF FEES
(Payable at time of filing Articles with Secretary of State)
Fee for filing Articles $5.00
In addition to the above, $.40
for each $1,000.00 of the
aggregate value of shares
which the corporation is
authorized to issue, but in
no case
less than 40.00
nor more than 1,000.00
NOTE: THIS FORM MUST BE COMPLETED IN ITS ENTIRETY BEFORE IT WILL BE ACCEPTED FOR
FILING.
THIS FORM MUST BE ACCOMPANIED BY THE FIRST REPORT OF CORPORATIONS AND A
CHECK IN THE AMOUNT OF $10.00 PAYABLE TO THE SOUTH CAROLINA TAX
COMMISSION.
<PAGE> 39
ATTACHMENT
----------
BOARD OF DIRECTORS OF SONOCO PRODUCTS COMPANY*
Charles J. Bradshaw, Spartanburg, South Carolina
Charles W. Coker, Hartsville, South Carolina
Fitz L. H. Coker, Myrtle Beach, South Carolina
James L. Coker, Charleston, South Carolina
Thomas C. Coxe, III, Darlington, South Carolina
Alan T. Dickson, Charlotte, North Carolina
C. Kirkland Dunlap, Jr., Hartsville, South Carolina
Robert E. Elberson, Chicago, Illinois
James C. Fort, Hartsville, South Carolina
Edgar H. Lawton, Jr., Hartsville, South Carolina
Hugh L. McColl, Jr., Charlotte, North Carolina
R. Roy Pearce, Columbia, South Carolina
Paul J. Rizzo, Chapel Hill, North Carolina
Donald R. Russell, Hartsville, South Carolina
E. Craig Wall, Jr., Conway, South Carolina
* As of October 7, 1988. For a current listing of the Board of Directors, refer
to Item 10 of the Company's Form 10-K Annual Report.
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
SONOCO PRODUCTS COMPANY
HARTSVILLE, S.C.
(Incorporated under the laws of the
State of South Carolina)
Revised through July, 1999
ARTICLE I - OFFICE
1. THE PRINCIPAL OFFICE of the corporation shall be at Hartsville,
Darlington County, South Carolina.
2. THE CORPORATION may also have offices at such other places as the
Board of Directors may from time to time determine or as the business of the
corporation may require.
ARTICLE II - SHAREHOLDERS' MEETINGS
1. THE PLACE OF ALL MEETINGS of shareholders shall be at Hartsville,
Darlington County, State of South Carolina.
2. THE ANNUAL MEETING of the shareholders of the corporation for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the third Wednesday
of April at 11:00 A.M., or such other date as the Board of Directors may, in its
discretion, choose.
3. SPECIAL MEETINGS OF SHAREHOLDERS for any purpose or purposes may be
called by or at the direction of the Board of Directors, or by the Chairman of
the Board of Directors, or by the President. Special meetings shall be called by
the Chairman of the Board of Directors at the request of: (a) holders of
Preferred Stock as may be provided in provisions of the Articles of
Incorporation at the time in effect with respect to the rights, preferences,
privileges, limitations and conditions affecting the capital stock of the
corporation; or (b) shareholders to the extent required by applicable law.
Business to be transacted at all special meetings shall be confined to the
purpose or purposes stated in the notice of the meeting. The time, date and
place of any special meeting shall be determined by the Chairman of the Board of
Directors, except as otherwise required by the Articles of Incorporation.
4. NOTICE of the time, date and place of the annual meeting and any
special meeting of shareholders shall be given by the corporation by
transmitting written or printed notice of the same not less than twenty (20)
days nor more than sixty (60) days prior to the meeting to each shareholder of
<PAGE> 2
record of the corporation entitled to notice of such meeting, addressed to the
shareholder at such shareholder's address appearing on the stock transfer books
of the corporation. Such notice may be amended or withdrawn after it is given in
the discretion of the Chairman of the Board of Directors.
NOTICE SHALL BE DEEMED TO HAVE BEEN GIVEN when actually received or
when deposited with postage prepaid in the United States mail, addressed to the
shareholder at the address appearing on the stock transfer books of the
corporation.
A RECORD DATE may be set by the Board of Directors for a date which is
not less than ten (10) nor more than seventy (70) days preceding the date of any
meeting of the shareholders, as a record date for the determination of the
shareholders entitled to notice of and to vote at any such meeting or
adjournment thereof.
5. A COMPLETE LIST OF SHAREHOLDERS ENTITLED TO NOTICE at the annual
shareholders' meeting or any adjournment thereof, or any special meeting of the
shareholders or adjournment thereof, shall be prepared by the corporation, such
list to be arranged by voting group in alphabetical order with each
shareholder's address appearing on the stock transfer books of the corporation,
showing the number of voting shares held by each shareholder, subject to the
provisions of the laws of the State of South Carolina.
6. THE VOTING AT ALL MEETINGS of the shareholders may be by voice vote,
but any shareholder entitled to vote may demand a stock vote whereupon such
stock vote shall be taken by ballot, each of which shall state the name of the
shareholder voting and the number of shares voted by him; and if such ballots be
cast by proxy, it shall also state the name of such proxy.
7. EVERY SHAREHOLDER HAVING THE RIGHT TO VOTE at any meeting of the
shareholders shall be entitled to vote in person or by proxy. A proxy may be
appointed either (a) by an instrument in writing subscribed by such shareholder,
or (b) by any other means permitted under applicable law; provided, however, the
Board of Directors shall have the authority, in its discretion, to prescribe or
limit a particular method or methods by which appointment of a proxy must be
made with respect to a vote on any matter. Unless otherwise provided in the
Articles of Incorporation, each shareholder entitled to vote shall have one vote
for each share of stock having voting power registered in his name on the books
of the corporation as of the record date set by the Board of Directors.
NO PROXY SHALL BE VALID after the expiration of eleven (11) months from
its execution.
8. A QUORUM as to any matter to come before any annual or special
meeting of shareholders shall consist of shareholders representing, either in
person or by proxy, a majority of shares of each voting group entitled to vote
on such matter. A majority of the votes cast on such matter shall decide any
question that may come before such meeting except as otherwise provided by law
and except as otherwise may be provided by provisions of the Articles of
Incorporation at the time in effect with respect to the rights, preferences,
privileges, limitations and conditions affecting shares of the
<PAGE> 3
corporation.
9. IN THE ABSENCE OF A QUORUM at a properly called shareholders'
meeting, such meeting may be adjourned from time to time by the Chairman as
provided in Section 12 of this Article. If the meeting is adjourned for thirty
(30) days or more, a notice of such adjournment shall be sent to all
shareholders entitled to vote thereat stating the time and place of holding such
adjourned meeting.
10. NO NOTICE OF ANY ADJOURNED MEETING for less than thirty (30) days
need be given if the time and place of the adjourned meeting are announced at
the meeting at which the adjournment is taken.
11. RESOLUTIONS TO BE VOTED ON BY SHAREHOLDERS, other than resolutions
proposed by the Board of Directors, shall be submitted to the Secretary of the
corporation in writing not less than seventy-five (75) days prior to the meeting
at which the vote is to occur. No resolution shall be considered at any meeting
of shareholders unless such resolution is proposed by the Board of Directors or
by a shareholder of record at the date of submission to the Secretary and on the
record date for the meeting. The person presiding at the meeting, in addition to
making any other determinations that may be appropriate to the conduct of the
meeting, shall determine whether such notice has been duly given and shall
direct that proposals and nominees not be considered if such notice has not been
duly given.
12. THE PRESIDING OFFICER OF ALL SHAREHOLDERS' MEETINGS shall be the
Chairman of the Board of Directors unless he or the Board of Directors shall
designate some other person to preside at the meeting. The presiding officer
may, in his discretion, adjourn any meeting to such later date and time as he
shall state whether or not there is a quorum present at the time of such
adjournment. The presiding officer shall determine the manner in which the
meeting shall be conducted, including the order of business, and all rulings of
the presiding officer shall be final and binding. The presiding officer may, in
his discretion, designate various persons to perform tasks associated with the
conduct of the meeting.
<PAGE> 4
ARTICLE III - DIRECTORS
1. THE MANAGEMENT of all the affairs, property and the business of the
corporation shall be vested in a Board of Directors. The number of directors of
the corporation shall be (i) the number fixed from time to time by the Board of
Directors, which number shall not be less than nine, plus (ii) any directors
elected exclusively by the holders of Preferred Stock as provided in the
corporation's Articles of Incorporation. Directors shall be shareholders, each
owning not less than one hundred (100) shares of the voting stock of the
corporation. The directors need not be residents of the State of South Carolina.
2. EXCEPT FOR ANY DIRECTOR elected exclusively by the holders of
Preferred Stock, the Board of Directors shall be divided into three classes of
as nearly equal size as possible in accordance with the provisions of the
Articles of Incorporation.
3. ALL DIRECTORS SHALL SERVE until their successors shall have been
duly elected and qualify or until their earlier resignation, retirement, removal
from office, death or incapacity except as otherwise provided by provisions of
the Articles of Incorporation with respect to the rights, preferences,
privileges, limitations and conditions affecting the shares of the corporation.
No reduction in the size of the Board of Directors shall have the effect of
shortening the term of any director in office at the time.
4. ALL DIRECTORS OF AN EXPIRING CLASS shall be eligible for re-election
to the Board of Directors.
5. ALL VACANCIES OCCURRING IN THE BOARD OF DIRECTORS whether caused by
resignation, death, increase in number of directors, or otherwise may be filled
by a majority vote of the remaining directors, even if such number would not
constitute a quorum.
6. RETIREMENT OF DIRECTORS shall be automatic upon each reaching the
age of seventy-two (72), and a special meeting of the Board of Directors may be
called to fill the vacancy thus created by the retirement.
7. REMOVAL OF A DIRECTOR OR THE ENTIRE BOARD OF DIRECTORS for cause
shall only be accomplished by a vote of the holders of at least a majority of
the outstanding shares then entitled to vote at an election for such Directors,
subject to the provisions of the laws of the State of South Carolina and the
Articles of Incorporation. Directors may be removed only for cause as defined by
the South Carolina Business Corporation Act.
8. REGULAR MEETINGS OF THE BOARD OF DIRECTORS shall be held quarterly
and ten (10) days written notice shall be given prior to the meeting date. The
date of each quarterly meeting shall be decided upon by the Chairman of the
Board of Directors or by the President or, in their absence, by any two Vice
Presidents or by any two directors.
<PAGE> 5
9. SPECIAL MEETINGS of the Board of Directors may be called at any time
to be held at the principal office of the corporation at Hartsville, South
Carolina or elsewhere by:
(a) The Chairman of the Board of Directors;
(b) The President;
(c) Unanimous written consent of all the members at any
time and place without notice; or
(d) The presence of all members at such meeting.
Notice of all special meetings of the Board of Directors shall
be given to each director at such director's address given to the Secretary for
the purpose of giving notices, by telegram, telephone, facsimile, letter, or
other reasonable means reasonably calculated to be received not less than
twenty-four hours prior to the meeting. Notice of a meeting of the directors
need not be given to any director who signs a waiver of notice either before or
after the meeting.
10. NOTICE OF ADJOURNMENT OF A MEETING OF THE BOARD OF DIRECTORS need
not be given if the time and place to which it is adjourned are fixed and
announced at such meeting.
11. NEITHER THE BUSINESS TO BE TRANSACTED at nor the purpose of any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice.
12. A QUORUM at any meeting of the Board of Directors shall consist of
a majority of the total number of directors then in office, but less than a
quorum may adjourn the meeting which may be held on a subsequent date without
further notice if the time and place to which it is adjourned are fixed and
announced at such meeting.
13. COMPENSATION shall be paid directors not otherwise currently
employed by the corporation for their services in such form and in such amount
as may be determined by Resolution of the Board of Directors.
ARTICLE IV - OFFICERS
1. THE OFFICERS OF THE CORPORATION shall consist of a President, one or
more Vice Presidents, a Secretary and Treasurer who shall be appointed for one
year by the directors at their first meeting after the annual meeting of
shareholders and who shall hold office until their successors are appointed and
qualify. The Board of Directors may also in their discretion elect one of their
number as Chairman of the Board of Directors for a term of one year. The
position of Vice President and Treasurer and/or Secretary and Treasurer and/or
Vice President and Secretary may be united in one person. The Board of Directors
may also appoint one or more Assistant Secretaries and Assistant Treasurers. The
Board of Directors may alter or modify the duties of any officer set forth
herein.
<PAGE> 6
2. THE CHAIRMAN OF THE BOARD OF DIRECTORS shall preside at all meetings
of the shareholders and directors, except as provided in Article II, Section 12.
The Chairman shall possess the same power as the President to sign all
certificates, contracts and other instruments of the corporation which may be
authorized by the Board of Directors. He shall perform all such other duties as
are incident to his office or are properly required of him by the Board of
Directors. Unless otherwise provided by the Board of Directors, the Chairman of
the Board of Directors shall serve as the Chief Executive Officer of the
Corporation.
3. THE PRESIDENT shall have general supervision of the affairs of the
corporation, shall sign or countersign all certificates, contracts and other
instruments of the corporation as authorized by the Board of Directors, shall
make reports to the Board of Directors and shareholders and shall perform all
such other duties as are incident to his office or are properly required of him
by the Board of Directors.
4. THE VICE PRESIDENTS, in the order designated by the Board of
Directors, shall exercise the functions of the President during the absence or
disability of the President and the Chairman of the Board of Directors. Each
Vice President shall have such powers and discharge such duties as may be
assigned to him from time to time by the Board of Directors.
5. THE SECRETARY shall issue notices for all meetings, shall keep
minutes of all meetings, shall have charge of the seal and corporate books,
shall have responsibility to authenticate corporate documents, shall sign with
the President such instruments that require his signature, shall make such
reports and shall perform such other duties as are incident to his office or are
properly required of him by the Board of Directors.
6. THE ASSISTANT SECRETARIES, in the order designated by the Board of
Directors, shall in the absence or disability of the Secretary, or as delegated
by the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such other duties as the Board of Directors may prescribe.
7. THE TREASURER shall have custody of all funds and securities of the
corporation and shall keep regular books of account. He shall disburse the funds
of the corporation in payment of just demands against the corporation or as may
be ordered by the Board of Directors, taking proper vouchers for disbursements,
and shall render to the Board of Directors from time to time as may be required
of him an account of all his transactions as Treasurer and of the financial
condition of the corporation. He shall perform all duties incident to his office
or which are properly required of him by the Board of Directors.
<PAGE> 7
8. THE ASSISTANT TREASURERS, in the order designated by the Board of
Directors, shall in the absence or disability of the Treasurer, or as delegated
by the Treasurer, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties as the Board of Directors may prescribe.
9. IN THE CASE OF ABSENCE OR INABILITY TO ACT of any officer of the
corporation or of any person herein authorized to act in his place, the Board of
Directors may from time to time delegate the powers or duties of such officer to
any other officer or any director or other person whom it may select.
10. VACANCIES in any office may be filled by the directors at any
regular or special meeting.
11. THE SALARIES of all officers receiving both officer compensation
and officer benefits shall be fixed by the Board of Directors.
ARTICLE V - SHARES
1. CERTIFICATES FOR SHARES, Common and Preferred, respectively, shall
be issued in numerical order, and each shareholder shall be entitled to a
certificate signed by the Chairman of the Board of Directors or by the President
or any Vice President and by the Secretary or Treasurer of the corporation or
bearing the facsimile signatures of such officers and bearing the corporate seal
or a facsimile thereof. A record of such certificates issued shall be kept by
the corporation or a designated transfer agent and/or registrar. No certificate
shall be issued covering or evidencing a fractional part of a share of either
Common or Preferred shares but in lieu thereof the corporation may issue script
in registered or bearer form over the manual or facsimile signature of an
officer of the corporation or of its agents, exchangeable as therein provided
for full shares, but such script shall not entitle the holder to any right of a
shareholder except as therein provided. Such script may be issued subject to the
condition that it shall become void if not exchanged for certificates
representing full shares before a specified date or, subject to the condition
that the shares for which such script is exchangeable, may be sold by the
corporation and the proceeds thereof distributed to the holders of such script
or subject to any other conditions which the Board of Directors may determine.
2. TRANSFERS OF SHARES shall be made only upon the transfer books of
the corporation kept at the principal office of the corporation or by a transfer
agent designated to transfer the Common or Preferred shares; and before a new
certificate is issued, the old certificate must be surrendered for cancellation.
3. REGISTERED HOLDERS only shall be entitled to be treated by the
corporation as holders in fact of the shares standing in their respective names
at their respective addresses appearing in the stock transfer books of the
corporation, and the corporation shall not be bound to recognize any equitable
or other claim to or interest in any share on the part of any person, whether or
not it shall have
<PAGE> 8
express or other notice thereof.
4. IN CASE OF LOSS OR DESTRUCTION BY A SHAREHOLDER of the original
certificate, another may be issued in its place upon proof of such loss or
destruction and upon the giving of a satisfactory bond of indemnity to the
corporation and/or to the transfer agent of such shares, subject to the
provisions of the laws of the State of South Carolina.
5. TRANSFER AGENTS OR REGISTRARS of the Common or Preferred shares of
the corporation may from time to time be designated by the Board of Directors
which may provide for their countersigning of share certificates.
ARTICLE VI - DIVIDENDS AND FINANCE
1. THE BOARD OF DIRECTORS MAY DECLARE and the corporation may pay
dividends at such time as the Board of Directors may designate on its
outstanding shares, in cash or property or from authorized but unissued shares
and may declare stock splits, but no dividends or splits shall be declared that
shall impair the capital stock of the corporation or violate any right,
preference, privilege, limitation or condition affecting any class of shares of
the corporation as fixed and determined by the shareholders or that shall
violate any agreement or undertaking made by the corporation or that shall not
conform to the laws of the State of South Carolina.
2. THE FUNDS of the corporation shall be deposited in the name of the
corporation in such bank or banks or trust company or trust companies as the
Board of Directors may designate and shall be drawn out by checks signed by any
two officers or any two designated employees or by an officer together with a
designated employee or by the use of facsimile signatures in lieu thereof.
3. THE FISCAL year of the corporation shall begin on the first day of
January in each year unless otherwise provided by the Board of Directors.
ARTICLE VII - SEAL
1. THE CORPORATE SEAL shall consist of two concentric circles between
which are written the words, "SONOCO PRODUCTS COMPANY, S.C.," and in the center
of which is written "INCORPORATED 1899," and such seal is impressed on the
margin hereof, has been and is hereby adopted as the corporate seal of the
corporation. Failure to affix the seal to a document shall not in any way affect
the validity of the document.
<PAGE> 9
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
1. Any present or former director, officer or employee of the
corporation or any person who, at the request of the corporation, may have
served as director or officer of another corporation in which it owns shares or
of which it is a creditor shall be entitled to reimbursement of expenses and
other liabilities to the maximum extent permitted by the laws of the State of
South Carolina or by order of any Court having jurisdiction in any action or
proceeding to which he is a party by reason of being or having been a director,
officer or employee.
ARTICLE IX - AMENDMENTS
1. The By-Laws may be amended, repealed or altered, in whole or in
part, or new By-Laws adopted, by a majority of the outstanding shares of the
corporation entitled to vote at any annual meeting of the shareholders of the
corporation or at any special meeting called for such purpose or, to the extent
permitted by law, by a majority of the Board of Directors at any regular meeting
or special meeting called for that purpose; PROVIDED, HOWEVER, that no such
amendment, repeal, alteration or adoption shall violate any right, preference,
privilege, limitation or condition affecting any class of stock of the
corporation as fixed and determined by shareholders or, acting under or pursuant
to authority in the Articles of Incorporation, by the Board of Directors, or
violate any agreement or understanding made by the corporation; and PROVIDED
FURTHER that Article III, Sections 1, 2, 7, and Article IX, Section 1, of the
By-Laws may not be amended, repealed or altered, in whole or in part, and no
By-Law may be amended, repealed, altered or adopted which is inconsistent with
any of such Sections or either Article 4 or Article 9 of the Articles of
Incorporation, other than by an affirmative vote of shareholders sufficient to
amend Articles 4 and 9 of the Articles of Incorporation of the corporation.
ARTICLE X - SUITS BY SHAREHOLDERS
1. No shareholder shall bring any action in law or in equity against
the corporation, or any of its officers or directors which is based on any right
of the shareholder as a shareholder except in compliance with the following
conditions:
a. The shareholder shall have first presented the substance of the
complaint to the corporation in writing in sufficient detail to permit
the corporation to determine the validity of the complaint. Such
complaint shall have been submitted to the Secretary of the corporation
not less than 90 days prior to the commencement of a legal proceeding.
b. The legal proceeding shall be commenced and maintained in a court of
competent jurisdiction in the State of South Carolina or in the United
States District Court for the District of South Carolina.
<PAGE> 10
ARTICLE XI - CONTROL SHARE ACQUISITIONS
1. Except as otherwise provided herein, terms in this Article shall
have the meaning assigned to such terms in Article 1 of Chapter 2 of Title 35 of
the Code of Laws of South Carolina, 1976, as amended (the "Control Share
Acquisitions Act").
2. The corporation is authorized, but not required, to redeem control
shares as provided in Section 35-2-110 of the Code of Laws of South Carolina,
1976, as amended. The fair value of such shares and the price at which they
shall be redeemed shall be the lesser of the lowest price paid by the holder of
the shares being redeemed in the ninety days immediately preceding the date on
which the control share acquisition occurred or the average closing price of the
shares on the ten trading days immediately preceding the earlier of: (i) a
public announcement of the acquiring person's acquisition of, or plan to
acquire, shares; or (ii) ten days prior to the date on which the acquiring
person would be required to file a Schedule 13D pursuant to Section 13(d) of the
Securities Exchange Act of 1934. In the event that the corporation exercises its
right to redeem control shares, it shall give written notice of such redemption
to the record owner of such shares. Upon receipt of such notice, such shares
shall be deemed to have been redeemed and the rights of the holder of such
shares shall be limited to the right to receive payment for such shares. Payment
for shares redeemed shall be made within two business days after surrender to
the corporation of the certificates for the shares redeemed.
3. For purposes of determining whether a control share acquisition has
occurred, whether shares are control shares, what are interested shares and
other rights with respect to control shares under the Control Share Acquisitions
Act, all shares tendered in response to any tender offer or made subject to any
option (other than an option granted by the corporation) shall be considered to
be held by the members of a group with respect to a control share acquisition.
Such group shall include all tendering shareholders and option granting
shareholders as well as the persons to whom or for whose benefit the shares were
tendered or optioned.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SONOCO PRODUCTS COMPANY FOR THE SIX MONTHS ENDED JUNE
27, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-27-1999
<CASH> 35,084
<SECURITIES> 9,761
<RECEIVABLES> 343,598
<ALLOWANCES> 5,645
<INVENTORY> 229,968
<CURRENT-ASSETS> 673,955
<PP&E> 1,977,062
<DEPRECIATION> 981,512
<TOTAL-ASSETS> 2,101,200
<CURRENT-LIABILITIES> 383,703
<BONDS> 699,184
0
0
<COMMON> 7,175
<OTHER-SE> 848,175
<TOTAL-LIABILITY-AND-EQUITY> 2,101,200
<SALES> 1,172,233
<TOTAL-REVENUES> 1,172,233
<CGS> 892,534
<TOTAL-COSTS> 892,534
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,414
<INTEREST-EXPENSE> 24,316
<INCOME-PRETAX> 141,598
<INCOME-TAX> 53,166
<INCOME-CONTINUING> 91,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91,311
<EPS-BASIC> 0.90
<EPS-DILUTED> 0.89
</TABLE>
