-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OZ02C1+KKOuDK5iMDAhLRZcc9zOj00GCijH3alRU7SwlaQJQ8mOE2vxbqG2yzJ4T EYM8WtkxjxzqlsIYCUKjUA== 0000105770-98-000033.txt : 19981118 0000105770-98-000033.hdr.sgml : 19981118 ACCESSION NUMBER: 0000105770-98-000033 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEST CO INC CENTRAL INDEX KEY: 0000105770 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 231210010 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08036 FILM NUMBER: 98751984 BUSINESS ADDRESS: STREET 1: 101 GORDON DR STREET 2: P O BOX 645 CITY: LIONVILLE STATE: PA ZIP: 19341-0645 BUSINESS PHONE: 6105942900 MAIL ADDRESS: STREET 1: 101 GORDON DRIVE STREET 2: PO BOX 645 CITY: LIONVILLE STATE: PA ZIP: 19341-0645 10-Q 1 10Q398 3RD QTR SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended September 30, 1998 --------------- Commission File Number 1-8036 ------ THE WEST COMPANY, INCORPORATED ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-1210010 ------------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645 ------------------------------------- ---------------------- (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code 610-594-2900 -------------- N/A ----------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. 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 twelve months, and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- September 30, 1998 -- 17,004,827 ----------------------------------------------------------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Page 2 Index Form 10-Q for the Quarter Ended September 30, 1998 Page Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Income for the Three and Nine Months ended September 30, 1998 and September 30, 1997 3 Condensed Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997 5 Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1998 and September 30, 1997 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Part II - Other Information Item 1. Legal Proceedings 20 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 21 Index to Exhibits F-1 Page 4 Item 1. Financial Statements The West Company, Incorporated and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per share data)
Three Months Ended Nine Months Ended Sept. 30, 1998 Sept. 30,1997 Sept. 30, 1998 Sept. 30, 1997 ---------------- ------------- --------------- -------------- Net sales $113,900 100% $105,200 100% $ 334,900 100% $343,000 100% Cost of goods sold 80,500 71 76,000 72 235,400 70 244,800 71 --------------------------------------------------------------------------------------------------- Gross profit 33,400 29 29,200 28 99,500 30 98,200 29 Selling, general and administrative expenses 17,300 15 16,300 15 52,500 16 53,400 16 Restructuring charge 4,000 3 - - 4,000 1 - - Acquired research and development - - - - 28,200 8 - - Other (income), net (300) - (900) - (1,700) - (1,400) - --------------------------------------------------------------------------------------------------- Operating profit 12,400 11 13,800 13 16,500 5 46,200 13 Interest expense 1,800 2 1,400 1 4,900 1 4,200 1 --------------------------------------------------------------------------------------------------- Income before income taxes and minority interests 10,600 9 12,400 12 11,600 4 42,000 12 Provision for (recovery of) income taxes 4,100 4 (4,600)(4) 15,300 5 6,700 2 Minority interests - - - - 100 - 100 - --------------------------------------------------------------------------------------------------- Income (loss) from consolidated operations 6,500 5% 17,000 16% (3,800) (1)% 35,200 10% --- --- --- ---- Equity in net income of affiliated companies - 300 500 600 --------------------------------------------------------------------------------------------------- Net income (loss) $ 6,500 $ 17,300 $ (3,300) $ 35,800 --------------------------------------------------------------------------------------------------- Page 5 Net income (loss) per share: Basic $ 0.38 $ 1.05 $ (0.20) $ 2.18 Assuming dilution $ 0.38 $ 1.05 $ (0.20) $ 2.17 --------------------------------------------------------------------------------------------------- Average shares outstanding 17,003 16,481 16,867 16,447 Average shares outstanding assuming dilution 17,078 16,594 16,867 16,513
See accompanying notes to interim financial statements. Page 6 The West Company, Incorporated and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
Unaudited Audited ASSETS Sept. 30, 1998 Dec. 31, 1997 --------------- ------------- Current assets: Cash, including equivalents $ 50,000 $ 52,300 Accounts receivable, less allowance 71,200 60,400 Inventories 44,800 38,300 Current deferred income tax benefits 9,500 9,400 Other current assets 10,800 10,300 --------------------------------------------------------------------------- Total current assets 186,300 170,700 --------------------------------------------------------------------------- Net property, plant and equipment 213,800 202,200 Investments in affiliated companies 14,300 22,700 Goodwill 71,100 51,600 Intangibles and other assets 36,200 30,700 --------------------------------------------------------------------------- Total Assets $521,700 $ 477,900 --------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 600 $ 700 Notes payable 17,200 900 Accounts payable 16,200 18,600 Accrued expenses: Salaries, wages, benefits 18,900 13,400 Income taxes payable 11,500 5,400 Other current liabilities 27,100 19,000 --------------------------------------------------------------------------- Total current liabilities 91,500 58,000 --------------------------------------------------------------------------- Long-term debt, excluding current portion 94,900 87,400 Deferred income taxes 30,600 30,100 Other long-term liabilities 25,300 24,700 Shareholders' equity 279,400 277,700 --------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $521,700 $477,900 --------------------------------------------------------------------------- Page 7 See accompanying notes to interim financial statements.
Page 8 The West Company Incorporated and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended Sept. 30, 1998 Sept. 30, 1997 ---------------- ------------------- Cash flows from operating activities: Net income, plus net non-cash items $ 45,800 $ 46,200 Changes in assets and liabilities (3,000) 10,400 ----------------------------------------------------------------------------------------- Net cash provided by operating activities 42,800 56,600 ----------------------------------------------------------------------------------------- Cash flows from investing activities: Property, plant and equipment acquired (27,900) (23,500) Proceeds from sale of assets 900 200 Payments for acquisitions, net of cash acquired (19,500) - Customer advances, net of repayments 900 - ----------------------------------------------------------------------------------------- Net cash used in investing activities (45,600) (23,300) ----------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings under revolving credit agreement 5,800 - Repayment of long-term debt (1,900) (1,100) Notes payable, net 700 (100) Dividend payments (7,500) (6,900) Sale of common stock, net 2,000 2,400 ----------------------------------------------------------------------------------------- Net cash used in financing activities (900) (5,700) ----------------------------------------------------------------------------------------- Effect of exchange rates on cash 1,500 (1,800) ----------------------------------------------------------------------------------------- Net (decrease) increase in cash, including equivalents $ (2,200) $25,800 ----------------------------------------------------------------------------------------- See accompanying notes to interim financial statements.
Page 9 The West Company, Incorporated and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The interim consolidated financial statements for the period ended September 30, 1998 should be read in conjunction with the consolidated financial statements and notes thereto of The West Company, Incorporated appearing in the Company's 1997 Annual Report on Form 10-K. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Interim results are based on the Company's accounts without audit. 1. Interim Period Accounting Policy --------------------------------- In the opinion of management, the unaudited Condensed Consolidated Balance Sheet as of September 30, 1998 and the related unaudited Consolidated Statement of Operations for the three and nine month period then ended, and the unaudited Condensed Consolidated Statement of Cash Flows for the nine month period then ended and for the comparative period in 1997 contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial position as of September 30, 1998 and the results of operations and cash flows for the respective periods. The results of operations for any interim period are not necessarily indicative of results for the full year. Operating Expenses ------------------ To better relate costs to benefits received or activity in an interim period, certain operating expenses have been annualized for interim reporting purposes. Such expenses include depreciation due to use of the half year convention, certain employee benefit costs, annual quantity discounts, and advertising. Income Taxes ------------- The tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on the current estimate of full year results except that the 1998 charge for acquired research and development, the 1997 German tax reorganization, and taxes applicable to operating results in Brazil are recorded on a basis discrete to the period, and prior year adjustments, if any, are recorded as identified. Net Loss Per Share --------------------- For the nine months ended September 30, 1998, because of the reported net loss, the incremental shares from potential issuance of common stock under the Company's stock option and award plan are not included in average shares assuming dilution. Page 10 The West Company, Incorporated and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) 2. Inventories at September 30, 1998 and December 31, 1997 are summarized as follows:
(in thousands) 1998 1997 -------- -------- Finished goods $ 15,600 $ 15,800 Work in process 13,900 8,100 Raw materials 15,300 14,400 -------- -------- $ 44,800 $ 38,300 -------- -------- -------- --------
3. The carrying value of property, plant and equipment at September 30, 1998 and December 31, 1997 is determined as follows: (in thousands) 1998 1997 -------- -------- Property, plant and equipment $466,700 $428,600 Less accumulated depreciation 252,900 226,400 -------- -------- Net property, plant and equipment $213,800 $202,200 -------- -------- -------- -------- 4. In 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, which establishes standards for the disclosure of comprehensive income and its components. Comprehensive income is the total of net income and other revenue, expenses, gains and losses for the period, which are excluded from net income under generally accepted accounting principles. For the three and nine months ended September 30, 1998 and 1997, the Company's comprehensive income (loss) is as follows:
Three Months Ended Nine Months Ended 9/30/98 9/30/97 9/30/98 9/30/97 (in thousands) ------- ------- ------- ------- Net income (loss) $6,500 $ 17,300 $(3,300) $35,800 Foreign currency translation adjustments 4,100 (900) 1,400 (9,000) -------- -------- -------- -------- Page 11 Comprehensive income The West Company, Incorporated and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) (loss) $10,600 $16,400 $(1,900) $26,800 -------- -------- -------- -------- -------- -------- -------- --------
In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information". As required by the standard, the Company will begin reporting under SFAS No. 131 in its 1998 Annual Report. On June 16, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activity". The statement will be effective for the Company in the year 2000. The new standard requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The impact that this accounting standard will have on the Company's financial position and results of operations cannot be determined at this time. On March 4, 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. This statement establishes standards for determining the internal and external costs of developing software for internal use which must be capitalized and amortized over the useful life of the software. The Company adopted this Statement, but the effect was not material on the quarter or year-to-date financial statements. 5. Common stock issued at September 30, 1998 was 17,165,141 shares, of which 160,314 shares were held in treasury. A dividend of $.15 per common share was paid in the third quarter of 1998, and a dividend of $.16 per share payable on November 4, 1998 to holders of record on October 21, 1998 was declared on August 11, 1998. 6. The Company has accrued the estimated cost of environmental compliance expenses related to soil or ground water contamination at current and former manufacturing facilities. The ultimate cost to be incurred by the Company and the timing of such payments cannot be fully determined. However, based Page 12 The West Company, Incorporated and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) on consultants' estimates of the costs of remediation in accordance with applicable regulatory requirements, the Company believes the accrued liability of $1.3 million at September 30, 1998 is sufficient to cover the future costs of these remedial actions, which will be carried out over the next two to five years. The Company has not anticipated any possible recovery from insurance or other sources. 7. At September 30, 1998 the cumulative number of employees terminated in accordance with the restructuring plan announced on March 29, 1996 was 225 and total payout of severance and benefits was $7.0 million. Restructuring activities, except for the sale of one building and certain excess equipment and payout of remaining severance, have been completed. On September 8, 1998, the Company recorded a pre-tax charge of $4.0 million. The charge is related to employee reductions associated with identified manufacturing and other efficiencies. The charge covers severance and benefits for 92 employees and other related charges. At September 30, 1998, the total payout of severance and benefits associated with this charge was $0.2 million. 8. On March 31, 1998, the Company acquired for approximately BPS 20 million ($33.5 million at March 31, 1998) the remaining 70% interest in DanBioSyst U.K. Ltd. ("DBS"), making DBS a wholly-owned subsidiary. This transaction is accounted for by the purchase method, and was financed with cash of $9.4 million, 320,406 shares of restricted common stock valued at $8.7 million, and short-term notes of $15.4 million. The preliminary allocation of the purchase price follows: (in thousands) Current assets $1,300 Equipment and leasehold improvements 800 In-process research & development 28,200 Other intangibles 400 Goodwill 2,800 Estimated in-process research and development was written off at the date of acquisition. Operating results of DBS were consolidated beginning on April 1, 1998. On July 1, 1998 the Company acquired Betraine, Ltd. for BPS 7.2 million ($11.8 million at July 1, 1998) Betraine manufactures precision injection molded plastic components for the healthcare and consumer products industries. The Page 13 The West Company, Incorporated and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) acquisition is accounted for as a purchase and results were consolidated as of July 1, 1998. The acquisition was financed from existing cash. The assets and liabilities have been consolidated based on a preliminary allocation of the purchase price; final allocation is expected by year end 1998. The excess of the purchase price over the net assets acquired will be amortized over 20 years. 9. On September 9, 1998 the Company commenced a "Dutch Auction" self-tender for up to 2,000,000 shares at a price range of not less than $27.00 per share and not more than $31.00 per share. The self-tender period expired on October 7, and on October 8 the Company announced that it would purchase approximately 2,000,000 shares at a price of $30.00 per share in accordance with the terms of the tender offer. The shares purchased represent approximately 11.8% of the shares outstanding immediately prior to the offer. The Company financed the purchase of the shares with funds borrowed under available lines of credit. Page 14 Item 2. Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------- Results of Operations. ---------------------- Results of Operations for the Three and Nine Month Periods --------------------------------------------------------- Ended September 30, 1998 Versus Comparable 1997 Periods -------------------------------------------------- Net Sales ---------- Net sales for the third quarter of 1998 were $113.9 million, an 8% increase compared with net sales of $105.2 million for the same quarter in 1997. Service sales to both healthcare and consumer product markets in the U.S. increased sharply over 1997 because of strong demand for contract packaging and manufacturing services. Product sales to healthcare customers were flat in North and South American markets, but 11% higher in European markets due to a combination of increased demand and the acquisition of Betraine, Ltd. on July 1, 1998. In addition product sales to consumer markets were 12% higher due largely to the introduction of Procter & Gamble's new Crest Multicare product and the acquisition of Betraine, Ltd. The total sales of companies acquired in 1998 included in the third quarter 1998 consolidated sales was $2.7 million. The impact on reported sales of foreign currency exchange rates was marginally favorable in the quarter as the U.S. dollar was stronger versus Asian currencies but weaker against European currencies. Net sales for the first nine months of 1998 were $334.9 million, a 2% decrease compared with $343.0 million for the first nine months of 1997. Product sales to U.S. healthcare and consumer markets were lower, a result of reduced sales to several key healthcare market customers, in part due to reductions in customers' inventory levels, and a combination of lower resin prices and loss of business at two accounts to competitors, respectively. Stronger sales in Europe due to demand and acquisitions (Betraine and DanBioSyst U.K. Ltd) partially offset this reduction. Other international markets had lower sales. Also, the stronger U.S. dollar reduced reported sales by $4.0 million. Gross Profit ------------- Gross profit margins improved for the third quarter and for the nine months. The gross profit margin for the third quarter was 29.2% of net sales compared with 27.7% for the same period in 1997. The gross profit margin for the nine month period was 29.7% up from 28.6% in 1997. Page 15 The Company continues to benefit from efficiencies and Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------- Results of Operations. (Continued) ----------------------------------- cost saving programs. In addition, margins on sales of contract services have improved due to mix, and margins on product sales to consumer markets has improved in part due to resin price decreases passed through to customers. Selling, General and Administrative Expenses -------------------------------------------- Selling, general and administrative (SG&A) expenses increased $1.0 million compared with the third quarter 1998, but declined as a percentage of sales from 15.4% in the third quarter 1997 to 15.2% in 1998. The impact of the stronger U.S. dollar and higher income on pension plan assets did not offset increased selling costs for contract services and the consolidation of SG&A expenses associated with companies acquired in 1998. In the nine month comparisons, SG&A expenses in 1998 decreased by $0.9 million compared with 1997 and rose slightly as a percentage of net sales. Higher income on pension plan assets, lower cost for other employee benefits and the impact of the stronger U.S. dollar more than offset SG&A expenses recorded by companies acquired in 1998. Restructuring Charge -------------------- The information contained in Note 7 to the Consolidated Financial Statements, which is incorporated herein by reference, describes the Company's charge to earnings in the third quarter of 1998, related to staff reductions, which are expected to reduce the headcount by about 1%. Acquired Research and Development --------------------------------- The information contained in Note 8 to the Consolidated Financial Statements, which is incorporated herein by reference, describes the Company's acquisition of DanBioSyst and the allocation of the purchase price based on an appraisal. Acquired in-process research and development expense of $28.2 million was expensed, as required, at the time of purchase. Other (income) expense ---------------------- In the third quarter, provision for losses on certain investments and disputed claims of former employees and losses on sale of fixed assets, reduced third quarter other income by $0.6 million. However, interest income was higher in the third quarter and for the nine month period reflecting higher average temporary cash investments during the periods. The interest income declined in the third quarter due to the cashpurchase of Betraine on July 1, Page 16 Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------- Results of Operations. (Continued) ----------------------------------- 1998. Interest Expense and Equity in Affiliates -------------------------------------------- Interest expense increased in the third quarter and nine month period comparisons, due to additional debt associated with the DanBioSyst acquisition. Equity in net income of affiliated companies was lower in both the quarter and nine months compared with the same periods in 1997. Lower income at Daikyo Seiko, Ltd., a Japanese company in which the Company owns a 25% equity stake, resulted from a sharp decline in third quarter sales, which drastically decreased margins and offset prior year-to-date comparative increases. Income at Mexican affiliates, in which the Company has a 49% equity stake, were also lower in part due to unfavorable currency exchange impacts. Taxes ----- The effective tax rate for the 1998 nine month period was 38.5%, excluding the charge for the acquired research and development. This rate is significantly higher than the full year 1997 effective tax rate of 23.2% which was affected by two, third- quarter 1997 events: a tax reorganization of the Company's German subsidiaries and repatriation of cash dividends from certain subsidiaries. These two events resulted in a full year net tax benefit of $7.9 million to the Company in 1997; excluding this benefit, the 1997 effective tax rate was 37%. The expected increase in the 1998 tax rate reflects the geographic mix of earnings. Net Income ---------- Net income for the third quarter 1998 was $6.5 million , or $.38 per share. Results include an after-tax restructuring charge of $2.5 million, associated mainly with staff reductions. In the third quarter of 1997, the Company reported net income of $17.3 million, or $1.05 per share, which included a net tax benefit of $9.4 million, or $.57 per share, associated mainly with the legal reorganization of German subsidiaries. Excluding these unusual items in both periods, net income increased by 13% in the quarter to $.53 per share from $.48 per share. The Company reported a net loss for the nine-month period of $3.3 million, or $.20 per share. Results include the $28.2 million charge relating to the in-process research and development associated with the acquisition of DanBioSyst and a net restructuring charge of $2.5 million. Page 17 Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------- Results of Operations. (Continued) ----------------------------------- In 1997, the year-to-date net income was $35.8 million, or $2.18 per share, which included a net tax benefit of $9.4 million related mainly to the tax reorganization of the Company's German subsidiaries. Excluding these unusual items in both periods, 1998 net income for the nine months increased by 4% to $1.62 per share from $1.60 per share in 1997. Financial Position ------------------- Working capital at September 30, 1998 was $94.8 million compared with $112.7 million at December 31, 1997. The working capital ratio at September 30, 1998 was 2.0 to 1. Cash provided by operations, was adequate to fund capital expenditures and make dividend payments of $.45 per share. The cash portion of acquisitions was financed using available cash and borrowings totalling $6.9 million. The borrowings were used for a portion of the cash required for the DanBioSyst acquisition, (see disclosure on the acquisition in Note 8 to the Consolidated Financial Statements). In addition, sellers received a portion of the purchase price, $15.4 million, in short-term notes and 320,406 shares of common stock. The acquisition price of Betraine was all cash (see disclosure on the acquisition in Note 8 to the Consolidated Financial Statements). Total debt as a percentage of total invested capital was 28.7% at September 30, 1998, compared with 24.2% at December 31, 1997. At September 30, 1998, the Company had available unused lines of credit of $114.9 million. Net borrowings of $5.8 million under a short-term line of credit were classified as long-term because of the Company s intent to renew the borrowings using available long-term credit facilities. On October 8, 1998, the Company acquired 2,000,000 shares of Common Stock at $30.00 per share at the close of a "Dutch Auction" tender offer. The Company funded the stock purchase using available lines of credit, but is currently negotiating long-term financing. Available lines of credit and cash flow from operations are adequate, in the opinion of management, to meet future cash requirements. Page 18 YEAR 2000 --------- Background ---------- Many computer systems were designed and developed using two digits, rather than four, to specify the year. As a result, such systems will recognize a date using "00" as the year 1900 rather than the year 2000. This could result in system failure or miscalculations. Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------- Results of Operations. (Continued) ----------------------------------- The Company's Year 2000 Program ------------------------------- With the assistance of an independent consultant, the Company has developed a comprehensive, centrally maintained, corporate-wide Year 2000 project plan designed to manage and carry out activities to address the Year 2000 issue. The Company's plan is being implemented by a Project Team consisting of two-full-time staff members, representatives from staff functions, and at least one project manager from each of the Company's locations. The plan calls for the Company to have completed modifications necessary to address the Year 2000 issue by June 30, 1999. The progress of the Company's Year 2000 efforts is reviewed monthly by senior management and reports are provided to the Company's Audit Committee and Board of Directors on a periodic basis throughout the year. The Company has completed a risk assessment of the impact of the Year 2000. The assessment identified and prioritized critical business processes and plant locations to be targeted for remediation, replacement or other corrective action. The Company has also substantially completed an inventory of all application software, hardware, operating systems software, desktop software and computer-controlled manufacturing and facility equipment from all Company locations worldwide to identify potential Year 2000 problems. The Company has made significant progress in remediating or replacing critical information systems which support business functions. Due to multiple geographical locations, discrete computer systems exist in the U.S., Europe, South America and Asia/ Pacific regions. The U.S. (other than Paco Pharmaceutical Services) and European-based manufacturing, financial-reporting and payroll systems have been completed, and other systems, including Paco, are at various stages of completion, but are on- schedule to be completed during the first half of 1999. Desktop inventory and assessment audits are expected to be completed by the end of the year, with corrective action expected to be completed by July 1, 1999. The assessment of research and development, manufacturing processes and facility management systems is well underway at all plant locations. Remediation and replacement, as necessary, of all critical software-dependent systems are expected to be completed by June 30, 1999. The Company is relying on a combination of testing, replacement and certification letters from Page 19 Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------- Results of Operations. (Continued) ----------------------------------- equipment and system vendors as part of its Year 2000 program. The Company has received Year 2000 compliance certifications from all of its major raw-materials suppliers and major service providers to ensure that delivery of required supplies and services continues uninterrupted. Based on the progress to date, no contingency plans are expected to be needed, and therefore none have been developed. However, because the Company's Year 2000 program schedule is expected to be substantially complete by June 30, 1999, the Company believes adequate time will be available to address deficiencies without a material impact on manufacturing and operations, customer service and other critical business functions. Nonetheless, if such deficiencies are not addressed in a timely manner, the Year 2000 issue could have a material impact on the operations of the Company. Internal and external resources are being used to remediate or replace non-compliant technology, and to appropriately test Year 2000 modifications. The program and related expenditures are being funded through operating cash flows. The project to address Year 2000 began in April 1997. The pretax costs incurred to date for this effort were approximately $3.7 million and $1.0 million in 1998 and 1997, respectively. Generally, compliance software is being implemented for its improved functionally. As a result $3.3 million and $1.0 million have been capitalized in 1998 and 1997, respectively. The Company does not separately track the cost and time that its own internal employees spend on the Y2K project. Such costs are principally the related payroll costs for its management information systems group. The Company expects costs of approximately $5.0 million will be incurred in 1999 to substantially complete the effort. The cost of the Year 2000 project and the date on which the Company believes it will substantially complete modifications are based on management s best estimates. Such estimates were derived using project-management software and information from individual project team members. The estimates are based on numerous assumptions of future events, including the continued Page 20 availability of certain resources and other factors. Because none of these estimates can be guaranteed, actual time and cost to complete modifications could differ materially from those anticipated. Specific factors that might cause such differences include, but are not limited to, the reliability and timely receipt of vendor certifications, the appropriateness and effectiveness of testing and validation methods, the availability and cost of trained personnel and the timely availability of replacement hardware and software and similar uncertainties. Item 3. Quantitative and Qualitative Disclosure about Market Risk ------------------------------------------------------ Not applicable. This requirement will become effective for the Company filings including annual financial statements for 1998. Page 21 Part II - Other Information Item 1. Legal Proceedings ----------------- None. Item 6. Exhibits and Reports on Form 8-K ----------------------------------- (a) See Index to Exhibits on pages F-1 and F-2 of this Report. (b) No reports on Form 8-K have been filed for the quarter ended September 30, 1998. Page 22 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE WEST COMPANY, INCORPORATED ----------------------------------- (Registrant) November 16, 1998 /s/ Steven A. Ellers ------------- --------------------------------- Date (Signature) Steven A. Ellers Senior Vice President, Finance and Administration (Chief Financial Officer) Page 23 INDEX TO EXHIBITS Exhibit Number (3) (a) Amended Articles of Incorporation of the Company. (3) (b) Amended By-Laws of the Company. (4) (a) Form of stock certificate for common stock incorporated by reference to Exhibit (3) (b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (File No. 1-8036). (4) (b) Flip-In Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent, dated as of January 16, 1990, incorporated by reference to Exhibit 1 to the Company's Form 8-A Registration Statement (File No. 1-8036). (4) (c) Flip-Over Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent, dated as of January 16, 1990, incorporated by reference to Exhibit 2 to the Company's Form 8-A Registration Statement (File No. 1-8036). (9) None. (11) Not Applicable. (12) Not Applicable. (15) None. (16) Not applicable. (18) None. (19) None. (22) None. (23) None. (24) None. (27) Financial Data Schedule (99) None. F-1 Page 24 EX-3 2 AMENDED ARTICALS EXHIBIT A AMENDED AND RESTATED ARTICLES OF INCORPORATION OF THE WEST COMPANY, INCORPORATED 1. The name of the Corporation is The West Company, Incorporated. 2. The location and post office address of the Corporation's registered office in Pennsylvania is c/o Corporation Service Company, 319 Market Street, Harrisburg, PA 17101. 3. The Corporation is incorporated under the Pennsylvania Business Corporation Law and shall have unlimited power to engage in and to do any lawful act concerning any or all lawful business, including manufacturing, processing, research and development, for which corporations may be incorporated under the Pennsylvania Business Corporation Law. 4. The term for which the Corporation is to exist is perpetual. 5. Capital Stock. The aggregate number of shares of capital stock which the Corporation shall have authority to issue is 53,000,000 shares, consisting of (i) 3,000,000 shares of Preferred Stock, par value $.25 per share ("Preferred Stock") and (ii) 50,000,000 shares of Common Stock, par value $.25 per share ("Common Stock"). The following is a statement of the designations, preferences qualifications, limitations, restrictions and the special or relative rights granted to or imposed upon the shares of each such class: Preferred Stock (a) Issue in Series. Preferred Stock may be issued from time to time in one or more series, each such series to have the terms stated herein and in the resolution of the board of directors providing for its issue. All shares of any one series of Preferred Stock shall be identical, but shares of different series of Preferred Stock need not rank equally or be identical except insofar as provided by law or hereunder. (b) Creation of Series. The board of directors shall have authority by resolution to cause to be created one or more series of Preferred Stock, and to determine and fix with respect to each series, prior to the issuance of any shares of the series to which such resolution relates: (i) The distinctive designation of the series and the number of shares which shall constitute the series, which number may be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the board of directors; (ii) The dividend rate and the times of payment of dividends on the shares of the series, whether dividends shall be cumulative, and, if so, from what date or dates; (iii) The price or prices at which, and the terms and conditions on which, the shares of the series may be redeemed at the option of the Corporation; (iv) Whether or not the shares of the series shall be entitled to the benefit of a retirement or sinking fund to be applied to the purchase or redemption of such shares and, if so entitled, the annual amount of such fund and the terms and provisions relative to the operation thereof; (v) Whether or not the shares of the series shall be convertible into, or exchangeable for, shares of any other series of the same or any other class or classes of stock of the Corporation, and if so convertible or exchangeable, the conversion price or prices, or the rates of exchange, and any adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange; (vi) The rights of the shares of the series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (vii) Whether or not the shares of the series shall have priority over or parity with or be junior to the shares of any other series or class in any respect or shall be entitled to the benefit of limitations restricting the issuance of shares of any other series or class having priority over or being on a parity with the shares of such series in any respect, or restricting the payment of dividends on, or the making of other distributions in respect of shares of any other series or class ranking junior to the shares of the series as to dividends or assets, or restricting the purchase or redemption of the shares of any such junior series or class, and the terms of any such restrictions; (viii) Whether the series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; and (ix) Any other preferences qualifications, privileges and other relative or special rights and limitations of that series. (c) Dividends. Holders of Preferred Stock shall be entitled to receive, when and as declared by the board of directors, out of funds legally available for the payment thereof, dividends at the rates fixed by the board of directors for the respective series, and no more, before any dividends shall be declared and paid, or set apart for payment, on Common Stock with respect to the same dividend period. (d) Preference on Liquidation. In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of each series of Preferred Stock shall be entitled to receive the amount fixed for such series plus, in the case of any series on which dividends shall have been determined by the board of directors to be cumulative, an amount equal to all dividends accumulated and unpaid thereon to the date of final distribution whether or not earned or declared. If the assets of the Corporation are not sufficient to pay such amounts in full, holders of all shares of Preferred Stock shall participate ratably in the distribution of assets in proportion to the full amounts to which they are entitled or in such order or priority, if any, as shall have been fixed in the resolution or resolutions providing for the issuance of the series of Preferred Stock. Neither the merger nor consolidation of the Corporation into or with any other corporation, nor a sale, transfer or lease of all or part of its assets, shall be deemed a liquidation of the Corporation within the meaning of this paragraph. (e) Redemption. The Corporation at the option of the board of directors may redeem all or part of the shares of any series of Preferred Stock on the terms and conditions fixed for such series. In case of the redemption of less than all outstanding shares of any series of Preferred Stock, the shares to be redeemed shall be selected by lot or in such other manner as the board of directors determines. (f) Voting Rights. Except as otherwise required by law or as otherwise provided in any certificate creating any series of Preferred Stock, the holders of such of the series of Preferred Stock, if any, as shall have been granted such power pursuant to any certificate creating any series of Preferred Stock shall, together with the holders of Common Stock, exclusively possess voting power in the election of directors and for all other purposes, and the holders of the other series of Preferred Stock shall have no voting power and shall not be entitled to any notice of any meeting of shareholders. Series A Junior Participating Preferred Stock (a) Designation and Amount. There shall be a series of Preferred Stock designated as "Series A Junior Participating Preferred Stock" and the aggregate number of shares constituting such series shall be 50,000. (b) Dividends and Distributions. (i) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the board of directors out of funds legally available for the purpose, quarterly dividends payable in cash on March 31, June 30, September 30 and December 31 in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time after January 16, 1990 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (ii) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (i) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (iii) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. (c) Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (i) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (a) declare any dividend on Common Stock payable in shares of Common Stock, (b) subdivide the outstanding Common Stock, or (c) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (ii) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (iii) (A) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) directors. (B) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (C) of this paragraph (c)(iii) or at any annual meeting of shareholders, and thereafter at annual meetings of shareholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of directors shall be exercised unless the holders of ten percent (10)% in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect directors to fill such vacancies, if any, in the board of directors as may then exist up to two (2) directors or, if such right is exercised at an annual meeting, to elect two (2) directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect directors in any default period and during the continuance of such period, the number of directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock. (C) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect directors, the board of directors may order, or any shareholder or shareholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this subparagraph (C) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any shareholder or shareholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this subparagraph (C), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the shareholders. (D) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of directors until the holders of Preferred Stock shall have exercised their right to elect two (2) directors voting as a class, after the exercise of which right (x) the directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the board of directors may (except as provided in subparagraph (B) of this paragraph (c)(iii) be filled by vote of a majority of the remaining directors theretofore elected by the holders of the class of stock which elected the director whose office shall have become vacant. References in this subparagraph (D) to directors elected by the holders of a particular class of stock shall include directors elected by such directors to fill vacancies as provided in clause (y) of the preceding sentence. (E) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect directors shall cease, (y) the term of any directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of directors shall be such number as may be provided for in the Articles of Incorporation or Bylaws irrespective of any increase made pursuant to the provisions of subparagraph (B) of this paragraph (c)(iii) (such number being subject, however, to change thereafter in any manner provided by law or in the Articles of Incorporation or Bylaws). Any vacancies in the board of directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining directors. (iv) Except as set forth herein, holders of Series A Junior participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extend they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. (d) Certain Restrictions (i) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in paragraph (b) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (A) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (B) declare or pay dividends on or make any other distributions on any shares of stock ranking on a party (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (C) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or (D) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the board of directors) to all holders of such shares upon such terms as the board of directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (ii) the Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (d)(i), purchase or otherwise acquire such shares at such time and in such manner. (e) Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the board of directors, subject to the conditions and restrictions on issuance set forth herein. (f) Liquidation, Dissolution or Winding Up. (i) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $10 per share, plus an amount equal to accrued and unpaid dividends any distribution thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (a) the Series A Liquidation Preference by (b) 1,000 (as appropriately adjusted as set forth in paragraph (iii) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (b), the Adjustment Number ). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior participating Preferred Stock and common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and common Stock, on a per share basis, respectively. (ii) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (iii) In the event the Corporation shall at any time after the Rights Declaration Date (a) declare any dividend on Common Stock payable in shares of Common Stock, (b) subdivide the outstanding Common Stock, or (c) combine the outstanding common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (g) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (h) No Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable. (i) Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of Preferred Stock as to the payment of dividends and the distribution of assets unless the terms of any such series shall provide otherwise. (j) Amendment. The Articles of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class. (k) Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. Common Stock (a) Dividends. Holders of Common Stock shall be entitled to receive such dividends as may be declared by the board of directors, except that the Corporation will not declare, pay or set apart for payment any dividend on shares of Common Stock (other than dividends payable in Common Stock), or directly or indirectly make any distribution on, redeem, purchase or otherwise acquire any such shares, if at the time of such action the Corporation is in default with respect to any dividend due and payable on, or any sinking or purchase fund requirement relating to, any shares of Preferred Stock. (b) Distribution of Assets. In the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Common Stock shall be entitled to receive pro rata all of the remaining assets of the Corporation available for distribution to its shareholders after all amounts to which the holders of Preferred Stock are entitled have been paid or set aside in cash for payment. (c) Voting Rights. Except as otherwise required by law or provided in any certificate creating any series of Preferred Stock, the holders of Common Stock shall have the exclusive right to vote in the election of directors and for all other purposes, each such holder being entitled to one vote for each share thereof held. 6. Vote Required for Certain Significant Transactions (a) Higher Vote for Certain Significant Transactions. In addition to any affirmative vote required by law or these Articles of Incorporation, and except as otherwise expressly provided in paragraph (b) of this Article 6: (i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Related Person (as hereinafter defined), or (b) any other corporation (whether or not itself a Related Person) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of a Related Person; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition(in one transaction or a series of transactions) to or with any Related Person or any Affiliate of any Related Person of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $1,000,000 or more; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Related Person or any Affiliate of any Related Person in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more; or (iv) the purchase by the Corporation or any Subsidiary (in one transaction or a series of transactions within a two year period) of any outstanding shares of capital stock of the Corporation which entitles the holder thereof to vote generally in the election of directors (the "Voting Stock") in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more; or (v) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of a Related Person or any Affiliate of any Related Person; or (vi) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving a Related Person) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Related Person or any Affiliate of any Related Person; shall require the affirmative vote of the holders of at least 80% of the voting power of the then-outstanding shares of voting Stock, voting together as a single class. (For purposes of this Article 6, each share of the Voting Stock shall have the number of votes granted to it pursuant to Article 5 of these Articles of Incorporation). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. The term Significant Transaction as used in this Article 6 shall mean any transaction which is referred to in any one or more of paragraphs (i) through (vi) of paragraph (a) of this Article 6. (b) When Higher Vote is Not Required. The provisions of paragraph (a) of this Article 6 shall not be applicable to any particular Significant Transaction, and such Significant Transaction shall require only such action as is required by law, the Bylaws of the Corporation, and any other provision of these Articles of Incorporation, if all of the conditions specified in either of the following paragraphs (i) and (ii) are met: (i) The Significant Transaction shall have been approved by a majority of the continuing Directors (as hereinafter defined) or (ii) All of the following conditions shall have been met: (A) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Significant Transaction of consideration other than cash to be received per share by holders of Common Stock in such Significant Transaction shall be at least equal to the highest of the following: (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Related Person for any shares of Common Stock acquired by it (a) within the two- year period immediately prior to the first public announcement of the proposal of the significant Transaction (the "Announcement Date"), or (b) in the transaction in which it became a Related Person, whichever is higher; and (2) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Related Person became a Related Person, whichever is higher; and (3) the earnings per share of Common Stock for the four full consecutive fiscal quarters immediately preceding the Announcement Date as to which financial results have been published by the Corporation, multiplied by the then highest price/earnings multiple (if any) of such Related Person or any of its Affiliates as customarily computed and reported in the financial community; and (4) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to subparagraph (A)(2) of this paragraph (b)(ii), multiplied by a fraction the numerator of which is the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid by the Related Person for any shares of Common Stock acquired by it within the two-year period immediately prior to the Announcement Date and the denominator of which is the Fair Market Value per share of Common Stock on the first day in such two-year period upon which the Related Person acquired any shares of Common Stock. (B) the consideration to be received by the holders of Common Stock in such Significant Transaction shall be either cash or the same type of consideration used by the Related Person in acquiring the largest portion of its holdings of Common Stock prior to the first public announcement of the proposed Significant Transaction. (C) After such Related Person has become a Related Person and prior to the consummation of such Significant Transaction: (1) there shall have been (a) no failure to pay nor reduction in the annual rate of dividends paid on the Common Stock (as such rate may be adjusted from time to time to reflect changes in the Corporation s capitalization) unless such failure to pay or reduction is approved by a majority of the continuing Directors; and (2) such Related Person shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Related Person becoming a Related Person. (D) after such Related Person has become a Related Person, such Related Person shall not have received the benefit, directly or indirectly (except proportionately as a shareholder of the Corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Significant Transaction or otherwise. (E) A proxy or information statement describing the proposed Significant Transaction and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public shareholders of the Corporation at least 30 days prior to the consummation of such Significant Transaction (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). (c) Certain Definitions. For the purposes of this Article 6: (i) A "person" shall mean any individual, firm, corporation or other entity. (ii) "Related Person" shall mean any person (other than the Corporation or any Subsidiary) who or which: (A) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the outstanding Voting Stock; or (B) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding Voting Stock; or (C) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Related Person, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1993. If two or more person shall at any time be "Related Persons," each Related Person whose involvement in a transaction causes it to be a Significant Transaction shall be treated as: (a) "the Related Person" for purposes of the application of the requirements of paragraph (b) of this Article 6 to such transaction, and (b) "the Related Person in question" for purposes of determining whether a person is a "Continuing Director" with respect to such transaction. (iii) A person shall be a "beneficial owner" of any Voting Stock: (A) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (B) which such person or any of its Affiliates or Associates has (1) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (2) the right to vote pursuant to any agreement, arrangement or understanding; or (C) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (iv) For the purposes of determining whether a person is a Related Person pursuant to paragraph (c)(ii), the number of share of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph (c)(iii) but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (v) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulation under the Securities Exchange Act of 1934, as in effect on May 5, 1983. (vi) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Related Person set forth in paragraph (c)(ii), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (vii) "Continuing Director" means any member of the board of directors of the Corporation (the "Board") who (a) was a member of the Board as of May 5, 1983, or (b) is not affiliated with the Related Person and was a member of the Board prior to the time that the Related Person became a Related Person, or (c) is a successor of a Continuing Director who is unaffiliated with the Related Person and is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board. (viii) "Fair Marker Value" means: (a) in the case of stock, the highest closing sale price during the 30- day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange--Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Deals, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board in good faith; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in good faith. (ix) In the event of any Significant Transaction in which the Corporation survives, the phrase "consideration other than cash to be received" as used in subparagraph (A) of paragraph (b)(ii) of this Article 6 shall include the shares of Common Stock, and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. (x) The Continuing Directors of the Corporation shall have the power and duty to determine for the purposes of this Article 6, on the basis of information known to them after reasonable inquiry, (a) whether a person is a Related Person, (b) the number of shares of Voting Stock beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, and (d) whether the assets which are the subject of any Significant Transaction have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Significant Transaction has an aggregate Fair Market Value of $1,000,000 or more. (d) No Effect on Fiduciary Obligations of Related Persons. Nothing contained in this Article 6 shall be construed to relieve any Related Person from any fiduciary obligation imposed by law. 7. Evaluation of Certain Proposals by the Board of Directors. The board of directors of the Corporation, when evaluating any proposal from another party to (a) make a tender offer for securities of the Corporation, (b) merge or consolidate the Corporation with another corporation, (c) purchase or otherwise acquire substantially all of the properties or assets of the Corporation, (d) engage in any transaction of the sort specified in paragraph (a) of Article 6 of these Articles of Incorporation, or (e) engage in any other transaction having a similar effect upon the properties, operations or control of the Corporation, shall, in connection with the exercise of its judgment in determining what is the best interests of the Corporation and its shareholders, give due consideration to the following: (i) the character, integrity, business philosophy and financial status of the other party or parties to the transaction; (ii) the consideration to be received by the Corporation or its shareholders in connection with such transaction, as compared to: (a) the current market price or value of the Corporation's properties or securities; (b) the estimated future value of the Corporation, its properties or securities; and (c) such other measures of the value of the Corporation, its properties or securities as the directors may deem appropriate. (iii) the projected social, legal and economic effects of the proposed action or transaction upon the Corporation, its employees, suppliers and customers and the communities in which the Corporation does business; (iv) the general desirability of the Corporation's continuing as an independent entity; and (v) such other factors as the board of directors may deem relevant. 8. Directors (a) Number, Election and Term. The number of the directors of the Corporation shall be fixed from time to time by or pursuant to the Bylaws of the Corporation. The directors shall be classified with respect to the time for which they severally hold into three classes, as nearly their equal in number as possible, as shall be provided in the manner specified in the bylaws of the Corporation. At the annual meeting of shareholders held in 1990, one class shall be originally elected for a term expiring at the annual meeting of shareholders to be held in 1991, another class shall be originally elected for a term expiring at the annual meeting of shareholders to be held in 1992, and another class shall be originally elected for a term expiring at the annual meeting of shareholders to be held in 1993, with the members of each class to hold office until their successors are elected and qualified. At each succeeding annual meeting of the shareholders of the Corporation, the successors of the class of directors whose term expires at that meeting shall, subject to paragraph (c) of this Article 8, be elected by plurality vote of all votes cast at such meeting to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election. (b) Vacancies. Vacancies in the board of directors, including vacancies resulting from an increase in the number of directors, shall be filled only by a majority of the directors then in office, though less than a quorum, and each person so elected shall be a director to serve for the balance of the unexpired term and until his successor is duly elected and qualified. (c) Cumulative Voting in Certain Circumstances (i) Except as and to the extent otherwise provided in this paragraph (c) shareholders of the Corporation shall not be entitled to cumulative voting rights in any election of directors of the Corporation. (ii) There shall be cumulative voting in any election of directors of the Corporation on or after the occurrence of both of the following events: (A) the public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), by the Corporation or a 40% Shareholder that a 40% Shareholder has become such. and (B) such 40% Shareholder makes, or in any way participates in, directly or indirectly, any "solicitation" of "proxies" (as such terms are defined or used in Regulation 14A under the Exchange Act) or becomes a "participant" in any "election contest" (as such terms are defined or used in Rule 14a-11 of the Exchange Act) with respect to the Corporation; seeks to advise or influence any person (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to the voting of any securities of the Corporation: or executes any written consent in lieu of a meeting of holders of the Voting Stock. "40% Shareholder" shall mean any Person who or which, together with all Affiliates and Associate of such Person, shall be the Beneficial Owner of 40% or more of the Voting Stock but shall not include (i) the Corporation, (ii) any wholly owned Subsidiary, (iii) any employee benefit plan of the Corporation or of any Subsidiary, or (iv) any Person holding securities of the Corporation for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become a "40% Shareholder" as the result of an acquisition of Common Stock by the Corporation which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 40% or more of the Voting Stock; provided, however, that if a Person who would otherwise be a 40% Shareholder but for the provisions of this sentence shall, after such share purchases by the Corporation, become the Beneficial Owner of any additional Voting Stock then such Person shall be deemed to be a "40% Shareholder." (ii) Certain Definitions. For purposes of this Article 8: "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on May 3, 1990. A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (A) which such Person or any such Persons's affiliates or Associates beneficially owns, directly or indirectly: (B) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights granted pursuant to the Flip-In Rights Agreement and Flip-Over-Rights Agreement between the Corporation and American Stock Transfer & Trust Company, dated as of January 16, 1990), warrants or options, or otherwise or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (C) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any securities of the Corporation. "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Subsidiary" shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by the Corporation. "Voting Stock" means Common Stock and any other securities of the Corporation entitled to vote generally for the election of directors or any security convertible into or exchangeable for or exercisable for the purchase of Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. 9. Vote Required for Amendment of Articles 6, 7, 8 or 9. Any provision in these Articles of Incorporation or in the Bylaws of the Corporation to the contrary notwithstanding, no provisions of Articles 6, 7, 8 or 9 of these Articles shall be altered, amended, supplemented or repealed by the shareholders of the Corporation, and no provision of the Bylaws or of these Articles of Incorporation inconsistent with such provisions shall be adopted by the shareholders of the Corporation, except by the affirmative vote of the holders of at least 80% of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for this purpose as one class. EX-3 3 AMENDED BY LAWS As Amended Through October 27, 1998 THE WEST COMPANY, INCORPORATED BYLAWS ARTICLE I SHAREHOLDERS Section 1. Meetings. (a) Annual Meeting. The annual meeting of the shareholders for the election of directors and for other business shall be held at such time as may be fixed by the board of directors, on the first Thursday of May in each year (or, if such is a legal holiday, on the next following day,) or on such other day as may be fixed by the board of directors. (b) Special Meetings. Special Meetings of the shareholders may be called at any time by the Chairman of the Board, the President, or a majority of the board of directors. (c) Place. Meetings of the shareholders shall be held at such place as may be fixed by the board of directors. Section 2. Notice. Written notice of the time and place of all meetings of shareholders and of the purpose of each special meeting of shareholders shall be given to each shareholder entitled to vote thereat at least five days before the date of the meeting, unless a greater period of notice is required by law in a particular case. Section 3. Voting. Except as otherwise provided herein, or in the Articles of Incorporation, or by applicable law, every shareholder shall have the right at every shareholders' meeting to one vote for every share standing in his name on the books of the Company which is entitled to vote at such meeting. Every shareholder may vote either in person or by proxy. No shareholder shall be entitled to participate in any meeting of shareholders by means of conference telephone or similar communications equipment unless the Board of Directors shall have provided by resolution for such participation. Section 4. Quorum. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of stock of the Company entitled to vote at a meeting shall constitute a quorum. If a quorum is not present no business shall be transacted except to adjourn to a future time. Section 5. Nomination of Directors. (a) Notice Required. Nominations for election of directors at a meeting of shareholders may be made by the Board of Directors or by any shareholder entitled to vote for the election of directors at such meeting; provided, however, that such nominations made by such a shareholder shall be made by written notice (the "Nomination Notice") of the shareholder's intent to nominate a director at the meeting given to and received by the Secretary of the Company in the manner and within the time specified in this Section 5. The Nomination Notice shall be delivered to the Secretary of the Company not less than 90 days prior to the anniversary date of the immediately preceding meeting of shareholders called for the election of directors; provided, however, that in the event less than 21 days' notice or prior public disclosure of the date of the meeting is given to shareholders or made, the Nomination Notice shall be delivered to the Secretary of the Company not later than the earlier of (i) the seventh day following the day on which notice of the date of the meeting was first mailed to shareholders or such public disclosure was made, whichever occurs first, or (ii) the fourth day prior to the meeting. In lieu of delivery to the Secretary, the Nomination Notice may be mailed to the Secretary by certified mail, return receipt requested, but shall be deemed to have been given only upon actual receipt by the Secretary. (b) Contents of Notice. The Nomination Notice shall be in writing and shall contain or be accompanied by: (1) the name and address, as they appear on the Company's books, of the shareholder giving the Nomination Notice; (2) a representation of the number and class of the Company's securities that the shareholder giving the Nomination Notice owns beneficially and that the shareholder is the holder of record of the Company's shares and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the Nomination Notice; (3) as to each proposed nominee, (i) his name, age, business address and, if known, residence address, (ii) his principal occupation or employment, (iii) the number and class of the Company's securities beneficially owned by him and (iv) such other information regarding such nominee as would have been required to be included in a proxy statement filed pursuant to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, (or pursuant to any successor act or regulation) had proxies been solicited with respect to such nominee by the management or Board of Directors of the Company; (4) a description of all arrangements or understandings among the shareholder giving the Nomination Notice and each proposed nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; and (5) the consent of each proposed nominee to serve as a director of the Company if so elected. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of the nominee to serve as a director. (c) Determination of Compliance. If a judge or judges of election shall not have been appointed pursuant to these bylaws, the chairman of the meeting may, if the facts warrant, determine and declare to the meeting that any nomination made at the meeting was not made in accordance with the procedures of this Section 5 and, in such event, the nomination shall be disregarded. Any decision by the chairman of the meeting shall be conclusive and binding upon all shareholders of the Company for any purpose. (d) Exception. The procedures of this Section 5 shall not apply to nominations with respect to which proxies shall have been solicited pursuant to a proxy statement filed pursuant to Regulation 14A of the rules and regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (or pursuant to any successor act or regulation). Section 6. Notice of Business at Annual Meetings. (a) Notice Required. At an annual meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (1) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (2) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (3) properly brought before the meeting by a shareholder. For business relating to the election of directors of the Company, to be properly brought before an annual meeting by a shareholder the procedures in Section 5 of this Article II must be complied with. If such business relates to any other matter, the shareholder must give written notice (the "Business Notice") of the shareholder's intent to propose business at the annual meeting to the Secretary of the Company in the manner and within the time specified in this Section 6. The Business Notice shall be delivered to the Secretary of the Company not less than 90 days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that less than 21 days' notice or prior public disclosure of the date of the meeting is given to shareholders or made, the Business Notice shall be delivered to the Secretary of the Company not later than the earlier of (i) the seventh day following the day on which such notice of the date of the meeting was first mailed to shareholders or such public disclosure was made, whichever occurs first, or (ii) the fourth day prior to the meeting. In lieu of delivering to the Secretary, the Business Notice may be mailed to the Secretary by certified mail, return receipt requested, but shall be deemed to have been given only upon receipt by the Secretary. (b) Content of Notice. The Business Notice shall be in writing and shall contain or be accompanied by the following as to each matter the shareholder proposes to bring before the annual meeting: (1) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meting, (2) the name and address, as they appear on the Company's books, of the shareholder giving the Business Notice, (3) the number and class of the Company's securities beneficially owned by him, and (4) any material interest of the shareholder giving the Business Notice in such business. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 6, except that any shareholder proposal which complies with Rule 14a-8 of the proxy rules (or any successor provision) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and is to be included in the Company's proxy statement for an annual meeting of shareholders shall be deemed to comply with the requirements of this Section 6. (c) Determination of Compliance. If a judge or judges of election shall not have been appointed pursuant to these bylaws, the chairman of the meeting may, if the facts warrant, determine and declare to the meeting that any business brought before the meeting was not done so in accordance with the procedures of this Section 6 and, in such event, the business shall be disregarded. Any decision by the chairman of the meeting shall be conclusive and binding upon all shareholders of the Company for any purpose. ARTICLE II DIRECTORS Section 1. Number and Term. Subject to the provisions of the Articles of Incorporation and of applicable law, the board of directors shall have the authority to (i) determine the number of directors to constitute the board, and (ii) fix the terms of office of the directors and classify each director in respect of the time for which he shall hold office. Section 2. Powers. The business of the Company shall be managed by the board of directors which shall have all powers conferred by applicable law and these bylaws. The board of directors shall elect, remove or suspend officers, determine their duties and compensations, and require security in such amounts as it may deem proper. Section 3. Committees. The board of directors shall establish and maintain a Compensation Committee and an Audit Committee and may establish such other committees as it shall deem appropriate. Each such committee shall consist of one or more directors and shall have such powers and duties as the board of directors shall determine. Section 4. Meetings. (a) Regular Meetings. Regular meetings shall be held at such times as the board shall designate by resolution. Notice of regular meetings need not be given. (b) Special Meetings. Special meetings of the board may be called at any time by the Chairman of the Board or the President and shall be called by him upon the written request of one-third of the directors. Notice of the time, place and general nature of the business to be transacted at each special meeting shall be given to each director at least 24 hours (in the case of notice by telephone) or two days (in the case of notice by other means) before such meeting. (c) Place. Meetings of the board of directors shall be held at such place as the board may designate or as may be designated in the notice calling the meeting. (d) Participation. One or more directors may participate in a meeting of the board or a committee of the board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Section 5. Quorum. A majority of all the directors in office shall constitute a quorum for the transaction of business at any meeting and, except as provided in Article VI, the acts of a majority of the directors present at any meeting at which a quorum is present shall be the acts of the board of directors. Section 6. Vacancies. Vacancies in the board of directors, including vacancies resulting from an increase in the number of directors, shall be filled only by a majority of the directors then in office, though less than a quorum, and each person so elected shall be a director to serve for the balance of the unexpired term and until his successor is duly elected and qualified. Section 7. Independent Directors. (a) Definition of Independent Director. For purposes of these bylaws, the term "Independent Director" shall mean a director who: (i) is not employed by the Company or its subsidiaries (collectively, the "Company"); (ii) does not have personal services contract(s) with the Company involving significant payments; (iii) is not employed in an executive capacity with a firm that does substantial business with the Company; (iv) is not employed in an executive capacity with a significant customer or supplier of the Company; and (v) is not a spouse, parent, sibling or child of any person described by (i) through (iv). Notwithstanding the foregoing, the ownership of equity or debt securities of the Company, or derivatives thereof, shall not by itself disqualify any person from being classified as an Independent Director. (b) Interpretation and Application of This Bylaw. The board of directors shall have the exclusive right and power to interpret and apply provisions of this bylaw, including, without limitation, the definitions of terms used in and guidelines for the application of this bylaw. In the case of any such interpretation or application to a specific person which results in such person being classified as an Independent Director, the board of directors shall have determined that such person is independent of management and free from any relationship that, in the opinion of the board of directors, would interfere with such person's exercise of independent judgment as a board member. Each director has a duty to disclose all circumstances that may have a bearing on his or her classification as an Independent Director. (c) Duties of Independent Directors. Independent Directors shall have the following special duties and responsibilities: (1) to evaluate, periodically and at least annually, the performance of the chief executive officer of the Company, including, among other things, a determination of the manner in which he or she is fulfilling responsibilities to directors, shareholders, employees, customers and other constituencies. (2) to assure that the chief executive officer has appropriate leadership succession plans for the Company; and (3) to review and monitor achievement of the chief executive officer's long-range strategic plans for the Company. (d) Chairman, Independent Directors. Immediately after adoption of this bylaw, and thereafter at the first board meeting after each annual meeting of shareholders, the Independent Directors shall elect from their membership one director to be chairman, whose term shall be annual, but who may not be elected to serve more than four annual terms in succession. The chairman shall preside at all meetings of Independent Directors and, in addition, shall have the following special duties and responsibilities: (1) to confer with the chief executive officer in advance of each board meeting to assure that (i) the board agenda contains those items that the Independent Directors believe are important to their understanding and evaluation of the Company and its affairs, and (ii) the information provided to and presentations made to the board, and other communications are in keeping with the board's needs and wishes; and (2) to be available to call meetings of the Independent Directors whenever he or she deems appropriate, and generally to be a focal point for Board discussion on any subject where a board member believes the chief executive officer would not be the appropriate person to call such meeting. Section 8. Limitation on Liability. A director shall not be personally liable for monetary damages for any action taken on or after January 27, 1987, or for the failure to take any action on or after the date, unless (i) the director has breached or failed to perform the duties of his office under Section 8363 of the Pennsylvania Directors' Liability Act (Act 145 of 1986, P.L. 1458), relating to standard of care and justifiable reliance, and (ii) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this Section 6 shall not apply to (i) the responsibility or liability of a director pursuant to any criminal statute, or (ii) the liability of a director for the payment of taxes pursuant to local, state or federal law. Any repeal or modification of any provision of this Section 8 of Article II shall be prospective only and shall not affect, to the detriment of any director, any limitation on the personal liability of a director of the Company existing at the time of such repeal or modification. ARTICLE III OFFICERS Section 1. Election. At its first meeting after each annual meeting of shareholders, the board of directors shall elect a chairman, a president, a treasurer, a secretary, a controller and such other officers as it deems advisable. Any two or more offices may be held by the same person. Section 2. Chairman. The chairman shall preside at all meetings of the board and of the shareholders. In the absence of the chairman, a director selected by a majority of the board shall discharge the duties of the chairman. Section 3. President. Except as the board of directors may otherwise prescribe by resolution, the president shall be the chief executive officer of the Company and shall have general supervision over the business and operations of the Company and may perform any act and execute any instrument or other papers for the conduct of such business and operations. Section 4. Other Officers. The duties and powers of the other officers shall be those usually related to their offices or as may be designated by the president, except as otherwise prescribed by resolution of the board of directors. Section 5. General. In the absence of the president, the chairman, or any other officer or officers designated by the board shall exercise the powers and perform the duties of the president. The president, or any officer or employee authorized by him, may appoint, remove or suspend agents or employees of the Company, other than officers appointed by the Board, and may determine their duties and compensation. ARTICLE IV INDEMNIFICATION Section 1. Right to Indemnification. The Company shall indemnify to the extent not prohibited by applicable law, any person who was or is a party (which shall include for purposes of this Article IV the giving of testimony or similar involvement) or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including an employee benefit plan, against any liability, penalty, damages, excise tax assessed with respect to an employee benefit plan, costs, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, whether or not the indemnified liability arises or arose from any threatened, pending or completed action by or in the right of the Company. The board of directors may, and on request of any such person shall be required to, determine in each case whether applicable law prohibits indemnification, or such determination shall be made by independent legal counsel if the board so directs or if the board is not empowered by law to make such determination. If there has been a change in control (as such term is used in Item 6(a) of Schedule 14A promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) of the Company between (1) the time of the action or failure to act giving rise to the claim for indemnification and (2) the time such claim is made, at the option of the person seeking indemnification the permissibility of indemnification shall be determined by independent legal counsel selected jointly by the Company and the person seeking indemnification. The fees and expenses of such counsel shall be paid by the Company. The obligations of the Company to indemnify a director, officer, employee or agent under this Article IV, including the duty to advance expenses, shall be a contract between the Company and such person, and no modification or repeal of any provision of this Article IV shall affect, to the detriment of the director, officer, employee or agent such obligations of the Company in connection with a claim based on any act or failure to act occurring before such modification or repeal. Section 2. Advancement of Expenses. Expenses (including attorney's fees) incurred in defending an action, suit or proceeding referred to in this Article IV shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the indemnified person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Company as authorized in this Article IV or otherwise. Section 3. Indemnification Not Exclusive. The indemnification and advancement of expenses provided by this Article IV shall not be deemed exclusive of any other right to which one indemnified may be entitled under any agreement, vote of shareholders or otherwise, both as to action in his official capacity and as to action in another capacity while holding that office, and shall inure to the benefit of the heirs, executors and administrators of any such person. Section 4. Insurance, Security and Other Indemnification. The board of directors shall have the power to (a) authorize the Company to purchase and maintain, at the Company's expense, insurance on behalf of the Company and others to the extent that power to do so has not been restricted by applicable law, (b) create any fund of any nature, whether or not under the control of a trustee, or otherwise secure in any manner any of its indemnification obligations and (c) give other indemnification to the extent not prohibited by applicable law. ARTICLE V CERTIFICATES OF STOCK Section 1. Share Certificates. Every shareholder of record shall be entitled to a share certificate representing the shares held by him. Every share certificate shall bear the corporate seal and the signature (which may be a facsimile signature) of the chairman, president or a vice president and the secretary or an assistant secretary or treasurer of the Company. Section 2. Transfers. Shares of stock of the Company shall be transferable on the books of the Company only by the registered holder or by duly authorized attorney. A transfer shall be made only upon surrender of the share certificate. ARTICLE VI CERTAIN MATTERS RELATING TO PENNSYLVANIA ACT NO. 36 OF 1990 In accordance with the provisions of Section 2571(b)(2)(i) of the Pennsylvania Associations Code, as amended, Subchapter H, Disgorgement by Certain Controlling Shareholders Following Attempts to Acquire Control, of Chapter 25 of the Pennsylvania Associations Code shall not be applicable to the Company. ARTICLE VII AMENDMENTS Except as restricted by applicable law, the authority to adopt, amend and repeal the bylaws of the Company is expressly vested in the Board of Directors, subject to the power of the shareholders to change such action. These bylaws may be changed at any regular or special meeting of the board of directors by the vote of a majority of all the directors in office. EX-27 4 10Q398EXH27
5 9-MOS DEC-31-1997 SEP-30-1998 50,000 0 71,200 0 44,800 20,300 466,700 252,900 521,700 91,500 94,900 0 0 4,200 275,200 521,700 334,900 334,900 235,400 235,400 (1,700) 0 4,900 11,600 15,300 (3,800) 0 0 0 (3,300) (.20) (.20)
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