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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM . . . . . . . . . . . . . . TO
. . . . . . . . . . . . . .
COMMISSION FILE NUMBER 1-5667
CABOT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2271897
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
75 STATE STREET, 02109-1806
BOSTON, MASSACHUSETTS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(617) 345-0100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, $1.00 PAR VALUE PER SHARE:
36,298,492 SHARES OUTSTANDING BOSTON STOCK EXCHANGE
AT NOVEMBER 30, 1995 NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the registrant's common stock held
beneficially or of record by shareholders who are not directors or executive
officers of the registrant at November 30, 1995, was approximately
$1,547,609,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for its 1996 Annual
Meeting of Stockholders (the "Proxy Statement") are incorporated by reference in
Part III.
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PART I
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ITEM 1. BUSINESS
GENERAL
Cabot's business was founded in 1882 and incorporated in the State of
Delaware in 1960. The Company has businesses in specialty chemicals and
materials and in energy. The Company and its affiliates have manufacturing
facilities in the United States and 21 other countries.
The term "Cabot" as used in this Report refers to Cabot Corporation. The
terms "Company" and "Registrant" mean Cabot and its consolidated subsidiaries.
The description of the Company's businesses is as of September 30, 1995,
unless otherwise noted. Information regarding the revenues and operating profits
of the Company's business segments and geographic areas appears on pages 15 and
F-19 and F-20 of this Report.
On November 10, 1995, Cabot's Board of Directors authorized a two-for-one
stock split of Cabot's common stock, $1.00 par value per share ("Common Stock"),
in the form of a stock dividend, subject to stockholder approval of an amendment
to Cabot's Certificate of Incorporation to increase the authorized number of
shares of Common Stock from 80,000,000 to 200,000,000 shares. If the
stockholders approve such increase at the Company's Annual Meeting, scheduled
for March 7, 1996, the record date for the split is expected to be March 15,
1996. In addition, the Board of Directors replaced the Company's Shareholder
Rights Plan, which had been adopted in 1986, with a new Shareholder Rights Plan,
which will expire in 2005. The rights under the old plan were redeemed at a
price of $0.05 per share and the rights under the new plan were distributed on
November 24, 1995 to persons who were stockholders at the close of business on
that date.
On September 8, 1995, the quarterly cash dividend paid on shares of Cabot's
Common Stock was increased to $0.18 per share from $0.14 per share. In September
1995, Cabot commenced a program to repurchase up to 3,000,000 shares of its
Common Stock in an effort to reduce the total number of shares of Common Stock
outstanding. Pursuant to that program, Cabot purchased approximately 2,318,000
shares through December 15, 1995. Prior to that program, Cabot had previously
purchased approximately 944,000 shares and options in private and open market
transactions during fiscal 1995 for the purpose of replacing shares issued under
the Company's employee incentive programs.
On July 11, 1995, the Company restructured the ownership of its safety and
specialty composite materials business into a new corporation owned by the
Company, Vestar Equity Partners, L.P. and the management of the newly formed
Cabot Safety Corporation. This transaction yielded approximately $128 million in
after-tax proceeds to the Company. The Company has an approximately 42.5%
ownership position in the new corporation.
Additional information regarding significant events affecting the Company
in its fiscal year ended September 30, 1995, appears in this Report at pages 12
through 21.
SPECIALTY CHEMICALS AND MATERIALS
The Specialty Chemicals and Materials Group manufactures carbon black;
fumed silica; thermoplastic concentrates and specialty compounds; and electronic
materials and refractory metals. The Company also owns an approximately 42.5%
interest in Cabot Safety Corporation, which manufactures and sells personal
safety products and specialty composite materials.
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CARBON BLACK DIVISIONS
The Company's Carbon Black Divisions manufacture and sell carbon black, a
very fine black powder used as a reinforcing agent in tires (tire blacks) and
industrial rubber products such as extruded profiles, hoses and molded goods
(industrial rubber blacks). Non-rubber grades of carbon black, known as special
blacks, are used to provide pigmentation, conductivity and ultraviolet
protection and for other purposes in many specialty applications such as inks,
plastics, cables and coatings. The Company believes that it is the leading
manufacturer of carbon black in the world. It estimates that it has about one
quarter of the worldwide production capacity and market share of carbon black.
The Company competes in the manufacture of carbon black with three companies
having an international presence and with at least 20 other companies in various
regional markets in which it operates (see "General" on pages 3 and 4 of this
Report).
The Company's carbon black business is operated through a matrix of four
regional Divisions, European, North American, Pacific Asia and South American,
and three sectors, industrial rubber blacks, special blacks and tire blacks.
Carbon black plants owned by Cabot or a subsidiary are located in Argentina,
Australia, Brazil, Canada, England, France (two plants), Indonesia, Italy,
Japan, The Netherlands, Spain and the United States (four plants). Affiliates of
the Company own carbon black plants in Colombia, the Czech Republic, India,
Japan (two plants), Malaysia, Mexico, The People's Republic of China and
Venezuela. During fiscal year 1995, an affiliate of the Company closed one of
its carbon black plants in Japan. The Company also announced plans to increase
its carbon black capacity in North America and South America (see Item 2
"Properties" at page 7 of this Report, and Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" at pages 16 and 17 of
this Report). The Company consolidated the operations of its affiliates in the
Czech Republic and India effective October 1, 1995.
The principal raw materials used in the manufacture of carbon black are
carbon black oils derived from petroleum refining operations and from the
distillation of coal tars and the production of ethylene throughout the world.
The availability of raw materials has not been and is not expected to be a
significant factor for the business. Raw material costs are influenced by the
cost and availability of oil worldwide and the availability of various types of
carbon black oils.
Sales are generally made by Company employees in the countries where carbon
black plants are located. Export sales are generally made through distributors
or sales representatives in conjunction with Company employees. Sales are made
under various trademarks owned by Cabot, of which Cabot(R), Black Pearls(R),
Elftex(R), Mogul(R), Monarch(R), Regal(R), Spheron(TM), Sterling(R) and
Vulcan(R) are the best known.
CAB-O-SIL DIVISION
The Company's Cab-O-Sil Division manufactures and sells fumed silica and
dispersions thereof under various trademarks including Cab-O-Sil(R). Fumed
silica is an ultra-fine, high-purity silica produced by a flame process for use
as a reinforcing, thickening, thixotropic, suspending or anti-caking agent in a
wide variety of products for the automotive and construction industries and
consumer industries, including adhesives, cosmetics, inks, lubricants, paints
and pharmaceuticals. The Company also manufactures and sells high-purity
polishing compounds, made from fumed metal oxides and a variety of chemistries,
used in the manufacture of wafers, chips and other electronic devices by the
semiconductor industry. The headquarters of the Cab-O-Sil Division is located in
Aurora, Illinois, and its North American manufacturing plant is located in
Tuscola, Illinois (see Item 2 "Properties" at page 7 of this Report for a
discussion on an additional manufacturing facility planned to be constructed in
Midland, Michigan). A subsidiary of Cabot owns a manufacturing plant in Wales,
and an affiliate of Cabot owns a manufacturing plant in Germany. Raw materials
for the production of fumed silica are various chlorosilane feedstocks. The
feedstocks are either purchased or toll converted for owners of the materials.
The Division has long-term procurement contracts in place which it believes will
enable it to meet its raw material requirements. Sales of fumed silica products
are made by Company employees and through distributors and sales
representatives. There are five principal producers of fumed silica in the world
(see "General" on pages 3 and 4 of this Report). The Company believes it is the
leading producer and seller of this chemical in the United States and second
worldwide.
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PLASTICS DIVISION
The Company's Plastics Division produces black and white thermoplastic
concentrates and specialty compounds for sale to plastic resin producers and the
plastics processing industry. Major applications for these materials include
pipe and tubing, packaging and agricultural film, automotive components, cable
sheathing and special packaging for use in the electronics industry. The
plastics business is operated through four sectors: polymer producers, specialty
compounds, proprietary products in Europe and proprietary products in Asia.
Sales are made by Company employees and through sales representatives and
distributors primarily in Europe and Asia. This business has manufacturing
facilities in Belgium (two plants), England, Hong Kong and Italy. In Europe, the
Company is one of the three leading producers of thermoplastic concentrates. The
main raw materials used in this business are carbon black, titanium dioxide,
thermoplastic resins and mineral fillers. Raw materials are in general readily
available. The Company also operates a small plastics recycling facility in
Belgium.
PERFORMANCE MATERIALS DIVISION
The Cabot Performance Materials Division serves the electronic materials
and refractory metals industries and produces tantalum, niobium (columbium),
niobium titanium, cesium, germanium, rubidium and tellurium and their compounds.
Tantalum is produced in various forms including powder, wire, sheet and foil for
electrolytic capacitors. Tantalum and niobium and their alloys are also produced
in wrought form for non-electronic applications such as chemical process
equipment and the production of superalloys, and for various other industrial,
aerospace and medical applications. Tantalum is also used in ballistic munitions
by the defense industry. The headquarters and the principal manufacturing
facility of this business are in Boyertown, Pennsylvania. Subsidiaries in Canada
hold leasehold interests in land and certain mineral rights with respect to such
land in Manitoba, Canada. (See Item 2 "Properties" at page 7 of this Report for
additional manufacturing facilities planned to be constructed in Boyertown,
Pennsylvania and Manitoba, Canada.) The subsidiaries mine and sell tantalite,
spodumene, lepidolite and pollucite. An affiliate of the Company has a
manufacturing plant in Japan. Raw materials are currently in adequate supply.
The Company is presently seeking new sources of supply to support future demand.
Raw materials are obtained from ores mined principally in Africa, Australia,
Brazil and Canada and from by-product tin slags from tin smelting mainly in
Malaysia and Thailand. Sales in the United States are made by personnel of the
Company with export sales to Europe handled by Company employees and independent
European sales representatives. Sales in Europe are made by an affiliate of the
Company. Sales to Japan and other parts of Asia are handled primarily through
employees of the Company's Japanese affiliate. There are currently three
principal groups producing tantalum and niobium in the western world. The
Company believes that it, together with its Japanese affiliate, is the leading
producer of electronic grade tantalum powder and wire products with competitors
having greater production in some other product lines (see "General" below).
OTHER
The Company maintained an approximately 42.5% ownership interest in Cabot
Safety Corporation, after the restructuring of the Company's safety products and
specialty composites business in July 1995, and has two representatives serving
on the Board of Directors of Cabot Safety Corporation. Cabot Safety Corporation
manufactures and sells personal safety products, as well as energy absorbing,
vibration damping and impact absorbing products for industrial noise control and
environmental enhancement.
GENERAL
The Company owns and is a licensee of various patents, which expire from
time to time, covering many products, processes and product uses of the
Specialty Chemicals and Materials Group. Although the rights of the Company and
the products made and sold under these patents and licenses are important to the
Specialty Chemicals and Materials Group, the loss of any particular patent or
license would not materially affect the businesses of this Group, taken as a
whole. Products of this Group are also sold by the Company under a
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variety of trademarks, the loss of any one of which would similarly not
materially affect the businesses of this Group, taken as a whole.
The Group's businesses are generally not seasonal in nature, although they
experience some decline in sales in the fourth fiscal quarter due to European
holiday plant shutdowns. Backlog orders for the Group believed to be firm as of
September 30, 1995 were approximately $169 million, compared to firm backlog
orders as of September 30, 1994, of approximately $108 million. All of the 1995
backlog orders are expected to be filled during fiscal year 1996.
Six major tire and rubber companies operating worldwide, one special blacks
customer operating in Europe and the United States, and one fumed silica
customer operating in Europe and the United States represent a material portion
of the Group's total net sales and operating revenues; the loss of one or more
of these customers might materially adversely affect the Group. The Cab-O-Sil
Division's largest customer, Dow Corning Corp., filed for protection against its
creditors under the bankruptcy laws in 1995. That filing is not expected to have
a material adverse affect on the Cab-O-Sil Division.
The Company's specialty chemicals and materials are used in many end-uses
associated with the automotive industry such as tires, extruded profiles, hoses,
molded goods, capacitors and paints. The Company's financial results are
affected by the cyclical nature of the automotive industry, although a large
portion of the market is for replacement tires and other parts which are less
subject to automobile industry cycles. During fiscal year 1995, the Company
entered into long-term carbon black supply contracts with certain of its North
American tire customers. These contracts are designed to provide such customers
with a secure supply of carbon black and reduce the volatility in the Company's
carbon black volumes and margins caused, in part, by automobile industry cycles.
Competition exists on the basis of price, service, quality, product
performance and technical innovation in the businesses of this Group.
Competitive conditions in the European market for carbon black were also
affected by sales of carbon black produced in Russia, Hungary and Croatia.
Competitive conditions also result in the need to carry an inventory of raw
materials and finished goods in order to meet the customers' needs for prompt
delivery of products. Competition in quality, service, product performance and
technical innovation is particularly significant for the fumed silica,
industrial rubber blacks, special blacks and tantalum businesses. Competition
affecting the businesses of the non-carbon black parts of the Group comes from
different firms for each product group.
ENERGY
The Company's energy businesses are conducted through two subsidiaries. The
businesses include importing, transporting, terminalling and marketing of
liquefied natural gas (through Cabot LNG Corporation, a wholly-owned subsidiary)
and coal handling and distribution (by TUCO INC., a wholly-owned subsidiary).
The headquarters of these companies are located as follows: Cabot LNG
Corporation, Boston, Massachusetts, and TUCO INC., Amarillo, Texas. The Company
also owns a 15% interest (17% assuming exercise of warrants) in K N Energy, Inc.
("KNE"), a natural gas services and utility company.
LIQUEFIED NATURAL GAS
The Company, through a subsidiary, purchases liquefied natural gas ("LNG")
from Sonatrading, an affiliate of Sonatrach, the Algerian national oil and gas
company, under a long-term and a medium-term supply contract. Cabot and
Sonatrach have each agreed to assure performance of the obligations of their
respective affiliates under these agreements. The LNG is stored and resold in
the northeastern United States from a terminal facility in Everett,
Massachusetts. The Company has received authorizations from the U.S. Department
of Energy to import LNG under the contracts with Sonatrading, as well as blanket
authorization to import LNG from other foreign suppliers on a short-term basis.
The Company has also received authorization from the Federal Energy Regulatory
Commission for sales services. The supply of LNG is currently limited to volumes
contracted for with Sonatrading/Sonatrach.
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In 1993, the Company was notified by Sonatrach that the renovation of
Sonatrach's Algerian LNG production facilities would likely result in a
temporary reduction of LNG deliveries to its customers, including the Company.
The Company expects the curtailment of LNG from its Algerian supplier to
continue through fiscal year 1996. The Company has been able to continue to meet
its firm sales obligations to customers and is exploring additional sources of
supply. The Company is not able to predict, at this time, what, if any, impact
the political instability in Algeria may have on the future supply of LNG from
its Algerian supplier, but to date, no direct adverse effect has been
experienced. The loss of supply from the Algerian supplier could have a material
adverse effect on the business of the Energy Group until additional sources of
supply are obtained.
A consortium of companies consisting of Amoco Trinidad (LNG) B.V., British
Gas Trinidad LNG Limited, Cabot Trinidad LNG Limited ("Cabot Trinidad," a
wholly-owned subsidiary of Cabot LNG Corporation) and NGC Trinidad and Tobago
LNG Limited have formed Atlantic LNG Company of Trinidad and Tobago ("Atlantic
LNG") to construct, own and operate a new LNG plant in the Republic of Trinidad
and Tobago designed to export 385 million cubic feet of natural gas per day in
the form of LNG. Repsol International Finance B.V., a wholly-owned subsidiary of
Repsol S.A., has elected to exercise an option to acquire a shareholding in
Atlantic LNG. Cabot Trinidad owns ten percent of Atlantic LNG. Cabot LNG
Corporation and ENAGAS, S.A., the largest importer and wholesaler of natural gas
in Spain, have entered into sales contracts with Atlantic LNG under which Cabot
LNG will purchase 60% and ENAGAS will purchase the remaining 40% of the LNG to
be produced by Atlantic LNG's new plant. The plant is expected to be completed
and deliveries of LNG to commence in fiscal year 1999. In November 1995, the
Company received authorization from the U.S. Department of Energy to import up
to 100 billion cubic feet of LNG per year from Trinidad and other countries for
a period of 40 years.
In 1992, a subsidiary of the Company entered into a long-term contract with
Nigeria LNG Limited for the supply of LNG from a project to be constructed. Amid
delays in the implementation of the LNG project, the subsidiary did not agree to
extend the contract, and Nigeria LNG Limited has sent notice of termination of
the contract.
COAL HANDLING AND DISTRIBUTION
TUCO INC. ("TUCO") purchases coal mined in Wyoming pursuant to long-term
and short-term (spot) contracts and has it transported by rail to Texas where it
is processed and sold to Southwestern Public Service Company ("SPS") pursuant to
long-term sales contracts for use in generating electricity. The loss of SPS as
a customer of TUCO would have a material adverse effect on the Energy Group. The
supply of coal is regarded as adequate.
In August 1995, the Company entered into an agreement to sell TUCO to SPS
for consideration approximating $77 million. That sale is subject to regulatory
approvals, which are presently being sought.
OTHER
The Company acquired its investment in KNE in connection with the merger of
American Oil and Gas Corporation with a subsidiary of KNE in July 1994. The
Company has reflected its investment in the common stock of KNE at its fair
market value on September 30, 1995.
GENERAL
The Energy Group is not materially dependent upon any patent, trademark or
intellectual property license. Backlog orders are not significant to this Group.
Sales by the coal business are stronger in the summer months because of
electrical demands for air conditioning and agricultural purposes in the Texas
Panhandle area, while sales by the LNG business are stronger in the winter
months because of heating demands in New England. No significant working capital
is required by this Group other than for coal inventories.
Price competition characterizes the markets served by the LNG business. The
Group has numerous competitors including natural gas suppliers and suppliers of
alternative fuels.
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OTHER INFORMATION
EMPLOYEES
As of September 30, 1995, the Company had approximately 4,100 employees.
Approximately 600 employees in the United States are covered by collective
bargaining agreements. The Company believes that its relations with its
employees are satisfactory.
RESEARCH AND DEVELOPMENT
The Company's Specialty Chemicals and Materials Group develops new and
improved products and processes and greater operating efficiencies through
Company-sponsored research and technical service activities including those
initiated in response to customer requests. Expenditures by the Company for such
activities are shown on page F-1 of this Report.
ENVIRONMENT, SAFETY AND HEALTH
The Company's operations are subject to various environmental laws and
regulations. Over the past several years, the Company has expended considerable
sums to add, improve, maintain and operate facilities for environmental
protection. Expenditures for equipment or facilities intended solely for
environmental protection are estimated to have been approximately $6 million in
fiscal year 1995 and are expected not to exceed $30 million in fiscal year 1996.
Expenditures of at least $65 million in the aggregate for such equipment and
facilities are forecast to be spent in fiscal years 1996, 1997 and 1998 to
enable Cabot's U.S. plants to comply with the Clean Air Act.
The Company has been named as a potentially responsible party under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(the "Superfund law") with respect to several sites (see Item 3, "Legal
Proceedings," on pages 7 through 9 of this Report for a description of various
environmental proceedings). During the next several years, as remediation for
various environmental sites is carried out, the Company expects to spend a
significant portion of its $51.6 million environmental reserve for costs
associated with such remediation. Additions are made to the reserve based on the
Company's continuing analysis of its share of costs likely to be incurred at
each site. The sites are primarily associated with divested businesses.
In October 1995, a working group of the International Agency for Research
on Cancer ("IARC") recommended that IARC's classifications of carbon black be
changed from Category 3 (insufficient evidence to make a determination regarding
carcinogenicity) to Category 2B (known animal carcinogen, possible human
carcinogen), based on results of studies of rat inhalation of carbon black. The
Company has communicated this recommended change in IARC classification to its
customers and employees. If the working group's recommendation is confirmed by
IARC's director, the Company will make changes to its material safety data
sheets and elsewhere, as appropriate. The Company continues to believe that
available evidence, taken as a whole, indicates that carbon black is not
carcinogenic to humans, and does not present a health hazard when handled in
accordance with good housekeeping and safe workplace practices as described in
the Company's material safety data sheets.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Industry segment financial data are set forth in tables on pages 15 and
F-19 and F-20 of this Report. A significant portion of the Company's revenues
and operating profits is derived from overseas operations. The profitability of
the Specialty Chemicals and Materials businesses is affected by fluctuations in
the value of the U.S. dollar relative to foreign currencies. The Company's
overseas operations do not currently include any energy-related businesses. (See
Note N of the Notes to Consolidated Financial Statements for further information
relating to sales and profits by geographic area, on pages F-19 and F-20 of this
Report, and Management's Discussion and Analysis of Financial Condition and
Results of Operations, appearing in Item 7 on pages 12 through 21 of this
Report.) Currency fluctuations and nationalization and expropriation of assets
are risks inherent in international operations. The Company has taken steps it
deems prudent in its
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international operations to diversify and otherwise to protect against these
risks, including the purchase of forward foreign currency contracts and options
to reduce the risk associated with changes in the value of certain foreign
currencies compared to the U.S. dollar.
ITEM 2. PROPERTIES
The Company owns, operates and leases office, manufacturing, production,
terminalling, storage, marketing and research and development facilities in the
United States and in foreign countries.
The principal facilities of the Company's business units are described
generally in Item 1 above.
The principal facilities owned by the Company in the United States are: (i)
the administrative offices and manufacturing plants of its carbon black
operations in Louisiana, Massachusetts, Texas and West Virginia (comprising
approximately 84,800 square yards); (ii) its research and development facilities
in Illinois, Massachusetts, Pennsylvania and Texas and its applications
development facility in Georgia (comprising approximately 24,700 square yards);
(iii) administrative offices and manufacturing plants of its Cab-O-Sil and Cabot
Performance Materials business units in Illinois and Pennsylvania (comprising
approximately 56,400 square yards); and (iv) its LNG terminalling and storage
facility in Massachusetts (comprising approximately 3,250 square yards).
Portions of plants in Louisiana referred to above are constructed on long-term
ground leases.
The Company's principal foreign facilities are owned by subsidiaries and
together they comprise approximately 433,600 square yards of manufacturing
facilities, 3,900 square yards of research and development facilities, and
63,500 square yards of administrative facilities.
The principal facilities leased by the Company in the United States are its
corporate headquarters and the administrative offices of the LNG companies in
Boston, Massachusetts, the carbon black operations in Georgia and the
administrative offices of the Cabot Performance Materials business in
Pennsylvania (comprising approximately 17,900 square yards).
The principal facilities leased by subsidiaries in locations outside of the
United States are the administrative offices and manufacturing facilities of the
carbon black operations in France and Spain and the Plastics business in Belgium
as well as the leasehold interests of the Cabot Performance Materials business
in Canada (comprising approximately 89,000 square yards).
The Company's administrative offices are generally suitable and adequate
for their intended purposes, except that additional administrative offices are
planned at the Company's research and development facility in Billerica,
Massachusetts. Existing manufacturing facilities of the Company are not
sufficient to meet the Company's increased requirements for the future and are
being supplemented by additional production facilities in several locations in
the U.S. and outside the U.S. A new plant to produce fumed silica is planned to
be constructed in Midland, Michigan; projects to expand carbon black production
capacity are being undertaken in North America, South America and Indonesia; a
slurry manufacturing facility, together with laboratory space, is under
construction in Aurora, Illinois; projects to expand tantalum powder and wire
capacity are being undertaken in Boyertown, Pennsylvania; and a cesium formate
plant is planned for Manitoba, Canada.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits and environmental
proceedings wherein substantial amounts are claimed. The following is a
description of the significant proceedings pending as of September 30, 1995:
Environmental Proceedings
In 1994, Cabot and the State of Florida signed a settlement of a 1983 state
court lawsuit requiring Cabot to pay the State $650,000 in past costs associated
with a site in Gainesville, Florida. The site included a parcel of land on which
Cabot previously owned and operated a pine tar distillation plant. In 1995,
Cabot completed
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installation of a groundwater collection system and removed the contaminated
soil from an old coal tar lagoon near its former property. Cabot has filed a
cost recovery suit against other responsible parties at the site seeking
reimbursement of their share of response costs.
In April 1985, Cabot and five other companies entered into a consent order
with the U.S. Environmental Protection Agency ("EPA") under the Superfund law to
perform a remedial investigation and feasibility study with respect to the King
of Prussia Technical Corp. site in Winslow Township, New Jersey. A Record of
Decision ("ROD") was issued by the EPA specifying a combination of remedial
actions for the site at an estimated cost of almost $15 million. The EPA issued
an administrative order directing Cabot and four other companies to design and
complete the remedial measures; most of the work on site remediation has been
completed. Cabot and the other companies involved have reached a tentative
agreement on the portions of the costs to be borne by each company.
Beginning in May 1986, the Department of Environmental Protection of the
State of New Jersey ("NJDEP") issued directives under the New Jersey Spill
Compensation and Control Act to Cabot and other potentially responsible parties
("PRPs") to fund a remedial investigation for the cleanup of hazardous waste at
the Old Bridge Township landfill near Perth Amboy, New Jersey. Cabot and other
parties contributed funds for a remedial investigation and feasibility study
which was conducted by a consultant to the NJDEP. In September 1992, the EPA
issued a ROD specifying certain remedial actions and indicating that a second
ROD would be issued following further study. Preliminary action on the first ROD
has been taken by the NJDEP. A group of companies, including Cabot, has reached
a tentative agreement with the NJDEP to perform an additional study of the site
and to handle minor remedial work. Until the study is complete, it will not be
possible to identify what the remediation costs for this site will be or what
Cabot's portion of such costs will be.
In 1989, the United States filed a claim in the U.S. District Court for the
Eastern District of Pennsylvania against 18 defendants under the Superfund law
for recovery of the EPA's cleanup costs at Moyer's Landfill in Collegeville,
Pennsylvania, estimated to be $48 million. For several years, Moyer's Landfill
was used for the disposal of municipal and industrial wastes by numerous
parties, including Cabot. More than 100 additional parties, including Cabot,
were brought into the litigation by means of a third-party complaint. Recently,
the EPA reached settlements in principle with certain parties, including Cabot,
and settlement documents are now being completed.
In 1989 and 1990, respectively, Cabot completed a remedial investigation
and feasibility study of its former beryllium processing plant in Hazleton,
Pennsylvania, and submitted the study to the Pennsylvania Department of
Environmental Resources ("DER"). An environmental consultant retained by Cabot
has designed and implemented certain of the remedial measures described in the
study. In April 1991, the DER issued a wastewater discharge permit to Cabot but
included certain limitations to which Cabot objected by filing an appeal with
the Pennsylvania Environmental Hearing Board. In August 1993, DER and Cabot
resolved the issues on appeal in a manner satisfactory to both parties and the
appeal was withdrawn. Source control remediation efforts by Cabot are continuing
and are scheduled for completion in late 1996.
Cabot is one of approximately 25 parties identified by the EPA as PRPs
under the Superfund law with respect to the cleanup of Fields Brook (the
"Brook"), a tributary of the Ashtabula River in northeastern Ohio. From 1963 to
1972, Cabot owned two manufacturing facilities located beside the Brook. The EPA
has specified a remedy for the site but continues to assess the condition of the
Brook. Cleanup is expected to begin in 1997 or 1998. Pursuant to an EPA
administrative order, 15 companies, including Cabot, are performing the design
and other preliminary work relating to sediment cleanup. Concurrently, the
companies and the EPA are evaluating remedial alternatives for the floodplain
and wetlands areas adjacent to the Brook. The EPA has not selected the remedy
for these areas. Consequently, it is not possible to determine future remedial
costs for the floodplain and wetlands. The EPA's cost recovery claims through
the end of 1989 have been settled; the companies, including Cabot, that have
paid for work at the site are seeking to recover a share of those costs from
other responsible parties. At one of the plants formerly operated by Cabot, two
subsequent owners are working with Cabot in evaluating site conditions and
potential remedies. The EPA has not selected the remedy for this plant site or
any other plant along the Brook; it is not possible at this time to determine
future
8
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remedial costs or Cabot's share of those costs. The State of Ohio has also
notified Cabot and several other companies that it will seek damages for injury
to natural resources at the Brook. Cabot is also participating in arbitration
proceedings with succeeding plant owners regarding costs associated with
remediation of the Brook and the plant site.
In 1994, Detrex Chemical Industries, Inc. filed third-party complaints
against eight companies, including Cabot, in connection with material allegedly
sent to the Koski/RES landfill in Ashtabula, Ohio. Cabot and other third-party
defendants filed complaints against five additional companies that sent waste to
the site. It is not possible at this time to determine future remedial costs or
Cabot's share, if any, of such costs.
In 1994, five plaintiffs filed suit in the U.S. District Court for the
Eastern District of Pennsylvania against 18 defendants, including Cabot, under
the Superfund law and State law seeking recovery of remediation costs at the
Berks Landfill site, which is located in the vicinity of Reading, Pennsylvania.
The plaintiffs claim that a beryllium alloy plant formerly owned by Cabot and
located in Reading, Pennsylvania sent waste to the Berks Landfill. The EPA has
not selected a remedy for the site. It is not possible at this time to determine
future remedial costs or the amount of those costs which Cabot may share with
the current owner.
In 1994, the EPA issued a Unilateral Administrative Order to Cabot and 11
other respondents pursuant to the Superfund law with respect to the Revere
Chemical Site (a/k/a Echo Site) in Nockamixon Township, Bucks County,
Pennsylvania (the "Revere Site"). The Order requires the respondents to design
and implement several remedial measures at the Revere Site, estimated to cost
approximately $15 million. Cabot's portion of that cost, if any, has not yet
been determined. Cabot has responded to the EPA's Order by indicating that it
should not have been named as a respondent and by raising several objections to
the Order.
Cabot has received various requests for information and notifications that
it may be a PRP at several other Superfund sites.
As of September 30, 1995, approximately $51.6 million was accrued for
environmental matters by the Company. The amount represents the Company's
current best estimate of its share of costs likely to be incurred based on its
analysis of the extent of cleanup required, alternative cleanup methods
available, abilities of other responsible parties to contribute and its
interpretation of laws and regulations applicable to each site.
Breast Implant Litigation
Fumed silica supplied by Cabot was used by others in the manufacture of
silicone breast implant envelopes. There are currently pending more than 10,000
lawsuits in state and federal courts alleging injuries against various parties
arising from the use of silicone breast implants. Cabot had been named as a
defendant in fewer than 100 breast implant lawsuits. As a result of voluntary
dismissals (some without prejudice to the right of the plaintiff to refile a
complaint) and summary judgments granted to Cabot, Cabot is currently a
defendant in only one such lawsuit. Cabot has not made any settlement payments
in connection with any breast implant suits. Cabot believes that it has adequate
defenses in the lawsuit in which it is known to be a defendant. However, the
scientific, legal and societal issues raised by these cases are complex and the
outcome is uncertain. Cabot, therefore, cannot predict with any assurance the
course this lawsuit will take, the number of cases to which Cabot will be added
as a defendant, the amount of damages, if any, that may be assessed against
Cabot or the defense costs that will be incurred by Cabot.
Other Proceedings
Cabot has been named as one of many defendants in a lawsuit, now pending in
the U.S. District Court in Oklahoma, brought by a large group of plaintiffs
claiming personal injury due to exposure to and contact with certain chemicals
and materials allegedly manufactured by the defendants. Plaintiffs seek actual
and punitive damages against all defendants, jointly and severally, in the
aggregate amount of $1.25 billion. Cabot has reached a settlement agreement with
the plaintiffs, pursuant to which it will pay a nominal amount in settlement of
all claims against Cabot.
The Company has various other lawsuits, claims and contingent liabilities
arising in the ordinary course of its business. In the opinion of the Company,
although final disposition of all of its suits and claims may impact
9
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the Company's financial statements in a particular period, it should not, in the
aggregate, have a material adverse effect on the Company's financial position.
(See Note L of the Notes to the Company's Consolidated Financial Statements on
pages F-17 and F-18 of this Report).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below, as of November 30, 1995, for each executive officer of
Cabot is information regarding his age, position(s) with Cabot, the periods
during which he served as an officer and his business experience during at least
the past five years:
OFFICES HELD/BUSINESS
NAME AGE EXPERIENCE DATES HELD
- ---- --- --------------------- ----------
Samuel W. Bodman.... 57 Cabot Corporation
Chairman of the Board October 1988 to present
President February 1991 to February 1995
January 1987 to October 1988
Chief Executive Officer February 1988 to present
Kennett F. Burnes... 52 Cabot Corporation
President February 1995 to present
Executive Vice President October 1988 to February 1995
Kenyon C. Gilson.... 51 Cabot Corporation
Chief Financial Officer October 1995 to present
Vice President August 1989 to present
Paul J. Gormisky.... 42 Cabot Corporation
Controller April 1995 to present
Vice President February 1994 to present
Director of Finance,
Carbon Black May 1993 to April 1995
Director of Corporate
Planning May 1990 to May 1993
Robert Rothberg..... 46 Cabot Corporation
Vice President and
General Counsel October 1993 to present
Choate, Hall & Stewart
(law firm), Partner January 1982 to October 1993
10
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- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Cabot's common stock is listed for trading (symbol CBT) on the New York,
Boston and Pacific Stock Exchanges. As of September 30, 1995, there were
approximately 2,100 holders of record of Cabot's common stock. The price range
in which the stock has traded, as reported on the composite tape, and the
quarterly cash dividends for the past two fiscal years are shown below, restated
to reflect a two-for-one stock split in August 1994.
STOCK PRICE AND DIVIDEND DATA
DECEMBER MARCH JUNE SEPTEMBER YEAR
-------- ------- ------ --------- ------
FISCAL 1995
Cash dividends per share........................... $ 0.14 $ 0.14 $ 0.14 $ 0.18 $ 0.60
Price range of common stock:
High............................................. $28.75 $37.13 $52.75 $57.88 $57.88
Low.............................................. $25.63 $28.13 $36.88 $48.13 $25.63
Close............................................ $28.38 $36.88 $52.75 $53.13 $53.13
DECEMBER MARCH JUNE SEPTEMBER YEAR
-------- ------- ------ --------- ------
FISCAL 1994
Cash dividends per share........................... $ 0.13 $ 0.13 $ 0.13 $ 0.14 $ 0.53
Price range of common stock:
High............................................. $29.19 $28.00 $26.63 $28.38 $29.19
Low.............................................. $26.13 $25.56 $24.44 $25.13 $24.44
Close............................................ $26.94 $27.00 $25.56 $27.25 $27.25
ITEM 6. SELECTED FINANCIAL DATA
Cabot Corporation Selected Financial Data:
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Financial Highlights
Net sales and other operating
revenues from continuing
operations.................... $1,830,393 $1,679,819 $1,614,315 $1,556,986 $1,482,089
---------- ---------- ---------- ---------- ----------
Income from continuing
operations.................... $ 171,932 $ 78,691 $ 37,410 $ 62,223 $ 39,825
---------- ---------- ---------- ---------- ----------
Long-term debt................... $ 306,443 $ 307,828 $ 459,275 $ 479,882 $ 369,609
Minority interest................ $ -- $ -- $ -- $ 9,756 $ --
Stockholders' equity............. $ 685,000 $ 562,489 $ 442,273 $ 492,955 $ 426,863
---------- ---------- ---------- ---------- ----------
Total capitalization.......... $ 991,443 $ 870,317 $ 901,548 $ 982,593 $ 796,472
---------- ---------- ---------- ---------- ----------
Total assets....................... $1,654,333 $1,616,756 $1,489,473 $1,554,529 $1,462,396
---------- ---------- ---------- ---------- ----------
Per Share:
Income from continuing
operations.................... $ 4.35 $ 1.96 $ 0.90(a) $ 1.59 $ 0.85
Net income....................... $ 4.35 $ 1.96 $ 0.20(b) $ 1.59 $ 2.90
Cash dividends................... $ 0.60 $ 0.53 $ 0.52 $ 0.52 $ 0.52
---------- ---------- ---------- ---------- ----------
Average shares outstanding --
thousands........................ 38,726 38,249 37,438 36,802 42,556
- ---------------
(a) Includes charge of $0.83 per share for the restructuring of the Company's
Specialty Chemicals and Materials businesses and a favorable energy accrual
adjustment of $0.23 per share. (see Item 7 of this Report)
(b) Includes a charge of $0.70 per share for the cumulative effect of required
accounting changes. (see Item 7 of this Report)
11
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Building on global economic strength that began in late 1994, Cabot
achieved strong financial results in each of its specialty chemicals businesses,
and in each of the four geographic regions in which it operates. Cabot had
earnings from continuing operations of $171.9 million ($4.35 per common share),
more than doubling 1994 earnings. Operating profit increased 63% in 1995 to
$299.5 million. The increase was primarily due to margin improvement and higher
volumes in the Specialty Chemicals and Materials Group.
The following analysis of financial condition and operating results should
be read in conjunction with the Company's Consolidated Financial Statements and
accompanying Notes.
RESULTS OF OPERATIONS
Net sales and other operating revenues increased 9% in 1995 over 1994,
compared to a gain of 4% in 1994 over 1993. The improvement came from the
Specialty Chemicals and Materials Group. Sales benefited from strong global
economies and strength in the automotive and tire markets. Europe realized the
most significant improvement over 1994. Demand for Cabot products was
exceptional. Price increases in many businesses further enhanced sales. In the
Energy Group, the Company's liquefied natural gas (LNG) business experienced
sales declines as a result of a low level of supplies of LNG due to the
refurbishment of the liquefaction facilities of the Company's Algerian supplier.
Revenues
Specialty Chemicals and Materials vs. Energy ($ millions)
[BAR GRAPH] 91 92 93 94 95
- -------------------------------------------------------------------------------
Specialty Chemicals & Materials $1,129 $1,181 $1,192 $1,241 $1,488
- -------------------------------------------------------------------------------
Energy $ 354 $ 376 $ 423 $ 439 $ 343
- -------------------------------------------------------------------------------
The 4% increase in the Company's net sales and other operating revenues in
1994 versus 1993 included improvement in both the Specialty Chemicals and
Materials Group and the Energy Group. The Specialty Chemicals and Materials
Group benefited from improving economies in several parts of the world,
particularly in North and South America, and the resulting improvement in the
tire and automotive industries. In the Energy Group, revenue gains from 1994
over 1993 were mostly due to the Company's LNG business, which benefited from an
unusually cold winter in the northeastern United States, prompting increased
demand and higher natural gas prices.
The Company has announced plans to add capacity to its North American tire
blacks business as a result of entering into long-term supply contracts with
certain tire customers. The Company has also announced plans to add capacity to
its South American carbon black operations and to build a new North American
fumed silica plant.
Cost of sales as a percentage of net sales improved in 1995 to 69%, from
73% in 1994, and 75% in 1993. The decrease in 1995 results from better pricing
and higher capacity utilization in many of the Company's Specialty Chemicals and
Materials businesses, more than offsetting higher material costs. The
improvement in 1994 was mainly due to better capacity utilization and lower
material costs.
Selling, research, and administrative expenses increased 9%, or $23
million, in 1995 versus an increase of 8%, or $20 million, in 1994. The 1995
increase is largely a result of additional research and development dedicated to
developing new, higher value products and processes, higher incentive
compensation and additional selling expenses associated with increased volumes.
These increases were partially offset by reduced
12
14
expenses in the Company's safety products and specialty composites business as a
result of the July 1995 ownership restructuring. The 1994 increase relates to
increased investment in systems and marketing development, increased incentive
compensation and additional research and development as cited above.
OPERATING PROFIT
Operating profit was $299.5 million in 1995, $184.3 million in 1994, and
$118.4 million in 1993. Operating profit in 1993 included a $47.4 million
restructuring charge to rationalize European production capacity. Operating
margins as a percentage of sales were 16% in 1995, 11% in 1994, and 10% before
the restructuring charge in 1993.
Operating profit increased 63% in 1995 over 1994 as a result of significant
improvement in the Specialty Chemicals and Materials Group, slightly dampened by
declines in the Energy Group.
Operating Margins
Specialty Chemicals and Materials
(percent)
[BAR GRAPH] 91 92 93* 94 95
- --------------------------------------------------------------------------------
Operating Margins 9.1% 13.1% 8.5% 13.4% 19.3%
- --------------------------------------------------------------------------------
* includes $47.4 million restructuring charge.
The most significant increases in operating profit were seen in the
Company's European Specialty Chemicals businesses, as the full effect of
economic recovery in that region was realized. In addition, better pricing
conditions, improved product mix and higher capacity utilization significantly
improved margins in all Specialty Chemicals businesses.
In the Energy Group, operating profit in fiscal year 1995 was down
primarily due to reduced supplies of LNG in the Company's LNG business.
Included in 1994 operating profit was a $4.0 million reversal of the 1993
Specialty Chemicals and Materials Group restructuring charge based on lower
actual costs incurred during the closing of a carbon black plant in Europe. Also
during 1994, a $6.2 million charge was taken to write off the Company's
investment in its Japanese carbon black affiliate as a result of significant
ongoing losses.
OTHER EXPENSES
Interest expense for 1995, 1994 and 1993 was $35.6 million, $41.7 million
and $44.0 million, respectively. The decrease in 1995 is primarily due to lower
average total debt and the results of refinancing fixed-rate, high coupon debt
with short-term floating-rate debt at lower interest rates during the year. The
improvement in 1994 was attributable to lower average debt than in 1993.
Unallocated corporate expenses were $27.7 million in 1995 as compared with
$23.4 million in 1994 and $20.7 million in 1993. Increases resulted from higher
incentive compensation and environmental expenses, partially offset by higher
interest and dividend income. Except for these items, unallocated corporate
expenses have been relatively flat from 1993 to 1995.
"Adjustments of reserves related to divested businesses" includes charges
related to environmental matters of $12.5 million in 1995 and $11.0 million in
1994. These adjustments are based on the Company's
13
15
estimates of additional costs likely to be incurred at various environmental
sites. The Company is now in the implementation stage of remediation on certain
sites, and its ability to accurately estimate its share of those costs has
improved significantly. In 1994, the Company also reversed $10.2 million of
energy reserves based on the settlement of a significant case during that year.
This compares to a $14.2 million reversal of energy reserves in 1993.
PROVISION FOR INCOME TAXES
The effective tax rates on income from continuing operations were 39% in
1995, 38% in 1994 and 44% in 1993. The increased tax rate in 1995 resulted from
the sale of a majority interest in the Company's safety business. The Company's
fiscal year 1995 effective tax rate would have been 37% without that
transaction. A more detailed analysis of income taxes is presented in Note K to
the Consolidated Financial Statements.
NET INCOME
Reported income in 1995 was $171.9 million ($4.35 per common share),
compared with $78.7 million ($1.96 per common share) in 1994, and $37.4 million
($0.90 per common share) before accounting changes in 1993. Income in 1995
includes a before-tax gain of $32.6 million ($0.37 per common share) associated
with the sale of a majority interest of Cabot Safety Corporation, and a
before-tax charge of $12.5 million ($0.20 per common share) due to an additional
adjustment in environmental reserves. Income in 1994 included a $10.2 million
($0.16 per common share) gain due to the reversal of energy reserves and an
$11.0 million ($0.18 per common share) expense due to an additional adjustment
in environmental reserves. Income in 1993 included a $47.4 million before-tax
restructuring charge, a $14.2 million before-tax favorable energy reserve
adjustment and a $26.1 million after-tax charge for required accounting changes.
Without these adjustments, income from operations would have been $165.3 million
($4.18 per common share) in 1995, $79.2 million ($1.98 per common share) in
1994, and $59.8 million ($1.50 per common share) in 1993.
SPECIALTY CHEMICALS AND MATERIALS GROUP
The Specialty Chemicals and Materials Group includes the Company's global
specialty chemicals operations. These operations manufacture carbon black, a
very fine black powder used as a reinforcing agent in tires and most industrial
rubber products, and also widely used as an agent in many specialty applications
such as inks, plastics, cables and coatings; fumed silica, a specialty chemical
used as a thickening, dispersing and reinforcing agent in hundreds of products
such as silicone rubber and polyester resins; thermoplastic concentrates and
specialty compounds; and tantalum capacitor materials and other metals and
alloys for the semiconductor, aerospace, defense and medical markets. On July
11, 1995, the Company restructured the ownership of its safety products and
specialty composites business into a new corporation owned by the Company,
Vestar Partners and Cabot Safety management. Effective with the restructuring,
the Company's interest in the results of the new corporation is reflected in
"Equity in net income of affiliated companies."
Sales for the Specialty Chemicals and Materials Group were up 20% in 1995
and 4% in 1994. All businesses reported double-digit revenue growth in 1995
versus 1994. Each of the four geographic regions had increased sales. Most
notable was a 41% increase in European revenues, reflecting the economic
recovery in that region. Sales growth for the Group was driven by an overall 10%
increase in volumes, most of which occurred during the first half of the year,
and much improved pricing in many businesses. Sales growth in 1994 was primarily
driven by volume improvement and economic recovery in North and South America.
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SELECTED FINANCIAL DATA BY INDUSTRY SEGMENT
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
NET SALES AND OTHER OPERATING REVENUES
Specialty Chemicals and Materials...... $1,487.8 $1,241.1 $1,191.8 $1,181.0 $1,128.6
Energy................................. 342.6 438.7 422.5 376.0 353.5
-------- -------- -------- -------- --------
Net sales and other operating
revenues................... $1,830.4 $1,679.8 $1,614.3 $1,557.0 $1,482.1
======== ======== ======== ======== ========
OPERATING PROFIT
Specialty Chemicals and Materials(a)... $ 286.8 $ 165.9 $ 101.7 $ 155.0 $ 103.2
Energy................................. 12.7 18.4 16.7 18.2 9.5
-------- -------- -------- -------- --------
Total operating profit....... 299.5 184.3 118.4 173.2 112.7
-------- -------- -------- -------- --------
Interest expense....................... 35.6 41.7 44.0 41.7 38.6
Unallocated corporate expenses, net(b). 27.7 23.4 20.7 14.9 11.7
Gain on sale of safety business........ (32.6) -- -- -- --
Adjustment of reserves related to
divested businesses.................. 12.5 0.8 (14.2) -- --
-------- -------- -------- -------- --------
Income from continuing
operations before income
taxes...................... $ 256.3 $ 118.4 $ 67.9 $ 116.6 $ 62.4
======== ======== ======== ======== ========
DEPRECIATION AND AMORTIZATION
Specialty Chemicals and Materials...... $ 91.2 $ 83.3 $ 81.5 $ 80.5 $ 70.8
Energy................................. 2.8 2.8 2.8 2.7 17.9
General corporate...................... 0.2 0.2 0.2 0.9 0.5
-------- -------- -------- -------- --------
Total........................ $ 94.2 $ 86.3 $ 84.5 $ 84.1 $ 89.2
======== ======== ======== ======== ========
FIXED ASSET ADDITIONS
Specialty Chemicals and Materials...... $ 130.4 $ 70.7 $ 63.9 $ 76.5 $ 138.0
Energy................................. 0.8 2.9 0.7 1.3 59.4
General corporate...................... -- -- 0.4 0.3 0.6
-------- -------- -------- -------- --------
Total........................ $ 131.2 $ 73.6 $ 65.0 $ 78.1 $ 198.0
======== ======== ======== ======== ========
IDENTIFIABLE ASSETS
Specialty Chemicals and Materials...... $1,167.9 $1,172.2 $1,117.4 $1,191.2 $1,059.6
Energy................................. 133.8 127.4 116.1 132.6 159.4
General corporate(c)................... 253.7 231.0 89.3 79.9 83.5
Equity in affiliates -- Specialty
Chemicals and Materials.............. 98.9 86.2 103.1 91.0 100.1
Equity in affiliates -- Energy......... -- -- 63.6 59.8 59.8
-------- -------- -------- -------- --------
Total........................ $1,654.3 $1,616.8 $1,489.5 $1,554.5 $1,462.4
======== ======== ======== ======== ========
- ---------------
(a) Includes a $47.4 restructuring charge in 1993.
(b) Unallocated corporate expenses, net, include corporate management costs
reduced by investment income.
(c) General corporate assets include cash, temporary cash investments,
investments other than equity basis, income taxes receivable, deferred taxes
and headquarters' assets.
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Specialty Chemicals and Materials Revenues
by Geographic Region (percent)
1994 [PIE CHART]
------------------------------------------
Pacific Asia 17%
------------------------------------------
North America 40%
------------------------------------------
Europe 35%
------------------------------------------
South America 8%
------------------------------------------
1995 [PIE CHART]
------------------------------------------
Pacific Asia 16%
------------------------------------------
North America 37%
------------------------------------------
Europe 39%
------------------------------------------
South America 8%
------------------------------------------
Revenues include 100% of equity affiliate sales
revenues. Region reflects sales destination point.
In 1995, 63% of Specialty Chemicals and Materials sales made by the Company
and its affiliates were to customers outside North America, compared with 60% in
1994, and 62% in 1993.
Operating profit for the Specialty Chemicals and Materials Group grew 73%,
or $120.9 million, in 1995 over 1994, compared to an increase of 63%, or $64.2
million, in 1994 over 1993. Operating profit in 1993 included a restructuring
charge of $47.4 million. Before this restructuring charge, operating profit grew
11%, or $16.8 million, in 1994 from 1993. In 1995, significantly stronger
pricing, volume growth, higher capacity utilization and an improved product mix
all contributed to the substantial margin improvement. The Company also received
a significant benefit from favorable currency translations, especially versus
European currencies, due to the relative weakness of the dollar. The improvement
in 1994 was a result of volume growth and improved product mix.
Financial results from affiliates are reported in the income statement as
"Equity in net income of affiliated companies." In 1995, equity in net income of
affiliates was $16.7 million, compared with $5.3 million in 1994. The
significant improvement is due to contributions from the new carbon black plant
in the Czech Republic that began operation in late 1994, improved earnings in
the Company's Mexican carbon black affiliate and the absence of losses from the
Company's Japanese carbon black affiliate, the investment in which was written
off in the third quarter of 1994.
The Company is the world's only global manufacturer of carbon black. In
1995, 66% of carbon black volumes sold by the Company and its affiliates were to
customers outside North America, compared with 65% in 1994 and 67% in 1993.
Carbon black is manufactured on five continents in 25 plants in 19 countries.
Many carbon black facilities are wholly owned by the Company, while others are
affiliates managed by the Company or by local partners in the specific regions.
The Carbon Black Divisions serve three main market sectors, and each is affected
in varying degrees by fluctuating economic conditions. Sales to tire
manufacturers represent the largest percentage of carbon black volumes. This
sector is dependent on both new automobile tire sales and, to a greater degree,
the replacement tire market. The makers of industrial rubber products, such as
hoses and gaskets, represent a second market for carbon black. The third market
is made up of manufacturers of inks and other specialty applications that use
very high grade carbon blacks.
During 1995, the Company entered into long-term carbon black supply
agreements of more than six years with several of its tire customers in North
America. The contracts are designed to share the Company's investment risks with
customers, which, in turn, will allow Cabot to provide a secure carbon black
supply to its contract customers and reduce the volatility of the Company's
carbon black margins and earnings. These contracts, coupled with the Company's
long-term strategy of product differentiation, are aimed at building a less
cyclical carbon black business and reducing the Company's susceptibility to
economic cycles. In conjunction with the signing of these contracts, the Company
announced plans to add manufacturing capacity to its North American tire black
business in order to meet the increasing supply obligations outlined in the
contracts. In addition, the Company announced plans to add tire black capacity
to its South American carbon
16
18
black operations to meet growing demand in that region. The Company expects to
invest approximately $230 million in these two expansion programs and in
equipment and facilities designed to meet Clean Air Act requirements. The
Company's previously announced carbon black expansion in Indonesia is expected
to be completed in 1996.
The Carbon Black Divisions' total sales for 1995 increased significantly
compared to a moderate increase in 1994. Each of the four geographic regions had
revenue increases of more than 15%. The increase resulted from continued
strength in the North and South American tire and automotive industries, the
effect of a full year's economic recovery in Europe, and growing economies in
the Pacific Asian region. During most of 1995, worldwide carbon black
manufacturing capacity was extremely tight. Prices, most notably in North
America, and margins increased during the year. Operating profit reflected the
improved prices that more than offset higher raw material costs. The Divisions
expect the strong performance to continue into 1996 although economic slowdowns
could inhibit further growth.
Carbon Black Sales Volumes
by Geographic Region (percent)
1994 [PIE CHART]
-------------------------------------
Pacific Asia 22%
-------------------------------------
North America 35%
-------------------------------------
Europe 30%
-------------------------------------
South America 13%
-------------------------------------
1995 [PIE CHART]
-------------------------------------
Pacific Asia 21%
-------------------------------------
North America 34%
-------------------------------------
Europe 32%
-------------------------------------
South America 13%
-------------------------------------
Volumes include 100% of equity affiliates sales
volumes. Region reflects sales destination point.
In 1994, the moderate increase in carbon black sales was due to the
improved North and South American tire and automotive industries, and the
beginning of a recovery in the European economy during the second half of the
year.
The Cab-O-Sil Division reported a 19% revenue gain in 1995 compared to
1994, with improvement in both North America and Europe. Operating profit also
increased significantly in 1995, reflecting modest volume growth, improved
product mix and favorable margins from better pricing and higher capacity
utilization. The Division expects continued growth in 1996. In 1994, the
Division reported significant improvements in profitability due to strong volume
growth, cost management and higher capacity utilization. During 1995, the
Company purchased certain assets of the Rippey Corporation related to the sale
and distribution of high-purity polishing compounds in an effort to further
expand the rapidly developing semiconductor segment of the business. The Company
also announced plans to build a new fumed silica plant in Midland, Michigan, to
meet the growing demand for new and differentiated silica products. The new
plant is estimated to cost $50 million, and is expected to begin commercial
operation in the first quarter of 1999.
In the Plastics Division, both revenues and operating profit were up
significantly in 1995 compared with 1994. Market conditions that began to
improve in late 1994 continued improving into 1995, enabling the Division to
improve margins through higher pricing and an improved product mix. Overall
volumes for the Division were down slightly year-over-year, reflecting some
softening in Europe late in 1995. The Company expects the volume softness to
carry into the early part of fiscal 1996 with some pricing pressure. In 1994,
the Division's operating profit grew moderately as a result of careful cost
management and restructuring initiatives undertaken in 1993, as well as
improving economic conditions in Europe.
Cabot Performance Materials reported a 15% increase in revenues and a
similar increase in profits in 1995 versus 1994. The improved results reflect
the continued strong performance of the tantalum capacitor business, partially
offset by continued operating problems, primarily related to yield and
throughput. The
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Division expects continued growth in 1996 driven by the tantalum capacitor
business. The Company has begun making significant investments in this business
to expand capacity and improve operating efficiency, of which at least $35
million will be spent in 1996. Part of this capital investment program will
include the construction of a new $10 million cesium formate production
facility. In 1994, performance of the Division was negatively impacted by the
operating problems mentioned previously.
On July 11, 1995, the Company restructured the ownership of its safety and
specialty composite materials business into a new corporation owned by the
Company, Vestar Equity Partners and the management of the newly formed Cabot
Safety Corporation. This transaction yielded approximately $128 million in
after-tax proceeds to the Company. Cabot has an approximately 42.5% ownership
position in the new corporation. The performance of the business prior to the
sale of the majority interest is included as part of the Specialty Chemicals and
Materials Group. During the first three quarters of fiscal 1995, the Company's
safety business reported a 26% increase in operating profit over the first three
quarters of 1994, due primarily to higher volumes. In 1994, the business
reported a slight decrease in profitability due to higher costs associated with
marketing programs and one-time expenses. As of the date of the transaction, the
Company began accounting for this affiliate using the equity method. As a
result, future sales and operating profit of the Specialty Chemical and
Materials Group will not include the results of Cabot Safety Corporation. The
Company's safety business recorded approximately $155 million of sales and $17
million of operating profit in fiscal 1995 prior to the transaction.
THE ENERGY GROUP
The Energy Group includes two operating businesses: Cabot LNG Corporation,
a liquefied natural gas importing, transporting, terminalling, and marketing
operation; and TUCO INC. (TUCO), a coal fuel services business. Until July 13,
1994, the Company owned a 34.4% interest in American Oil and Gas Corporation
(AOG), the earnings of which were reflected in "Equity in net income of
affiliated companies." At that time, AOG was merged into a subsidiary of KN
Energy, Inc. (KNE), and Cabot became a 17% owner, including warrants, of KNE.
The Company's investment in KNE is now accounted for on a cost basis, and
dividends from this investment are included in interest and dividend income.
Energy Group sales were $342.6 million in 1995, $438.7 million in 1994 and
$422.5 million in 1993. Operating profit fell to $12.7 million in 1995 from
$18.4 million last year. Declines in 1995 revenue and profit are primarily
attributable to the Company's LNG business, which has been negatively impacted
by reduced supplies of LNG caused by the refurbishment of the liquefaction
facilities of the Company's Algerian supplier. The LNG business was able to
reduce the impact of the supply curtailments by purchasing available domestic
gas at competitive prices. In addition, the overall impact was mitigated by an
unseasonably warm 1994-1995 winter in the northeastern United States. Profit in
the Company's TUCO business was flat in 1995 compared to 1994 with price
improvements offsetting slightly lower volumes.
Improved Energy Group results in 1994 were due to strong performance in the
Company's LNG business, where an unusually cold winter in the northeastern
United States boosted demand and resulted in higher natural gas prices. During
1994, TUCO's profit was lower as a result of disruptions in coal transportation
from flooding in the midwestern U.S. that significantly reduced inventories of
coal. This, in turn, reduced TUCO's service margins under a contractual formula.
The Company expects reduced supplies of LNG to impair the Energy Group's
performance during fiscal 1996. The extent of the impact will depend on the
actual number and timing of LNG shipments received, weather patterns and other
factors. The Algerian supplier's refurbishment program is expected to be
completed in 1996. The Company also cannot predict at this time, what, if any,
impact the political instability in Algeria may have on the deliveries of LNG to
the Company, but to date, no direct adverse effect has been experienced. The
Company continues to explore other short-term LNG supply opportunities. The
Company is a 10% shareholder in a company developing a proposed liquefaction
plant in Trinidad, and has agreed to purchase 60% of the LNG produced by that
plant. LNG from this project is expected to be available during fiscal year
1999. During the fourth quarter of this year, the Company announced plans to
sell the stock of its
18
20
TUCO subsidiary to Southwestern Public Service Company for approximately $77
million before taxes. The transaction is subject to regulatory approvals and is
expected to be completed in fiscal 1996.
CASH FLOW AND LIQUIDITY
Cash generated in 1995 from the Company's operating activities increased
27% to $182.0 million from $143.8 million in 1994. The increase primarily
resulted from higher net income than the year-ago period and an increase in
taxes payable. This is partially offset by an increase in accounts receivable
related to the increase in sales, most notably in Europe, and an increase in
inventories in the Company's TUCO, Performance Materials and Carbon Black
businesses.
Capital spending on property, plant and equipment was $131.2 million in
1995, $73.6 million in 1994 and $65.0 million in 1993. The increased spending in
1995 includes costs associated with capacity expansions in the Company's North
American carbon black operations, capital expenditures associated with the
Performance Materials and Cab-O-Sil businesses, and the expansion of the
Company's Indonesian carbon black subsidiary. Additional costs are expected to
be incurred over several years and include an estimated $200 million in North
American carbon black (including Clean Air Act compliance costs), $30 million in
South American carbon black, and $50 million for a new North American fumed
silica plant.
The Company expects capital spending to more than double in 1996 as it
continues to invest in new business opportunities.
Sources and Uses of Cash
Fiscal years 1994, 1995 ($ millions)
Sources of Cash [BAR GRAPH] 94 95
--------------------------------------------------------
Operations $144 $182
--------------------------------------------------------
Sales of Assets $ 1 $170
--------------------------------------------------------
Uses of Cash [BAR GRAPH] 94 95
--------------------------------------------------------
Capital Expenditures and Investments $74 $145
--------------------------------------------------------
Dividends $24 $ 26
--------------------------------------------------------
Financing and Other $ 6 $171
--------------------------------------------------------
These expenditures include a portion of the ones mentioned previously, the
Company's share of the Trinidad LNG project, additional expenses for the
Performance Materials business, and an amount to further develop the special
blacks business. Over the next several years, as the remediation of various
environmental sites is carried out, the Company also expects to spend a
significant portion of its $51.6 million reserve for costs associated with such
remediation. These sites are associated primarily with divested businesses.
19
21
Research and technical service spending was $59.2 million, $48.7 million,
and $45.7 million in 1995, 1994 and 1993, respectively. The Company has been
increasing the amount of spending to develop new, differentiated products for
its specialty chemicals businesses. The Company anticipates research and
technical service spending to increase to approximately $80 million in 1996 for
these and other initiatives.
Research and Technical Service
Specialty Chemicals and Materials Group ($ millions)
[BAR GRAPH]
91 92 93 94 95
- -----------------------------------------------------------------------
Dollars $37.7 $37.5 $45.7 $48.7 $59.2
- -----------------------------------------------------------------------
Spending as a percent of sales 3.3% 3.2% 3.8% 3.9% 4.0%
- -----------------------------------------------------------------------
Cabot decreased its borrowings by $114 million and increased cash by $10
million in 1995. Early in the fiscal year, the Company replaced $115 million of
9.875% coupon debt with short-term floating rate debt at lower interest rates. A
portion of this debt has been repaid with proceeds from the Cabot Safety
transaction.
During 1995, $76 million of common stock was purchased and is held as
treasury stock. The program to repurchase common stock is described below under
"Common Stock," and is expected to continue in 1996.
Primarily due to the Cabot Safety transaction and the Company's strong
operating performance in 1995, the ratio of total debt (including short-term
debt net of cash) to capital decreased to 29% at the end of 1995 from 42% at the
end of 1994. The Company anticipates an increase in the ratio of total debt to
capital in 1996 due to planned capital investments and the stock repurchase
program.
Total Debt to Capital
(percent)
[BAR GRAPH]
91 92 93 94 95
- -----------------------------------------------------------------------
Total Debt to Capital 55.9% 51.5% 50.4% 42.1% 29.1%
- -----------------------------------------------------------------------
Total debt includes short-term debt net of cash.
Management expects cash from operations, proceeds from the Cabot Safety
transaction and the anticipated TUCO sale, and present financing arrangements,
including the Company's unused line of credit of $250 million, to be sufficient
to meet the Company's cash requirements for the foreseeable future.
20
22
COMMON STOCK
In September 1995, the Company announced that it had begun a new share
repurchase program for up to 3,000,000 of its common shares in order to reduce
the total number of shares outstanding. As of September 30, 1995, approximately
581,000 shares of common stock had been repurchased through this program. The
Company also repurchased approximately 944,000 shares in private and open market
transactions during fiscal 1995 for the purpose of replacing shares issued under
its employee incentive programs.
During fiscal year 1995, the Company paid cash dividends of $0.60 per share
reflecting a quarterly dividend of $0.14 per share for the first three quarters
of the year and $0.18 per share in the fourth quarter. The book value per share
of Cabot stock increased 24% to $18.32 at September 30, 1995.
NEW ACCOUNTING STANDARDS
At September 30, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Upon adoption, the Company recorded
an unrealized gain on marketable securities available for sale of $46 million.
The gain was recorded as a separate component of stockholders' equity, net of a
deferred tax liability of $17 million.
The Company adopted two new accounting principles during 1993, effective as
of the beginning of fiscal 1993: SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for
Income Taxes."
SFAS No. 106 mandates the accrual of certain postretirement health care and
life insurance benefits obligations on an "as-earned" basis. The Company
recognized the entire accumulated benefit obligation in 1993 and, as a result,
recorded a $43.2 million after-tax charge for the cumulative effect of the
change in accounting for postretirement health care and life insurance benefits.
SFAS No. 109 requires an asset and liability approach for financial
accounting and reporting of income taxes. The Company recognized a $17.1 million
benefit in 1993 as the cumulative effect of adoption of SFAS No. 109.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are
set forth on pages F-1 to F-20 of this Report and are indexed herein under Item
14(a) of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
21
23
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required regarding the executive officers of Cabot is
included on page 10 of this Report in the unnumbered item captioned "Executive
Officers of the Registrant." Certain other information required regarding the
directors of Cabot is contained in the Proxy Statement under the heading
"Certain Information Regarding Directors." All of such information is
incorporated herein by reference.
The information required regarding the filing of reports by directors,
executive officers and 10% stockholders with the Securities and Exchange
Commission relating to transactions in Cabot stock is contained in the Proxy
Statement under the heading "Certain Securities Filings" and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required is contained in the Proxy Statement under the
heading "Executive Compensation." All of such information is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required is contained in the Proxy Statement under the
heading "Beneficial Stock Ownership of Directors, Executive Officers and Persons
Owning More than Five Percent of Common Stock." All of such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the Proxy Statement
under the heading "Certain Relationships and Related Transactions." All of such
information is incorporated herein by reference.
22
24
- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements. Set forth below is a listing of the Consolidated
Financial Statements of the Company with reference to the page numbers in this
Report at which such statements are disclosed.
PAGE NUMBER
DESCRIPTION OF THIS REPORT
----------- --------------
(1) Consolidated Statements of Income for each of the three fiscal
years in the period ended September 30, 1995.................. F-1
(2) Consolidated Balance Sheets at September 30, 1995 and 1994...... F-2
(3) Consolidated Statements of Cash Flows for each of the three
fiscal years in the period ended September 30, 1995........... F-3
(4) Notes to Consolidated Financial Statements...................... F-4 to F-20
(5) Statement of Management Responsibility for Financial Reporting
and Report of Independent Accountants relating to the
Consolidated Financial Statements listed above................ F-21 to F-22
(b) Reports on Form 8-K. None, except as previously reported in Cabot's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, file
reference 1-5667, filed with the Commission on August 14, 1995.
(c) Exhibits. (not included in copies of the Form 10-K provided upon
request)
The exhibit numbers in the following list correspond to the numbers
assigned to such exhibits in the Exhibit Table of Item 601 of Regulation S-K.
The Company will furnish to any stockholder, upon written request, any exhibit
listed below upon payment by such stockholder to the Company of the Company's
reasonable expenses in furnishing such exhibit.
EXHIBIT
NUMBER DESCRIPTION
------------ -----------
3(a) -- Certificate of Incorporation of Cabot Corporation restated effective
October 24, 1983, as amended February 14, 1985, December 3, 1986, February
19, 1987, November 18, 1988, and November 24, 1995, filed herewith.
3(b) -- The By-laws of Cabot Corporation as of January 11, 1991 (incorporated
herein by reference to Exhibit 3(b) of Cabot's Annual Report on Form 10-K
for the year ended September 30, 1991, file reference 1-5667, filed with
the Commission on December 27, 1991).
4(a) -- Rights Agreement, dated as of November 10, 1995, between Cabot Corporation
and The First National Bank of Boston as Rights Agent (incorporated herein
by reference to Exhibit 1 of Cabot's Registration Statement on Form 8-A,
file reference 1-5667, filed with the Commission on November 13, 1995).
4(b)(i) -- Indenture, dated as of December 1, 1987, between Cabot Corporation and The
First National Bank of Boston, Trustee (incorporated herein by reference to
Exhibit 4 of Amendment No. 1 to Cabot's Registration Statement on Form S-3,
Registration No. 33-18883, filed with the Commission).
4(b)(ii) -- First Supplemental Indenture, dated as of June 17, 1992, to Indenture,
dated as of December 1, 1987, between Cabot Corporation and The First
National Bank of Boston, Trustee (incorporated by reference to Exhibit 4.3
of Cabot's Registration Statement on Form S-3, Registration No. 33-48686,
filed with the Commission).
4(c)(i)+ -- Finance Agreement between P.T. Cabot Chemical and Overseas Private
Investment Corporation, dated September 10, 1991.
4(c)(ii)+ -- Facility Agreement and Acknowledgement of Indebtedness (The Hongkong and
Shanghai Banking Corporation Limited), dated January 10, 1992.
23
25
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4(c)(iii)+ -- Project Completion Agreement between Cabot Corporation, P.T. Cabot Chemical
and The Hongkong and Shanghai Banking Corporation Limited, dated April 28,
1992.
10(a) -- Form of Distribution Agreement between Cabot Corporation and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Merrill Lynch & Co., Goldman Sachs &
Co., and J.P. Morgan Securities Inc. for the issuance and sale of
medium-term notes pursuant to a prospectus supplement dated July 17, 1992
(incorporated herein by reference to Exhibit 1 of Cabot's Current Report on
Form 8-K, dated July 17, 1992, file reference 1-5667, filed with the
Commission).
10(b)(i) -- Credit Agreement, dated as of January 13, 1994, among Cabot Corporation and
11 banks and Morgan Guaranty Trust Company of New York, as agent for the
banks (incorporated by reference to Exhibit 4 of Cabot's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1993, file reference
1-5667, filed with the Commission on February 16, 1993).
10(b)(ii) -- Amendment No. 1, dated January 13, 1995, to Credit Agreement, dated as of
January 13, 1994, among Cabot Corporation and 11 banks and Morgan Guaranty
Trust Company of New York, as agent for the banks, filed herewith.
10(c)* -- Equity Incentive Plan, as amended (incorporated herein by reference to
Exhibit 99 of Cabot's Registration Statement on Form S-8, Registration No.
33-53659, filed with the Commission).
10(d) -- Note Purchase Agreement between John Hancock Mutual Life Insurance Company,
State Street Bank and Trust Company, as trustee for the Cabot Corporation
Employee Stock Ownership Plan, and Cabot Corporation, dated as of November
15, 1988 (incorporated herein by reference to Exhibit 10(c) of Cabot's
Annual Report on Form 10-K for the year ended September 30, 1988, file
reference 1-5667, filed with the Commission on December 29, 1988).
10(e)(i)* -- Supplemental Cash Balance Plan (incorporated herein by reference to Ex-
hibit 10(e)(i) of Cabot's Annual Report on Form 10-K for the year ended
September 30, 1994, file reference 1-5667, filed with the Commission on
December 22, 1994).
10(e)(ii)* -- Supplemental Employee Stock Ownership Plan (incorporated herein by
reference to Exhibit 10(e)(ii) of Cabot's Annual Report on Form 10-K for
the year ended September 30, 1994, file reference 1-5667, filed with the
Commission on December 22, 1994).
10(e)(iii)* -- Supplemental Retirement Incentive Savings Plan (incorporated herein by
reference to Exhibit 10(e)(iii) of Cabot's Annual Report on Form 10-K for
the year ended September 30, 1994, file reference 1-5667, filed with the
Commission on December 22, 1994).
10(e)(iv)* -- Supplemental Employee Benefit Agreement with John G.L. Cabot (incorporated
herein by reference to Exhibit 10(f) of Cabot's Annual Report on Form 10-K
for the year ended September 30, 1987, file reference 1-5667, filed with
the Commission on December 28, 1987).
10(e)(v)* -- Cabot Corporation Deferred Compensation Plan, dated January 1, 1995, filed
herewith.
10(f)* -- Form of severance agreement entered into between Cabot and various managers
(incorporated herein by reference to Exhibit 10(g) of Cabot's Annual Report
on Form 10-K in the year ended September 30, 1991, file reference 1-5667,
filed with the Commission on December 27, 1991).
10(g) -- Group Annuity Contract No. GA-6121 between The Prudential Insurance Company
of America and State Street Bank and Trust Company, dated June 28, 1991
(incorporated herein by reference to Exhibit 10(h) of Cabot's Annual Report
on Form 10-K for the year ended September 30, 1991, file reference 1-5667,
filed with the Commission on December 27, 1991).
10(h)* -- Non-employee Directors' Stock Compensation Plan (incorporated herein by
reference to Exhibit A of Cabot's Proxy Statement for its 1992 Annual
Meeting of Stockholders, file reference 1-5667, filed with the Commission
on December 27, 1991).
24
26
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10(i)(i) -- Amended and Restated Omnibus Acquisition Agreement among American Oil and
Gas Corporation, Cabot Corporation and Cabot Transmission Corporation,
dated as of November 13, 1989 (incorporated herein by reference to Exhibit
(2) of Cabot's Current Report on Form 8-K, dated November 16, 1989, file
reference 1-5667, filed with the Commission).
10(i)(ii) -- Amended and Restated Basket Agreement among American Oil and Gas
Corporation, American Pipeline Company, Cabot Corporation and Cabot
Transmission Corporation, dated as of June 30, 1990 (incorporated herein by
reference to Exhibit 10(n) of Cabot's Annual Report on Form 10-K for the
year ended September 30, 1990, file reference 1-5667, filed with the
Commission on December 24, 1990).
10(i)(iii) -- First Amendment, dated March 31, 1992, to Amended and Restated Omnibus
Acquisition Agreement among American Oil and Gas Corporation, Cabot
Corporation and Cabot Transmission Corporation, dated as of November 13,
1989, and to Amended and Restated Basket Agreement among American Oil and
Gas Corporation, American Pipeline Company, Cabot Corporation and Cabot
Transmission Corporation, dated as of June 30, 1990 (incorporated herein by
reference to Exhibit 10(i)(ii) of Cabot's Annual Report on Form 10-K for
the year ended September 30, 1992, file reference 1-5667, filed with the
Commission on December 24, 1992).
10(j) -- Agreement for the Sale and Purchase of Liquefied Natural Gas and
Transportation Agreement, dated April 13, 1976, between Sonatrach and
Distrigas Corporation, and Amendment No. 3 to said Agreement, dated
February 21, 1988 (incorporated herein by reference to Exhibit 10(j) of
Cabot's Annual Report on Form 10-K for the year ended September 30, 1994,
file reference 1-5667, filed with the Commission on December 22, 1994).
10(k) -- Agreement for the Sale and Purchase of Liquefied Natural Gas and
Transportation Agreement, dated December 11, 1988, between Sonatrading and
Distrigas Corporation (incorporated herein by reference to Exhibit 10(p) of
Cabot's Annual Report on Form 10-K for the year ended September 30, 1989,
file reference 1-5667, filed with the Commission on December 28, 1989).
10(l) -- Contract for sale of vessel GAMMA between Cabot LNG Shipping Corporation
and the United States of America, dated September 18, 1990 (incorporated
herein by reference to Exhibit 10(q) of Cabot's Annual Report on Form 10-K
for the year ended September 30, 1990, file reference 1-5667, filed with
the Commission on December 24, 1990).
10(m) -- Mutual Assurances Agreements among Cabot Corporation, L'Entreprise
Nationale pour la Recherche, la Production, le Transport, la Transformation
et la Commercialisation des Hydrocarbures ("Sonatrach"), Distrigas
Corporation and Sonatrading Amsterdam B.V., dated February 21, 1988 and
December 11, 1988, respectively (incorporated herein by reference to
Exhibit 10.1 of Cabot's Current Report on Form 8-K, dated July 17, 1992,
file reference 1-5667, filed with the Commission).
10(n)(i) -- Agreement between K N Energy, Inc. ("KNE"), American Oil and Gas
Corporation ("AOG") and Cabot Corporation, dated June 27, 1994
(incorporated herein by reference to Exhibit 1 of Cabot's Schedule 13D
relating to KNE, file reference 1-5667, filed with the Commission on July
22, 1994 (the "KNE Schedule 13D")).
10(n)(ii) -- Registration Rights Agreement between KNE and Cabot Corporation, dated July
13, 1994 (incorporated herein by reference to Exhibit 2 of the KNE Schedule
13D).
10(n)(iii) -- Share Transfer and Registration Agreement between KNE and Cabot
Corporation, dated July 13, 1994 (incorporated herein by reference to
Exhibit 3 of the KNE Schedule 13D).
10(n)(iv) -- KNE By-law provision (incorporated herein by reference to Exhibit 10(o)(iv)
of Cabot's Annual Report on Form 10-K for the year ended September 30,
1994, file reference 1-5667, filed with the Commission on December 22,
1994).
25
27
EXHIBIT
NUMBER DESCRIPTION
------------ ---------------------------------------------------------------------------
10(n)(v) -- Request of Cabot for No Action Letter from staff of Securities and Exchange
Commission dated June 28, 1994, and reply dated July 6, 1994 (incorporated
herein by reference to Exhibit 10(o)(v) of Cabot's Annual Report on Form
10-K for the year ended September 30, 1994, file reference 1-5667, filed
with the Commission on December 22, 1994).
10(n)(vi) -- Application of Cabot for Declaration of Non-holding Company Status Pursuant
to Section 2(a)(7) of the Public Utility Holding Company Act of 1935, dated
July 11, 1994 (incorporated herein by reference to Exhibit 10(o)(vi) of
Cabot's Annual Report on Form 10-K for the year ended September 30, 1994,
file reference 1-5667, filed with the Commission on December 22, 1994).
10(o)(i) -- Asset Transfer Agreement, dated as of June 13, 1995, among Cabot Safety
Corporation, Cabot Canada Ltd., Cabot Safety Limited, Cabot Corporation,
Cabot Safety Holdings Corporation and Cabot Safety Acquisition Corporation
(incorporated herein by reference to Exhibit 2(a) of Cabot Corporation's
Current Report on Form 8-K, dated July 11, 1995, file reference 1-5667,
filed with the Commission).
10(o)(ii) -- Stockholders' Agreement, dated as of July 11, 1995, among Vestar Equity
Partners, L.P., Cabot CSC Corporation, Cabot Safety Holdings Corporation,
Cabot Corporation and various other parties thereto (incorporated herein by
reference to Exhibit 2(b) of Cabot Corporation's Current Report on Form
8-K, dated July 11, 1995, file reference 1-5667, filed with the
Commission).
11 -- Statement Re: Computation of Per Share Earnings, filed herewith.
12 -- Statement Re: Computation of Ratio of Earnings to Fixed Charges, filed
herewith.
21 -- List of Significant Subsidiaries, filed herewith.
24 -- Power of attorney for signing of this Annual Report on Form 10-K, filed
herewith.
27 -- Financial Data Schedule, filed herewith.
- ---------------
+ The Registrant agrees to furnish to the Commission upon request a copy of
these instruments with respect to long-term debt (not filed as an exhibit),
none of which relates to securities exceeding 10% of the total assets of the
Registrant and its consolidated subsidiaries.
* Management contract or compensatory plan or arrangement.
(d) Schedules. The Schedules have been omitted for the reason that they
are not required, not applicable, or the required information is included in the
financial statements or notes thereto.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned Registrant undertakes as follows, which undertaking shall be
incorporated by reference into Registrant's Registration Statement on Form S-8,
Registration No. 33-28699 (filed May 12, 1989), the Registrant's Registration
Statement on Form S-8, Registration No. 33-52940 (filed October 5, 1992) and the
Registrant's Registration Statement on Form S-8, Registration No. 33-53659
(filed May 16, 1994):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
26
28
SIGNATURES
Pursuant to the requirements of Section 13 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.
CABOT CORPORATION (Registrant)
By /s/ SAMUEL W. BODMAN
---------------------------------
Samuel W. Bodman, Chairman of the
Board and Chief Executive Officer
Date: December 21, 1995
Pursuant to the requirement of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ SAMUEL W. BODMAN Chairman of the Board and December 21, 1995
- ------------------------------------------ Director (Principal Executive
Samuel W. Bodman Officer)
/s/ KENYON C. GILSON Vice President and Chief December 21, 1995
- ------------------------------------------ Financial Officer (Principal
Kenyon C. Gilson Financial Officer)
/s/ PAUL J. GORMISKY Vice President and Controller December 21, 1995
- ------------------------------------------ (Principal Accounting Officer)
Paul J. Gormisky
* Director December 21, 1995
- ------------------------------------------
Jane C. Bradley
* Director December 21, 1995
- ------------------------------------------
Kennett F. Burnes
* Director December 21, 1995
- ------------------------------------------
John G.L. Cabot
* Director December 21, 1995
- ------------------------------------------
Robert A. Charpie
* Director December 21, 1995
- ------------------------------------------
Arthur L. Goldstein
27
29
SIGNATURES TITLE DATE
---------- ----- ----
* Director December 21, 1995
- ------------------------------------------
Robert P. Henderson
* Director December 21, 1995
- ------------------------------------------
Arnold S. Hiatt
* Director December 21, 1995
- ------------------------------------------
Gerrit Jeelof
* Director December 21, 1995
- ------------------------------------------
John H. McArthur
* Director December 21, 1995
- ------------------------------------------
John F. O'Brien
* Director December 21, 1995
- ------------------------------------------
David V. Ragone
* Director December 21, 1995
- ------------------------------------------
Charles P. Siess, Jr.
* Director December 21, 1995
- ------------------------------------------
Morris Tanenbaum
* Director December 21, 1995
- ------------------------------------------
Lydia W. Thomas
*By /s/ CHARLES D. GERLINGER
- ------------------------------------------
Charles D. Gerlinger
as Attorney-in-Fact
28
30
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Cabot Corporation on Form S-3 (File No. 33-48686) and on Forms S-8 (File Nos.
33-28699, 33-52940 and 33-53659) of our report dated October 30, 1995, on our
audit of the consolidated financial statements of Cabot Corporation as of
September 30, 1995 and 1994, and for each of the three years in the period ended
September 30, 1995, which report is included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 20, 1995
29
31
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30
----------------------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Revenues:
Net sales and other operating revenues........... $1,830,393 $1,679,819 $1,614,315
Interest and dividend income..................... 10,492 6,742 4,225
---------- ---------- ----------
Total revenues.............................. 1,840,885 1,686,561 1,618,540
========= ========= =========
Costs and expenses:
Cost of sales.................................... 1,258,964 1,234,272 1,211,655
Selling and administrative expenses.............. 234,693 222,069 204,804
Research and technical service................... 59,184 48,701 45,651
Interest expense (Note G)........................ 35,639 41,668 44,043
Specialty Chemicals and Materials Group
restructuring (Note B)......................... -- (4,000) 47,400
Gain on resolution of matters from divested
energy businesses (Note B)..................... -- (10,210) (14,177)
Gain on sale of safety business (Note B)......... (32,625) -- --
Other charges, net............................... 28,688 35,736 11,264
---------- ---------- ----------
Total costs and expenses.................... 1,584,543 1,568,236 1,550,640
========= ========= =========
Income before income taxes............................ 256,342 118,325 67,900
Provision for income taxes (Note K)................... (101,080) (44,963) (30,699)
Equity in net income of affiliated companies
(Note D)............................................ 16,670 5,329 209
---------- ---------- ----------
Income before cumulative effect of accounting
changes............................................. 171,932 78,691 37,410
---------- ---------- ----------
Cumulative effect of accounting changes
(Notes H and K)..................................... -- -- (26,109)
---------- ---------- ----------
Net income.................................. 171,932 78,691 11,301
========= ========= =========
Dividends on preferred stock, net of tax benefit of
$1,911, $1,929 and $1,934........................... (3,551) (3,583) (3,632)
---------- ---------- ----------
Income applicable to common shares.......... $ 168,381 $ 75,108 $ 7,669
========= ========= =========
Income per common share (Notes A and I):
Primary
Continuing operations............................ $ 4.35 $ 1.96 $ 0.90
Cumulative effect of accounting changes.......... -- -- (0.70)
---------- ---------- ----------
Income per share............................ $ 4.35 $ 1.96 $ 0.20
Fully diluted
Continuing operations............................ $ 4.04 $ 1.84 $ 0.90
Cumulative effect of accounting changes.......... -- -- (0.70)
---------- ---------- ----------
Income per share............................ $ 4.04 $ 1.84 $ 0.20
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-1
32
CABOT CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30
-------------------------
1995 1994
---- ----
ASSETS (DOLLARS IN THOUSANDS)
Current assets:
Cash and cash equivalents................................................ $ 90,792 $ 80,917
Accounts and notes receivable (net of reserve for doubtful accounts of
$5,207 and $7,697)...................................................... 292,777 272,787
Inventories (Note C)..................................................... 253,110 216,882
Prepaid expenses......................................................... 13,499 13,293
Deferred income taxes (Note K)........................................... 27,681 22,509
---------- ----------
Total current assets................................................ 677,859 606,388
---------- ----------
Investments:
Equity (Notes B and D)................................................... 98,866 86,164
Other (Notes D and I).................................................... 119,866 115,768
---------- ----------
Total investments................................................... 218,732 201,932
---------- ----------
Property, plant and equipment (Note E)....................................... 1,447,653 1,381,576
Accumulated depreciation and amortization.................................... (741,132) (687,068)
---------- ----------
Net property, plant and equipment................................... 706,521 694,508
---------- ----------
Other assets:
Intangible assets (net of accumulated amortization of $3,396 and
$34,534)................................................................ 13,922 74,089
Deferred income taxes (Note K)........................................... 6,949 6,722
Other assets............................................................. 30,350 33,117
---------- ----------
Total other assets.................................................. 51,221 113,928
---------- ----------
Total assets................................................................. $1,654,333 $1,616,756
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks................................................... $ 52,437 $ 26,480
Current portion of long-term debt (Note G)............................... 15,709 159,724
Accounts payable and accrued liabilities (Note F)........................ 260,879 281,342
U.S. and foreign income taxes............................................ 69,286 3,626
Deferred income taxes (Note K)........................................... 4,068 3,943
---------- ----------
Total current liabilities........................................... 402,379 475,115
---------- ----------
Long-term debt (Note G)...................................................... 306,443 307,828
Deferred income taxes (Note K)............................................... 100,353 124,286
Other liabilities (Notes H and L)............................................ 160,158 147,038
Commitments and contingencies (Note L)
Stockholders' equity (Notes D, G, H, I and J):
Preferred stock:
Authorized: 2,000,000 shares of $1 par value
Series A Junior Participating Preferred Stock
Issued and outstanding: none
Series B ESOP Convertible Preferred Stock 7.75% Cumulative
Issued: 75,336 shares (aggregate redemption value of $72,479 and
$73,577).......................................................... 75,336 75,336
Less cost of shares of preferred treasury stock.............................. (4,836) (4,003)
Common stock:
Authorized: 80,000,000 shares of $1 par value
Issued: 67,774,968 shares................................................ 67,775 67,775
Additional paid-in capital................................................... 17,799 3,783
Retained earnings............................................................ 1,062,482 916,942
Less cost of shares of common treasury stock (including unearned amounts of
$10,834 and $7,884)........................................................ (539,585) (475,055)
Deferred employee benefits................................................... (65,907) (67,403)
Unrealized gain on marketable securities..................................... 32,023 28,787
Foreign currency translation adjustments..................................... 39,913 16,327
---------- ----------
Total stockholders' equity............................................... 685,000 562,489
---------- ----------
Total liabilities and stockholders' equity................................... $1,654,333 $1,616,756
========== ==========
The accompanying notes are an integral part of these financial statements.
F-2
33
CABOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30
------------------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................... $ 171,932 $ 78,691 $ 11,301
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization....................... 94,184 87,357 85,155
Deferred tax (benefit) provision.................... (24,163) 27,084 (12,176)
Gain on sale of safety business..................... (32,625) -- --
Gain on sales of investments........................ -- -- (2,841)
Effects of accounting changes....................... -- -- 26,109
Equity in income of affiliated companies, net of
dividends received................................ (6,292) 309 5,779
Other, net.......................................... 6,694 5,750 3,391
Changes in assets and liabilities, excluding safety
business assets and liabilities sold:
Increase in accounts receivable................... (37,354) (3,042) (17,332)
(Increase) decrease in inventories................ (57,987) (13,688) 17,412
(Decrease) increase in accounts payable and
accruals....................................... (6,905) (27,862) 38,555
Other, net........................................ 74,477 (10,832) 33,790
--------- -------- ---------
Cash provided by operating activities.................. 181,961 143,767 189,143
========= ======== =========
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment............... (131,214) (73,555) (65,009)
Proceeds on sale of safety business...................... 169,178 -- --
Investments and acquisitions (excluding cash acquired)... (13,874) (371) (40,905)
Sales of property, plant and equipment, and
investments............................................ 373 545 3,506
--------- -------- ---------
Cash provided (used) by investing activities........... 24,463 (73,381) (102,408)
========= ======== =========
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt............................. 17,385 1,189 9,259
Repayments of long-term debt............................. (157,609) (41,584) (7,076)
Net increase (decrease) in short-term debt............... 25,980 24,979 (66,700)
Purchases of treasury stock.............................. (76,251) (1,000) (367)
Sales and issuances of treasury stock.................... 19,658 8,703 13,014
Cash dividends paid to stockholders...................... (26,392) (23,552) (22,920)
--------- -------- ---------
Cash used by financing activities...................... (197,229) (31,265) (74,790)
========= ======== =========
Effect of exchange rate changes on cash.................. 680 1,529 (2,334)
--------- -------- ---------
Increase in cash and cash equivalents.................... 9,875 40,650 9,611
Cash and cash equivalents at beginning of year........... 80,917 40,267 30,656
--------- -------- ---------
Cash and cash equivalents at end of year............... $ 90,792 $ 80,917 $ 40,267
========= ======== =========
The accompanying notes are an integral part of these financial statements.
F-3
34
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. The significant accounting policies of
the Company are described below.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Cabot
Corporation and majority-owned and controlled domestic and foreign subsidiaries.
Investments in majority-owned affiliates where control does not exist and
investments in 20 percent to 50 percent-owned affiliates are accounted for on
the equity method. Intercompany transactions have been eliminated.
CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
time deposits and short-term investments with a maturity of three months or less
at time of purchase to be cash equivalents.
FOREIGN CURRENCY TRANSLATION
Substantially all assets and liabilities of the Company's foreign
operations are translated at year-end exchange rates. Revenues and expenses are
translated at the weighted average rates during the year. Foreign currency gains
and losses arising from transactions are reflected in net income. Balance sheet
translation gains and losses are reflected as a separate component of
stockholders' equity.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of most
domestic inventories is determined using the last-in, first-out (LIFO) method.
The cost of other domestic and all foreign inventories is determined using the
average cost method or the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. For financial reporting
purposes, depreciation of property, plant and equipment is calculated using
primarily the straight-line method based on estimated economic lives of 3 to 25
years.
EARNINGS PER SHARE
Earnings per share is computed on the basis of weighted average shares
outstanding during each year. Fully diluted earnings per share considers
conversion of the Company's Series B ESOP Convertible Preferred Stock held by
the Company's Employee Stock Ownership Plan (Note I) and shares issuable under
the Company's incentive compensation plans (Note J).
INCOME TAXES
In the fourth quarter of 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," retroactive
to October 1, 1992. Under SFAS No. 109, deferred income taxes are provided based
on the estimated future tax effects of differences between financial statement
carrying amounts and the tax bases of existing assets and liabilities.
Provisions are made for the U.S. income tax liability and additional foreign
taxes on the undistributed earnings of foreign subsidiaries, except for amounts
the Company has designated to be permanently reinvested (Note K).
F-4
35
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTANGIBLE ASSETS
Intangible assets are comprised of the cost of business acquisitions in
excess of the fair value assigned to the net tangible assets acquired and the
costs of technology, licenses and patents purchased in business acquisitions.
The excess of cost over the fair value of net assets acquired is amortized on
the straight-line basis over either 40 years or an estimated useful life,
whichever is shorter. Other intangibles are amortized over their estimated
useful lives. The Company considers the impairment of long-lived assets, in
accordance with the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-lived Assets," based on an assessment of the asset's ability to
contribute to the profitability of the Company. Included in other charges is
amortization expense of $6,638,000, $7,661,000 and $6,884,000, in 1995, 1994 and
1993, respectively.
FINANCIAL INSTRUMENTS
Forward foreign currency exchange contracts and currency options are used
to manage foreign currency exposures. Realized and unrealized gains and losses
on these contracts are recorded in net income currently, with the exception of
gains or losses on contracts designated to hedge a net investment, which are
recorded as translation adjustments, and currency options, which are designated
to hedge future cash flows. Included in other charges are foreign exchange gains
(losses) of $1,354,000, $(1,713,000) and $(1,977,000) in 1995, 1994 and 1993,
respectively.
Financial instruments, primarily interest rate swaps, are used to manage
interest rate risks. The interest differentials from these swaps are recorded as
interest expense.
RECLASSIFICATION
Certain amounts in 1994 and 1993 have been reclassified to conform to the
1995 presentation.
B. DIVESTITURES & RESTRUCTURING
SPECIALTY CHEMICALS AND MATERIALS
On July 11, 1995, the Company sold substantially all of the assets of its
safety products and specialty composites business to Cabot Safety Acquisition
Corporation and its subsidiaries (New Safety). The transaction was accounted for
as a sale, with the Company receiving consideration consisting of approximately
$169,178,000 in cash, 42,500 common shares of Cabot Safety Holdings Corporation
(Holdings), a subsidiary of Cabot Safety Acquisition Corporation, representing
approximately 42.5% of Holdings' outstanding common stock, and $22,500,000 of
Holdings' non-voting 12.5% preferred stock. In addition, New Safety assumed
approximately $22,176,000 of the third party current liabilities relating to the
safety business and approximately $4,822,000 in debt. The Company recorded an
after-tax gain on the sale of approximately $14,500,000. The Company's book
value in Holdings' common and preferred stock after the transaction was zero
dollars. The Company accounts for its investment in New Safety using the equity
method.
During 1993, the Company recognized a $47,400,000 charge for the
restructuring of certain Specialty Chemicals and Materials businesses including
a carbon black plant closing in Europe, the scaling back of the Company's
plastics recycling business and the closing of certain Specialty Chemicals
production lines.
During 1995 and 1994, the Company incurred $6,079,000 and $17,890,000,
respectively, of costs accrued for in 1993 for employee separation and facility
closings. During 1994, the Company revised its restructuring reserve based on
the actual costs incurred during the closing of a carbon black plant in Europe.
A $4,000,000 benefit from the revision of the reserve was recorded in other
charges in 1994. The Company will continue to evaluate its remaining reserve of
$13,395,000 as new data become available, primarily relating to the final
disposition of the closed plant's assets and cleanup costs.
F-5
36
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Also during 1994, the Company recorded a $6,150,000 charge to write off its
investment in its Japanese carbon black equity affiliate due to significant
ongoing losses.
ENERGY
During 1994 and 1993, the Company recognized gains of $10,210,000 and
$14,177,000, respectively, on the favorable resolution of certain matters
related to divested energy businesses, which included settlement of the
Company's last significant take-or-pay case in 1994.
C. INVENTORIES
Inventories were as follows:
SEPTEMBER 30,
----------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
Raw materials.................................................. $ 64,830 $ 52,564
Work in process................................................ 47,058 33,139
Finished goods................................................. 97,597 94,363
Other.......................................................... 43,625 36,816
-------- --------
Total................................................ $ 253,110 $ 216,882
======== ========
Inventories valued under the LIFO method comprised approximately 37 percent
and 26 percent of 1995 and 1994 total inventory, respectively. The estimated
current cost of these inventories exceeded their stated valuation determined on
the LIFO basis by $27,393,000 and $25,149,000 at September 30, 1995 and 1994,
respectively.
D. INVESTMENTS
Investments in net assets of affiliated companies accounted for under the
equity method amounted to $98,866,000 and $86,164,000 at September 30, 1995 and
1994, respectively. The combined results of operations and financial position of
the Company's equity-basis affiliates are summarized below:
YEARS ENDED
SEPTEMBER 30,
----------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
CONDENSED INCOME STATEMENT INFORMATION
Net sales...................................................... $ 435,806 $ 335,346
Gross margin................................................... 120,130 84,281
Net income..................................................... 32,462 5,064
CONDENSED BALANCE SHEET INFORMATION
Current assets................................................. $ 257,941 $ 199,920
Non-current assets............................................. 454,877 317,666
Current liabilities............................................ 269,852 242,452
Non-current liabilities........................................ 247,150 105,599
Net worth...................................................... 195,816 169,535
-------- --------
Condensed income statement (after July 11, 1995) and balance sheet
information of New Safety (Note B) have been included in the 1995 amounts above.
F-6
37
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 13, 1994, American Oil and Gas Corporation (AOG) was merged into a
subsidiary of KN Energy, Inc. (KNE). As a result of the merger, each outstanding
share of AOG held by the Company was converted into 0.47 of a share of KNE
common stock. On the completion of the merger, the Company owned approximately
15% of the outstanding KNE common stock (17% including warrants) and has
accounted for its investment in accordance with the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," which the
Company adopted effective September 30, 1994. The Company's investment in KNE
common stock is $114,394,000 and $109,693,000 at September 30, 1995 and 1994,
respectively. Prior to the merger, the Company owned a 34% interest in AOG and
accounted for its investment using the equity method.
During 1994, the Company's investment in its Indonesian affiliate was
accounted for on an equity basis. Effective September 30, 1994, the balance
sheet of the Indonesian affiliate was fully consolidated, reflecting the
Company's controlling interest.
In accordance with SFAS No. 115, equity securities with readily
determinable fair values have been reflected on the balance sheet at their fair
values. Unrealized gains of $32,023,000 and $28,787,000, which are net of
deferred tax liabilities of $18,807,000 and $17,644,000, have been reflected as
a separate component of stockholders' equity (Note I) at September 30, 1995 and
1994, respectively.
E. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment is summarized as follows:
SEPTEMBER 30,
-------------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
Land and improvements....................................... $ 49,435 $ 46,778
Buildings................................................... 242,374 245,319
Machinery and equipment..................................... 990,521 965,665
Other....................................................... 70,019 72,467
Construction in progress.................................... 95,304 51,347
---------- ----------
Total property, plant and equipment......................... $1,447,653 $1,381,576
Less: accumulated depreciation.............................. 741,132 687,068
---------- ----------
Net property, plant and equipment................. $ 706,521 $ 694,508
========== ==========
F. ACCOUNTS PAYABLE & ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following:
SEPTEMBER 30,
-------------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
Accounts payable............................................ $ 107,003 $ 101,934
Accrued employee compensation............................... 25,984 25,024
Restructuring liabilities................................... 13,395 19,474
Other accrued liabilities................................... 114,497 134,910
---------- ----------
Total............................................. $ 260,879 $ 281,342
========== ==========
F-7
38
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
G. DEBT
Long-term debt consisted of the following:
SEPTEMBER 30,
---------------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
Notes due 1994, 9.875%......................................... $ -- $150,000
Notes due 2002-2022, 8.07%..................................... 105,000 105,000
Notes due 1997, 10.25%......................................... 100,000 100,000
Guarantee of ESOP notes due 2013, 8.29%........................ 65,907 67,403
Term loan due 2000, 8.7%....................................... 16,385 --
Overseas Private Investment Corporation term loan due 2002,
floating rate, 8.0% and 6.5%................................. 13,100 15,000
Industrial Revenue Bonds due 1997-2014, 9.35%-14.00%........... 4,000 5,000
Other, including foreign term loans............................ 17,760 25,149
-------- --------
322,152 467,552
Less: current portion of long-term debt........................ (15,709) (159,724)
-------- --------
Total................................................ $306,443 $307,828
======== ========
In June 1992, the Company filed a $300,000,000 debt shelf registration
statement with the Securities and Exchange Commission. Subsequently,
$105,000,000 of notes payable were refinanced with notes of a weighted average
maturity of 19 years and a weighted average interest rate of 8.07%. The notes
were issued at par and provide for principal to be repaid at maturity.
During fiscal 1989, the Company's Employee Stock Ownership Plan (ESOP)
borrowed $75,000,000 from an institutional lender in order to finance its
purchase of 75,000 shares of the Company's Series B ESOP Convertible Preferred
Stock. This debt bears interest at 8.29% per annum, and is to be repaid in equal
quarterly installments through December 31, 2013. The Company, as guarantor, has
reflected the outstanding balance of $65,907,000 as a liability on the Company's
consolidated balance sheet at September 30, 1995. An equal amount, representing
deferred employee benefits, has been recorded as a reduction of stockholders'
equity (Note I).
The Company may borrow up to $250,000,000 at floating rates under the terms
of a revolving credit and term loan facility. The agreement contains provisions
regarding minimum net worth requirements and certain indebtedness limitations
which would limit the amount available for future borrowings. Commitment fees
are paid based on the used and unused portions of the facility. The facility is
available through January 13, 2000. No amounts were outstanding under this
credit agreement at September 30, 1995 or 1994.
The aggregate principal amounts of long-term debt due in each of the five
fiscal years 1996 through 2000 are $15,709,000, $10,138,000, $109,528,000,
$10,106,000 and $7,080,000, respectively.
Based primarily on dealer quotes, the fair value of long-term borrowings
was approximately $353,000,000 and $478,000,000 at September 30, 1995 and 1994,
respectively.
The weighted average interest rate on short-term borrowings was
approximately 7% and 8% at September 30, 1995 and 1994, respectively.
Cash paid for interest during 1995, 1994 and 1993 totalled $37,912,000,
$41,663,000 and $41,970,000, respectively. The Company capitalized no interest
in 1995, 1994 or 1993.
F-8
39
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. PENSION PLANS & POSTRETIREMENT BENEFITS
PENSION PLANS
Net periodic pension cost was comprised of the following elements:
YEARS ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
Current year service cost.......................... $ 7,629 $ 8,090 $ 9,254
Interest accrued on pension obligations............ 12,493 11,675 9,964
Actual return on plan assets....................... (25,320) (11,431) (12,357)
Net amortization and deferral...................... 10,606 (2,062) (1,580)
------ ------ ------
Net periodic pension cost................ $ 5,408 $ 6,272 $ 5,281
====== ====== ======
The following table sets forth the funded status of pension plans:
SEPTEMBER 30,
---------------------
1995 1994
---- ----
(DOLLARS IN
THOUSANDS)
Actuarial present value of projected benefit obligations....... $182,771 $155,253
Plan assets at fair value (primarily fixed-income and equity
securities).................................................. 187,339 163,651
-------- --------
Excess of plan assets over projected benefit obligations....... 4,568 8,398
Unrecognized net gain.......................................... (19,012) (24,084)
Unrecognized prior service cost................................ 3,512 3,066
Unrecognized net asset being amortized over 16 years........... (6,013) (6,906)
-------- --------
Net deferred pension credit (included in other
liabilities)....................................... $(16,945) $(19,526)
======== ========
The Company has trusteed, non-contributory pension plans covering most
employees in the United States and certain foreign subsidiaries. Benefits
provided under the Company's defined benefit pension plans are primarily based
on the employee's years of service and compensation. The Company's funding
policy is to contribute annually amounts based upon actuarial and economic
assumptions designed to achieve adequate funding of projected benefit
obligations.
Pension benefits accrue under several benefit plans, including the
following two plans: the Cash Balance Plan (CBP), a defined benefit pension
plan, and the Employee Stock Ownership Plan (ESOP). In November 1988, the ESOP
was funded with the Company's newly issued Series B ESOP Convertible Preferred
Stock, which was acquired with $75,000,000 borrowed by the ESOP (Notes G and I).
At September 30, 1995 and 1994, the projected benefit obligations included
accumulated benefit obligations of $152,422,000 and $132,823,000, respectively,
of which $142,296,000 and $123,694,000 were vested, respectively.
The following weighted average rates were used in the calculations:
YEARS ENDED
SEPTEMBER 30,
---------------
1995 1994
---- ----
Discount rate........................................................ 7.3 % 8.0 %
Expected rate of return on plan assets............................... 8.9 % 9.0 %
Assumed rate of increase in compensation............................. 5.1 % 5.5 %
F-9
40
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has defined benefit postretirement plans that provide certain
health care and life insurance benefits for retired employees. Substantially all
U.S. employees become eligible for these benefits if they have met certain age
and service requirements at retirement. The Company funds the plans as claims or
insurance premiums are incurred.
Effective October 1, 1992, the Company adopted the provisions of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
which requires accrual of these benefits during the years an employee provides
service. Prior to October 1, 1992, the expense for these benefits was recognized
as actual claims or insurance premiums were incurred. As of October 1, 1992, the
cumulative effect of adopting this change was a $43,200,000 after-tax charge. In
addition to the one-time charge upon adoption, the effect of the change in
accounting increased 1993 pre-tax expense by $800,000, resulting in a pre-tax
net periodic postretirement benefit cost of $5,500,000.
Net periodic postretirement benefit cost was comprised of the following
elements:
YEARS ENDED
SEPTEMBER 30,
----------------------------
1995 1994 1993
------ ------ ------
(DOLLARS IN THOUSANDS)
Current year service cost....................................................... $ 672 $ 709 $ 580
Interest accrued on postretirement benefit obligations.......................... 5,301 4,776 4,920
Net amortization................................................................ -- 221 --
------ ------ ------
Net periodic postretirement benefit cost........................................ $5,973 $5,706 $5,500
====== ====== ======
The following table sets forth the funded status of the postretirement
benefit plans:
SEPTEMBER 30,
-------------------------
1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
Accumulated postretirement benefit obligations:
Retirees....................................................................... $ 58,526 $ 51,489
Fully eligible active plan participants........................................ 6,262 4,716
Other active plan participants................................................. 13,221 10,712
-------- --------
78,009 66,917
Plan assets at fair value........................................................ -- --
-------- --------
Excess of accumulated postretirement benefit obligations over plan assets........ (78,009) (66,917)
Unrecognized net loss (gain)..................................................... 10,749 (81)
Unrecognized prior service cost.................................................. 95 (85)
-------- --------
Accrued postretirement benefit cost (included in other liabilities)...... $(67,165) $(67,083)
======== ========
Health care cost trend rate assumptions have a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of September 30, 1995 and 1994 by
approximately $6,700,000 and $5,400,000, respectively, and the aggregate of the
service and interest cost components of net periodic postretirement benefit cost
for the years then ended by approximately $600,000 and $500,000, respectively.
The following rates were used in the calculations:
YEARS ENDED
SEPTEMBER 30,
---------------
1995 1994
---- ----
Discount rate............................................................................. 7.0% 8.3%
Assumed rate of increase in compensation.................................................. 5.3% 6.0%
Assumed average annual rate of increase in health care benefits........................... 10.5% 11.5%
Annual decrease in assumed rate of increase in health care benefits....................... 1.0% 1.0%
Assumed ultimate trend rate............................................................... 5.0% 6.3%
Assumed ultimate trend rate to be reached in year......................................... 2003 2002
F-10
41
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
I. STOCKHOLDERS' EQUITY
The following table summarizes the changes in stockholders' equity for each
of the three years in the period ended September 30, 1995:
YEARS ENDED SEPTEMBER 30,
--------------------------------------
1995 1994 1993
---------- --------- ---------
(DOLLARS IN THOUSANDS)
PREFERRED STOCK
Beginning of year........................................................... $ 75,336 $ 75,336 $ 75,336
---------- --------- ---------
End of year............................................................... $ 75,336 $ 75,336 $ 75,336
---------- --------- ---------
PREFERRED TREASURY STOCK
Beginning of year........................................................... $ (4,003) $ (3,003) $ (2,693)
Purchase of treasury stock.................................................. (833) (1,000) (310)
---------- --------- ---------
End of year............................................................... $ (4,836) $ (4,003) $ (3,003)
---------- --------- ---------
COMMON STOCK
Beginning of year........................................................... $ 67,775 $ 33,887 $ 33,887
Two-for-one stock split..................................................... -- 33,888 --
---------- --------- ---------
End of year............................................................... $ 67,775 $ 67,775 $ 33,887
---------- --------- ---------
ADDITIONAL PAID-IN CAPITAL
Beginning of year........................................................... $ 3,783 $ 33,621 $ 30,324
Sale of treasury stock to the Company's savings plans....................... 3,576 633 861
Issuance of treasury stock under employee compensation plans................ 10,440 3,417 2,436
Two-for-one stock split..................................................... -- (33,888) --
---------- --------- ---------
End of year............................................................... $ 17,799 $ 3,783 $ 33,621
---------- --------- ---------
RETAINED EARNINGS
Beginning of year........................................................... $ 916,942 $ 861,803 $ 873,422
Net income.................................................................. 171,932 78,691 11,301
Common dividends paid ($0.60, $0.53, $0.52 per share)....................... (22,841) (19,969) (19,288)
Preferred dividends paid to ESOP, net of tax benefit........................ (3,551) (3,583) (3,632)
---------- --------- ---------
End of year............................................................... $1,062,482 $ 916,942 $ 861,803
---------- --------- ---------
COMMON TREASURY STOCK
Beginning of year........................................................... $ (467,171) $(475,863) $(490,132)
Purchase of treasury stock.................................................. (75,418) -- (57)
Sale of treasury stock to the Company's savings plans....................... 4,348 625 1,896
Issuance of treasury stock under employee compensation plans................ 9,490 8,067 12,430
---------- --------- ---------
End of year............................................................... $ (528,751) $(467,171) $(475,863)
---------- --------- ---------
UNEARNED COMPENSATION
Beginning of year........................................................... $ (7,884) $ (7,321) $ (4,692)
Issuance of treasury stock under employee compensation plans................ (8,196) (4,039) (4,609)
Amortization................................................................ 5,246 3,476 1,980
---------- --------- ---------
End of year............................................................... $ (10,834) $ (7,884) $ (7,321)
---------- --------- ---------
DEFERRED EMPLOYEE BENEFITS
Beginning of year........................................................... $ (67,403) $ (68,781) $ (70,050)
Principal payment by ESOP under guaranteed loan............................. 1,496 1,378 1,269
---------- --------- ---------
End of year............................................................... $ (65,907) $ (67,403) $ (68,781)
---------- --------- ---------
UNREALIZED GAIN ON MARKETABLE SECURITIES (NOTE D)
Beginning of year........................................................... $ 28,787 $ -- $ --
Unrealized holding gain..................................................... 3,236 28,787 --
---------- --------- ---------
End of year............................................................... $ 32,023 $ 28,787 $ --
---------- --------- ---------
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Beginning of year........................................................... $ 16,327 $ (7,406) $ 47,553
Foreign currency translation adjustments.................................... 23,586 23,733 (54,959)
---------- --------- ---------
End of year............................................................... $ 39,913 $ 16,327 $ (7,406)
---------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY, END OF YEAR....................................... $ 685,000 $ 562,489 $ 442,273
========== ========= =========
F-11
42
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHARES OF STOCK
YEARS ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
---- ---- ----
PREFERRED STOCK
Beginning of year...................................... 75,336 75,336 75,336
---------- ---------- ----------
End of year.......................................... 75,336 75,336 75,336
========== ========== ==========
PREFERRED TREASURY STOCK
Beginning of year...................................... 4,504 3,686 3,230
Purchased.............................................. 532 818 456
---------- ---------- ----------
End of year.......................................... 5,036 4,504 3,686
========== ========== ==========
COMMON STOCK
Beginning of year...................................... 67,774,968 33,887,484 33,887,484
Two-for-one stock split................................ -- 33,887,484 --
---------- ---------- ----------
End of year.......................................... 67,774,968 67,774,968 33,887,484
========== ========== ==========
COMMON TREASURY STOCK
Beginning of year...................................... 29,783,722 15,161,103 15,560,213
Purchased.............................................. 1,525,036 -- 1,300
Issued................................................. (915,791) (278,550) (400,410)
Two-for-one stock split................................ -- 14,901,169 --
---------- ---------- ----------
End of year.......................................... 30,392,967 29,783,722 15,161,103
========== ========== ==========
In November 1995, the Company declared a dividend of one Preferred Stock
Purchase Right (Right) for each outstanding share of Cabot common stock. The
Rights are not presently exercisable. Each Right entitles the holder, upon the
occurrence of certain specified events, to purchase from Cabot one one-hundredth
of a share of Series A Junior Participating Preferred Stock at a purchase price
of $200 per share. The Rights further provide that each Right will entitle the
holder, upon the occurrence of certain other specified events, to purchase from
Cabot, Cabot common stock having a value of twice the exercise price of the
Right and, upon the occurrence of certain other specified events, to purchase
from another person into which Cabot was merged or which acquired 50% or more of
Cabot's assets or earnings power, common stock of such other person having a
value of twice the exercise price of the Right. The Rights may be generally
redeemed by Cabot at a price of $0.01 per Right. The Rights expire on November
10, 2005.
The Company redeemed the rights issued under the 1986 shareholder rights
plan from shareholders of record on November 24, 1995, for a redemption payment
equal to $0.05 per share.
During fiscal 1989, the Company placed 75,336 shares of its Series B ESOP
Convertible Preferred Stock with the Company's Employee Stock Ownership Plan
(ESOP) for cash at a price of $1,000 per share. Each share of the Series B ESOP
Convertible Preferred Stock is convertible into 43.735 shares of the Company's
common stock subject to certain events and anti-dilution adjustment provisions,
and carries voting rights on an "as converted" basis. The trustee for the ESOP
has the right to cause the Company to redeem shares sufficient to provide for
periodic distributions to plan participants. Such shares shall be redeemed at
their fair market value, and may be redeemed by the Company for cash, shares of
the Company's common stock, or a combination thereof at the Company's option.
Each share is redeemable at the option of the Company at a price of $1,031. The
redemption price declines annually until it becomes $1,000 on and after November
19, 1998, plus accrued but unpaid dividends to the redemption date.
F-12
43
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The issued shares of Series B ESOP Convertible Preferred Stock are entitled
to receive preferential and cumulative quarterly dividends, and rank as to
dividends and liquidation prior to the Company's Series A Junior Participating
Preferred Stock and common stock. At September 30, 1995, 3,075,000 shares of the
Company's common stock were reserved for conversion of the Series B ESOP
Convertible Preferred Stock.
On July 27, 1994, a two-for-one stock split in the form of a stock dividend
was authorized, payable to stockholders of record on August 9, 1994. A total of
33,887,484 shares were issued in connection with the split. Also, $33,887,484
was reclassified from additional paid-in capital to common stock. All common
share and per share amounts in these financial statements have been restated to
reflect the split where appropriate.
In September 1995, the Company commenced a program to purchase up to
3,000,000 of the Company's common shares. As of September 30, 1995, 581,000
shares had been purchased under that program.
J. SAVINGS & INCENTIVE COMPENSATION PLANS
During 1994, the Company amended its Profit Sharing and Savings Plan
(PSSP), which covers salaried employees of most U.S. operations, effective
October 1, 1994. Under the amended plan, now called the Cabot Retirement
Incentive Savings Plan (CRISP), the Company makes matching contributions of at
least 75% of a participant's contribution of up to 7.5% of the participant's
eligible compensation, subject to limitations required by governmental laws or
regulations. Accrued contributions to the CRISP in 1995 were $3,886,000.
Accrued contributions of the Company under the PSSP, which were based upon
an annual return on stockholders' equity, were $5,707,000 and $1,178,000 in 1994
and 1993, respectively.
The Company has an Equity Incentive Plan for key employees. Under this
plan, participants may be granted various types of stock and stock-based awards.
During 1988 through 1991, the awards granted consisted of stock options,
performance appreciation rights (PARs) and tandem units which may be exercised
as stock options or PARs. These awards were granted at fair market value of
Cabot's stock at date of grant, and vested ratably on each of the next four
anniversaries of the award. In 1992 through 1995, awards consisted of common
stock of the Company which employees could elect to receive in the form of
restricted stock purchased at a price equal to 50% of the fair market value on
the date of the award, nonqualified stock options at fair market value of
Cabot's stock on the date of the award, or a combination of one-half of each.
Variations on these awards were made to international employees in order to try
to provide results comparable to U.S. employees. The awards vest on the third
anniversary of the award for employees then employed by the Company or a
subsidiary.
F-13
44
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the Equity Incentive Plan's activity from
September 30, 1992 through September 30, 1995:
STOCK OPTIONS
AND
RESTRICTED STOCK PARS PRICE RANGE
---------------- ------ -----------------
September 30, 1992......................... 1,971,922 5,274 $12.63 to $23.38
Granted.................................. 431,870 -- $21.94 to $22.82
Exercised................................ (100,086) (1,120) $14.63 to $20.94
Cancelled................................ (75,428) -- $14.00 to $23.38
--------- ------ ----------------
September 30, 1993......................... 2,228,278 4,154 $12.63 to $23.38
Granted.................................. 484,090 -- $24.56 to $27.94
Exercised................................ (110,202) (950) $12.63 to $20.94
Cancelled................................ (139,420) -- $15.19 to $24.56
--------- ------ ----------------
September 30, 1994......................... 2,462,746 3,204 $12.63 to $27.94
Granted.................................. 472,200 -- $40.00
Exercised................................ (177,574) -- $12.63 to $23.38
Vested................................... (311,606) -- $14.00 to $24.56
Cancelled................................ (284,224) -- $15.19 to $23.38
--------- ------ ----------------
September 30, 1995......................... 2,161,542 3,204 $14.31 to $40.00
========= ====== ================
The options in the table above expire at various dates through September
2002. Options for 1,020,565 shares were exercisable at prices ranging from
$14.31 to $23.38 at September 30, 1995. During 1995, Cabot purchased
approximately 57,000 options, included in the "Exercised" caption, at the then
current market value less the exercise price. The Company had reserved 3,635,336
shares of common stock for issuance under the plan at September 30, 1995. There
were 456,338 shares available for future grants at September 30, 1995.
The Company has not adopted the recently issued SFAS No. 123, "Accounting
for Stock-based Compensation," which is required to be adopted by fiscal 1997.
The Company currently intends to continue to record compensation based on the
provisions of Accounting Principles Board Opinion 25, "Accounting for Stock
Issued to Employees," as allowed by SFAS No. 123. Although the Company has not
determined the ultimate impact of adopting SFAS No. 123 on its present
disclosure, it does not believe, based on the number of options previously
granted, that the adoption will have a material impact on its current
disclosure.
K. INCOME TAXES
In the fourth quarter of 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," retroactive to October 1, 1992. The Company
recognized the cumulative effect of adoption, which resulted in an increase to
net income for the year ended September 30, 1993, of approximately $17,100,000.
Income before income taxes and the cumulative effect of accounting changes
was as follows:
YEARS ENDED SEPTEMBER 30,
-----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
Domestic............................................ $102,980 $ 30,388 $32,780
Foreign............................................. 153,362 87,937 35,120
-------- -------- --------
Total..................................... $256,342 $118,325 $67,900
======== ======== ========
F-14
45
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of taxes on income is as follows:
YEARS ENDED SEPTEMBER 30,
-----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
U.S. federal and state:
Current........................................... $ 64,204 $ (3,131) $16,798
Deferred.......................................... (25,794) 15,644 (5,305)
-------- -------- --------
Total..................................... $ 38,410 $ 12,513 $11,493
======== ======== ========
Foreign:
Current........................................... $ 61,039 $ 21,010 $26,077
Deferred.......................................... 1,631 11,440 (6,871)
-------- -------- --------
Total..................................... $ 62,670 $ 32,450 $19,206
-------- -------- --------
Total U.S. and Foreign.................... $101,080 $ 44,963 $30,699
======== ======== ========
The provision for income taxes at the Company's effective tax rate differed
from the provision for income taxes at the statutory rate as follows:
YEARS ENDED SEPTEMBER 30,
----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS)
Computed tax expense at the expected statutory
rate............................................... $ 89,720 $41,414 $23,596
Foreign income:
Impact of taxation at different rates, repatriation
and other....................................... 5,407 (257) 2,412
Impact of foreign losses for which a current tax
benefit is not available........................ 529 701 2,158
State taxes, net of federal effect................... 5,560 2,655 407
Foreign sales corporation............................ (1,500) (1,158) (1,000)
Increase in U.S. tax rate............................ -- -- (812)
Other, net........................................... 1,364 1,608 3,938
-------- ------- -------
Provision for income taxes......................... $101,080 $44,963 $30,699
======== ======= =======
F-15
46
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of deferred income taxes were as follows:
SEPTEMBER 30,
---------------------
1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
Deferred tax assets:
Property, plant and equipment................................ $ 28,467 $ 23,257
Pension and other benefits................................... 44,640 43,572
Environmental issues......................................... 18,008 14,761
Restructuring charges........................................ 5,633 10,337
Investments.................................................. 10,850 --
State and local taxes........................................ 5,449 1,804
Net operating loss and other tax carryforwards............... 12,132 14,568
Other........................................................ 33,373 25,338
-------- --------
Subtotal.................................................. 158,552 133,637
-------- --------
Valuation allowances........................................... (9,318) (14,915)
-------- --------
Total deferred tax assets............................ $149,234 $118,722
-------- --------
Deferred tax liabilities:
Property, plant and equipment................................ $ 71,629 $ 72,379
Pension and other benefits................................... 10,235 10,967
Investments.................................................. 36,629 34,480
Other........................................................ 100,532 99,894
-------- --------
Total deferred tax liabilities....................... $219,025 $217,720
======== ========
The valuation allowance for deferred tax assets decreased $5,597,000 in
1995 primarily because of improved business results which allowed realization of
deferred tax assets for which a valuation allowance had been previously
established. The major component of the valuation allowance at September 30,
1995 relates to the uncertainty of realizing certain foreign deferred tax
assets.
Approximately $45,415,000 of net operating losses and other tax
carryforwards remain at September 30, 1995, $24,005,000 of which expire in the
years 1996 through 2002, and $21,410,000 of which can be carried forward
indefinitely. The benefits of these carryforwards are dependent on taxable
income during the carryforward period in those foreign jurisdictions wherein
they arose, and accordingly, a valuation allowance has been provided where the
Company has determined that it is more likely than not that the carryforwards
will not be utilized.
United States income tax returns for fiscal years 1990 and 1991 are
currently under examination by the Internal Revenue Service. Assessments, if
any, are not expected to have a material adverse effect on the financial
statements.
Provision has not been made for U.S. income taxes or foreign withholding
taxes on approximately $130,000,000 of undistributed earnings of foreign
subsidiaries as these earnings are considered indefinitely reinvested. These
earnings could become subject to U.S. income taxes and foreign withholding taxes
(subject to a reduction for foreign tax credits) if they were remitted as
dividends, if foreign earnings were loaned to the Company or a U.S. subsidiary,
or if the Company should sell its stock in the subsidiaries. However, the
Company believes that U.S. foreign tax credits would largely eliminate any U.S.
income tax and offset any foreign withholding tax that might otherwise be due.
F-16
47
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash paid for income taxes during 1995, 1994 and 1993 totalled $60,340,000,
$23,855,000 and $25,934,000, respectively.
L. COMMITMENTS & CONTINGENCIES
LEASE COMMITMENTS
The Company leases certain transportation vehicles, warehouse facilities,
office space, machinery and equipment under cancelable and non-cancelable
leases, most of which expire within 10 years and may be renewed by the Company.
Rent expense under such arrangements totalled $16,545,000, $17,638,000 and
$14,514,000 in 1995, 1994 and 1993, respectively. Future minimum rental
commitments under non-cancelable leases are as follows:
(DOLLARS IN THOUSANDS)
1996.................................... $12,108
1997.................................... 10,499
1998.................................... 9,503
1999.................................... 6,918
2000.................................... 6,548
2001 and thereafter..................... 23,635
-------
$69,211
=======
OTHER LONG-TERM COMMITMENTS
During 1995, the Company entered into long-term supply agreements of more
than six years with certain North American tire customers. The contracts are
designed to provide such customers with agreed upon amounts of carbon black at
prices based on agreed upon formulae.
Also during 1995, the Company agreed to participate as a 10 percent owner
in a proposed liquefied natural gas plant in Trinidad, and to purchase 60
percent of the LNG produced by the plant. Once the plant is operational, it is
estimated that it will produce 3.3 trillion cubic feet of gas over a period of
20 years. All costs related to this project to date have been charged to expense
as incurred. LNG from the project is not expected to be available until fiscal
year 1999.
CONTINGENCIES
The Company is a defendant or potentially responsible party in various
lawsuits and environmental proceedings wherein substantial amounts are claimed
or at issue.
Fumed silica supplied by Cabot was used by others in the manufacture of
silicone breast implant envelopes. There are currently pending more than 10,000
lawsuits in state and federal courts alleging injuries against various parties
arising from the use of silicone breast implants. Cabot had been named as a
defendant in fewer than 100 breast implant lawsuits. As a result of voluntary
dismissals (some without prejudice to the right of the plaintiff to refile a
complaint) and summary judgments granted to Cabot, Cabot is currently a
defendant in only one such lawsuit. Cabot has not made any settlement payments
in connection with any breast implant suits. Cabot believes that it has adequate
defenses in the lawsuit in which it is known to be a defendant. However, the
scientific, legal and societal issues raised by these cases are complex and the
outcome is uncertain. Cabot, therefore, cannot predict with any assurance the
course this lawsuit will take, the number of cases to which Cabot will be added
as a defendant, the amount of damages, if any, that may be assessed against
Cabot or the defense costs that will be incurred by Cabot.
F-17
48
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of September 30, 1995, approximately $51,580,000 was accrued for
environmental matters, primarily related to divested businesses. The amount
represents the Company's current best estimate of its share of costs likely to
be incurred based on its analysis of the extent of cleanup required, alternative
cleanup methods available, abilities of other responsible parties to contribute
and its interpretation of applicable laws and regulations at each site. The
Company reviews the adequacy of this reserve as circumstances change at
individual sites. Included in other charges are environmental expenses of
$17,000,000, $15,000,000 and $1,000,000 in 1995, 1994 and 1993, respectively.
In the opinion of the Company, although final settlement of these suits and
claims may impact the Company's financial statements in a particular period,
they will not, in the aggregate, have a material adverse effect on the Company's
financial position.
M. FINANCIAL INSTRUMENTS & CONCENTRATIONS OF CREDIT RISK
The Company uses financial instruments, primarily forward contracts,
options and swaps in its management of foreign currency and interest rate
exposures. These financial instruments hedge transactions and balances
consistent with the Company's currency and interest rate exposures. The Company
does not purchase or issue financial instruments for trading purposes. None of
the Company's off-balance-sheet financial instruments would result in a
significant loss to the Company if the counterparty failed to perform in
accordance with the terms of the agreements.
FOREIGN EXCHANGE
The Company's forward foreign exchange contracts and options do not subject
the Company to risk due to exchange rate movements because gains and losses on
these contracts offset losses and gains on the assets, liabilities, transactions
and cash flows being hedged. The Company had $59,567,000 of foreign exchange
contracts outstanding at September 30, 1995. The fair value of such contracts,
which was the replacement value, represented a net unrealized gain of
approximately $2,679,000 as of September 30, 1995. The Company purchased foreign
currency put options at a cost of $3,200,000 during 1995. The cost of these
options will be recognized as cost of sales, along with any gains, over the
option period. Forward exchange and option contracts generally have maturities
which do not exceed twelve months. See Note A for information on the Company's
policy on forward exchange contract and currency option gains and losses.
INTEREST RATE
During 1995, the Company entered into an interest rate swap agreement to
fix the interest rate on certain borrowings expected to be refinanced in 1997.
Pursuant to the agreement, beginning on June 17, 1998, the Company will pay an
average fixed rate of 7.375% on a notional $100,000,000 and receive a floating
rate based on London Interbank Offered Rates (LIBOR) as determined at six month
intervals through December 17, 2007. During 1993, the Company entered into swap
agreements to convert a portion of its fixed-rate borrowings to floating-rate
borrowings.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which subject the Company to concentrations of credit
risk consist principally of trade receivables. International tire manufacturers
comprise a significant portion of the Company's carbon black customer base. The
Company had trade receivables of approximately $68,105,000 and $52,641,000 from
international tire manufacturers at September 30, 1995 and 1994, respectively.
Although the Company's exposure to credit risk associated with nonpayment by
tire manufacturers is affected by conditions or occurrences within the tire
industry, trade receivables from the international tire manufacturers were
current at September 30, 1995, and no manufacturer exceeded 7.5% of the
Company's receivables at that date.
F-18
49
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
N. FINANCIAL INFORMATION BY INDUSTRY SEGMENT & GEOGRAPHIC AREA
Financial information by industry segment for 1991 through 1995, as set
forth in Part II, Item 7. of the Company's Form 10-K, and on page 19 of the
annual report, is an integral part of these financial statements. Energy segment
sales include sales to a major customer in the amount of $250,439,000,
$272,245,000 and $265,800,000, in 1995, 1994 and 1993, respectively. Transfers
between geographic areas are recorded at cost plus mark-up or at market.
Financial information by geographic area is as follows:
YEARS ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
SALES
United States:
Sales, excluding export sales
Specialty Chemicals and Materials............... $ 605.7 $ 563.2 $ 521.4
Energy.......................................... 342.6 438.7 422.5
Export sales....................................... 93.7 85.0 73.9
-------- -------- --------
1,042.0 1,086.9 1,017.8
Europe............................................... 642.9 503.8 512.3
Other areas.......................................... 249.5 177.1 156.9
-------- -------- --------
Total...................................... 1,934.4 1,767.8 1,687.0
Less: Eliminations................................... 104.0 88.0 72.7
-------- -------- --------
Net sales.................................. $1,830.4 $1,679.8 $1,614.3
======== ======== ========
OPERATING PROFIT
United States:
Specialty Chemicals and Materials(a)............... $ 155.9 $ 108.5 $ 105.8
Energy............................................. 12.7 18.4 16.7
Europe(a)............................................ 103.0 49.0 (21.4)
Other areas(a)....................................... 27.9 8.4 17.3
-------- -------- --------
Total operating profit..................... 299.5 184.3 118.4
Interest expense..................................... 35.6 41.7 44.0
Unallocated corporate expenses, net(b)............... 27.7 23.4 20.7
Gain on sale of safety business...................... (32.6) -- --
Adjustment of reserves related to divested
businesses......................................... 12.5 0.8 (14.2)
-------- -------- --------
Income before income taxes................. $ 256.3 $ 118.4 $ 67.9
======== ======== ========
F-19
50
CABOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
IDENTIFIABLE ASSETS
United States:
Specialty Chemicals and Materials.................. $ 426.9 $ 482.7 $ 480.9
Energy............................................. 133.8 127.4 116.1
Europe............................................... 465.3 444.3 437.2
Other areas.......................................... 275.7 245.2 199.3
General corporate(c)................................. 253.7 231.0 89.3
Equity in affiliates -- United States................ -- -- 63.6
Equity in affiliates -- Europe....................... 26.9 22.3 21.8
Equity in affiliates -- Other areas.................. 72.0 63.9 81.3
-------- -------- --------
Total...................................... $1,654.3 $1,616.8 $1,489.5
======== ======== ========
- ---------------
(a) Operating profit in 1993 included losses from restructuring of the Specialty
Chemicals and Materials Group of $2.9 in the United States, $43.8 in Europe
and $0.7 in Other areas.
(b) Unallocated corporate expenses, net, include corporate management costs
reduced by investment income.
(c) General corporate assets include cash, temporary cash investments,
investments other than equity basis, income taxes receivable, deferred taxes
and headquarters' assets.
O. UNAUDITED QUARTERLY FINANCIAL INFORMATION
Unaudited financial results by quarter for the fiscal years ended September
30, 1995 and 1994 are summarized below and should be read in conjunction with
Management's Discussion and Analysis of Results of Operations and Financial
Condition.
DEC MARCH JUNE SEPT YEAR
------ ------ ------ ------ --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
FISCAL 1995
Net sales............................ $428.0 $481.3 $494.8 $426.3 $1,830.4
Cost of sales........................ $296.8 $329.4 $336.1 $296.7 $1,259.0
Net income........................... $ 33.9 $ 46.4 $ 47.0 $ 44.6(a) $ 171.9
Income applicable to common shares... $ 33.0 $ 45.5 $ 46.1 $ 43.7 $ 168.4
------ ------ ------ ------ --------
Income per common share (primary).... $ 0.85 $ 1.17 $ 1.18 $ 1.13 $ 4.35
====== ====== ====== ====== ========
FISCAL 1994
Net sales............................ $398.5 $434.9 $428.8 $417.7 $1,679.8
Cost of sales........................ $296.8 $319.3 $312.3 $305.9 $1,234.3
Net income........................... $ 16.0 $ 22.3 $ 22.0 $ 18.4(b) $ 78.7
Income applicable to common shares... $ 15.1 $ 21.4 $ 21.1 $ 17.5 $ 75.1
------ ------ ------ ------ --------
Income per common share (primary).... $ 0.39 $ 0.56 $ 0.55 $ 0.45 $ 1.96
====== ====== ====== ====== ========
- ---------------
(a) Includes $14.5 after-tax gain on sale of safety business and $7.9 after-tax
charge for environmental reserves.
(b) Includes $6.8 after-tax charge for environmental reserves and $6.3 after-tax
gain on resolution of matters from divested energy businesses.
F-20
51
MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying financial statements were prepared by Cabot Corporation in
conformity with generally accepted accounting principles. The Company's
management is responsible for the integrity of these statements and of the data,
estimates and judgments that underlie them.
Cabot Corporation maintains a system of internal accounting controls
designed to provide reasonable assurance that the Company's assets are
safeguarded from loss or unauthorized use, that transactions are properly
authorized and recorded, and that financial records are reliable and adequate
for public reporting. The standard of reasonable assurance is based on
management's judgment that the cost of such controls should not exceed their
associated benefits. The system is monitored and evaluated on an ongoing basis
by management in conjunction with the Company's internal audit staff,
independent accountants, and the Audit Committee of the Board of Directors.
Coopers & Lybrand, L.L.P., independent accountants, were engaged by the
Company to audit these financial statements. Their audit was conducted in
accordance with generally accepted auditing standards and included a study and
evaluation of the Company's system of internal accounting controls, selected
tests of that system, and related audit procedures as they consider necessary to
render their opinion.
The Audit Committee of the Board of Directors provides general oversight
responsibility for the financial statements. Composed entirely of Directors who
are not employees of the Company, the Committee meets periodically with Company
management, internal auditors and the independent accountants to review the
quality of the financial reporting and internal controls as well as the results
of the auditing efforts. The internal auditors and independent accountants have
full and direct access to the Audit Committee, with and without management
present.
/s/ Samuel W. Bodman
Samuel W. Bodman
Chief Executive Officer
/s/ Kenyon C. Gilson
Kenyon C. Gilson
Chief Financial Officer
/s/ Paul J. Gormisky
Paul J. Gormisky
Chief Accounting Officer
F-21
52
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE DIRECTORS AND STOCKHOLDERS OF CABOT CORPORATION
We have audited the accompanying consolidated balance sheets of Cabot
Corporation as of September 30, 1995 and 1994 and the related consolidated
statements of income and cash flows for each of the three fiscal years in the
period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cabot
Corporation as of September 30, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three fiscal years in the
period ended September 30, 1995, in conformity with generally accepted
accounting principles.
As discussed in Notes H and K to the Consolidated Financial Statements, the
Company changed its methods of accounting for postretirement benefits other than
pensions and for income taxes, respectively, in fiscal 1993.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 30, 1995, except for the information in Note I,
for which the date is December 1, 1995
F-22
53
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
- --------------------------------------------------------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended SEPTEMBER 30, 1995 Commission File Number 1-5667
- --------------------------------------------------------------------------------
CABOT CORPORATION
(Exact Name of Registrant as Specified in Charter)
EXHIBITS
- --------------------------------------------------------------------------------
EXHIBIT INDEX
- --------------------------------------------------------------------------------
EXHIBIT
NUMBER DESCRIPTION
- --------------------------------------------------------------------------------------------------
3 (a) -- Certificate of Incorporation of Cabot Corporation restated effective October
24, 1983, as amended February 14, 1985, December 3, 1986, February 19, 1987,
November 18, 1988, and November 24, 1995.
10 (b)(ii) -- Amendment No. 1, dated January 13, 1995, to Credit Agreement, dated as of
January 13, 1994, among Cabot Corporation and 11 banks and Morgan Guaranty
Trust Company of New York, as agent for the banks.
10 (e)(v)* -- Cabot Corporation Deferred Compensation Plan, dated January 1, 1995.
11 -- Statement Re Computation of Per Share Earnings.
12 -- Statement Re Computation of Ratio of Earnings to Fixed Charges.
21 -- List of Significant Subsidiaries.
24 -- Power of attorney for signing of this Annual Report on Form 10-K.
27 -- Financial Data Schedule.
* Management contract or compensatory plan or arrangement.
1
EXHIBIT 3 (a)
-------------
RESTATED CERTIFICATE OF INCORPORATION
OF
CABOT CORPORATION
(Originally incorporated July 14, 1960)
Pursuant to Section 245, Subchapter VIII, Chapter 1, Title 8
of the
General Corporation Law of Delaware
CABOT CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware, by authority of its Board of
Directors set forth in a vote duly adopted on October 14, 1983, restates and
integrates its Certificate of Incorporation to read in full as herein set
forth:
FIRST: The name of this corporation is
CABOT CORPORATION
SECOND: Its principal office in the State of Delaware is located at
No. 100 West Tenth Street, in the City of Wilmington, County of New Castle.
The name and address of its resident agent is The Corporation Trust Company,
No. 100 West Tenth Street, Wilmington, Delaware 19801.
THIRD: The nature of the business of this corporation and the objects
or purposes to be transacted, promoted and carried on by it are as follows:
2
1. To acquire, by merger, consolidation, or otherwise, the businesses
now owned and carried on by the following corporations organized and existing
under the Laws of the Commonwealth of Massachusetts:
(a) Godfrey L. Cabot, Inc.
(b) Cabot Carbon Company
(c) Cabot Shops, Inc.
(d) Cabot Gasoline Corporation
together with all their property, rights, privileges, powers and franchises;
and to assume in connection therewith all of the debts, liabilities and duties
of the said Massachusetts corporations.
2. To manufacture, produce, compound, refine, buy or otherwise
acquire, to sell or otherwise dispose of, and to deal in chemicals of every
description, chemical mixtures, medicines, pharmaceutical supplies, chemical
and medicinal preparations, drugs (except as forbidden by law), and any other
chemical products in the form of raw materials or otherwise, and by-products
derived from the manufacture thereof or made therefrom, carbon black, furnace
black, dye-stuffs, cements, minerals, superphosphates, soap, fertilizers,
paints, varnishes, pigments, polishes, stains, oils, acids, alcohols, coal,
coke, coal-tar, coal-tar products and derivatives, peat, peat products, rubber,
rubber goods, synthetic rubber, butadiene, and other petrochemicals of every
description, and all oher products related to any one or more of the foregoing.
2
3
3. To prospect, explore, drill for, produce and accumulate oil and
gas, liquified petroleum gas and natural gasoline; to buy, lease or otherwise
acquire, to sell, lease or otherwise dispose of, and to deal in oil, gas,
natural gasoline and any and all materials incidental to or necessary for the
production of oil, gas, natural gasoline, and all the by-products thereof, and
oil and gas rights, privileges and leases of all kinds and descriptions.
4. To mine, produce, manufacture, refine, handle, buy, or otherwise
acquire, and to sell or otherwise dispose of, and to deal in elements,
minerals, metals, ores, precious stones and base materials of every nature and
products using the same.
5. To buy, sell, manufacture, fabricate, produce and deal in steel,
iron, and other metals, metal products, and all other building materials; to
construct, maintain, work or operate, plants, mills, furnaces, factories,
engines, boilers, machinery and tools; and to carry on the business of
mechanical engineers and dealers in machinery and manufacturers of plants,
engines and other machinery, tool makers, brass founders, metal workers, boiler
makers, mill-wrights, machinists, iron and steel converters, smiths, builders,
carpenters, metallurgists, and electrical, civil, mechanical and water supply
engineers.
6. To conduct research, scientific or technical investigations and
experiments, development work and pilot plant work, and training and
educational programs, and to seek for and develop inventions, processes,
improvements, new or improved products, and uses for products, new or improved
manufacturing and operating techniques and methods, and wider scientific,
technical, manufacturing and operating knowledge, and to furnish, to this
corporation or to others, consulting, engineering, testing, experimental and
other services, all as may relate or be incidental to or be useful or
advantageous in or in connection with any business, operation or activity in
which this corporation is authorized to engage.
3
4
7. To manage and operate, in whole or in part, and to keep the books,
accounts and records, in whole or in part, of any other corporation, firm or
entity, and to enter into contracts for the performance of such service.
8. To carry on any manufacturing, selling, management, service,
research or other business, operation or activity which is lawful to be carried
on by a corporation organized under the General Corporation Law of the State of
Delaware as amended, whether or not similar or related or incidental to or
useful or advantageous in or in connection with the businesses, operations and
activities referred to in the foregoing paragraphs.
9. To manufacture, produce, purchase, lease or otherwise acquire, to
own, operate, and process, to sell, lease or otherwise dispose of, and to deal
in all kinds of machines, machinery, plant equipment, tools, materials,
merchandise, fixtures, goods and other property of all kinds useful in or in
connection with any business or activity in which this corporation is
authorized to engage.
10. To explore, prospect, buy, lease or otherwise acquire, to own,
hold and operate, to sell, lease or otherwise dispose of, and to deal in lands,
mining claims, water claims, water rights, mineral rights, and any other
rights, oil wells, gas wells, oil lands, gas lands and other real property, the
rights and interest in and to real property, manufacturing plants,
laboratories, pilot plants, oil refineries, gas works and plants, including
plants for the production of coke, gasoline, and other by-products, mines,
smelters, warehouses, offices and other buildings, structures, building
equipment, pipelines, railroads, and real estate improvements, all to the
extent permitted by law and as may relate or be incidental to or be useful in
or in connection with any business or activity in which this corporation is
authorized to engage.
4
5
11. To acquire, hold, use, sell, assign, lease, grant licenses under,
or otherwise dispose of, letters patent of the United States or any foreign
country, patent rights, licenses and privileges, inventions, improvements and
processes, copyrights, trademarks and trade names, relating to or useful in
connection with any business in which this corporation is authorized to engage.
12. To subscribe for, purchase or otherwise acquire, to hold and own,
to sell, assign, transfer or otherwise dispose of, and generally to deal in and
with, securities, and while the holder or owner thereof to have and exercise
all rights, powers and privileges of ownership, including the right to vote or
consent or give proxies or powers of attorney therefor; and to carry on any
business, operation or activity through a wholly or partly owned subsidiary.
13. To acquire by purchase, exchange, merger or consolidation or
otherwise all or any part of the property and assets, including the business,
good will, rights and franchises, of any corporation, association, trust, firm
or individual wherever organized, created or located, and in payment or
exchange therefor to pay cash, transfer property and issue securities to the
transferor or its security holders and to assume or become liable for any
liabilities and obligations; and to hold and operate or in any manner to
dispose of all or any part of the property and assets so acquired.
14. To dispose by sale, exchange, merger or consolidation or
otherwise, of all or any part of the property and assets, including the
business, good will, rights and franchises, of this corporation, to any
corporation, association, trust, firm or individual wherever organized, created
or located, for cash or property, including securities, or the assumption of
the liabilities and obligations of this corporation, and if desired, and
subject to the rights of creditors and preferred stockholders (if any), to
distribute such cash, securities or other property to the security holders of
this corporation in exchange for or in partial or complete liquidation or
redemption of their securities.
5
6
15. To enter into, make and perform contracts of every kind and
description with any person, firm, association, corporation, municipality,
county, state, body politic or government or colony or dependency thereof.
16. To have one or more offices and to carry on all or any of
operations and businesses in any and all parts of the world.
17. To borrow money and obtain credit; for money borrowed or for sale
or pledge or in order to pay, evidence or secure any liability or obligation,
to execute, issue and deliver and sell, pledge or otherwise dispose of bonds,
notes, debentures or other evidences of indebtedness, secured or unsecured; to
give security for any such bonds, notes, debentures or other evidences of
indebtedness or for any purchase price, guaranty, line of credit, covenant,
fidelity or performance bond or any other liability or obligation and any
premium interest and other sums due thereon or therewith and any covenants or
obligations connected therewith; and for the foregoing purposes to mortgage or
pledge or execute an indenture of mortgage or deed of trust upon or create a
lien upon or other security title or security interest in all or any part of
the property and assets, real and personal, of this corporation, then owned or
thereafter acquired.
18. To lend money, credit or security to, and to guarantee or assume
any liabilities and obligations of, and to aid in any other manner any
corporation, association, trust, firm or individual wherever organized, created
or located, any of whose securities are held by this corporation or in whose
affairs or prosperity this corporation has a lawful interest, and to do all
acts and things designed to protect, improve or enhance the value of such
securities or interest.
6
7
19. The directors of this corporation are authorized to make
charitable contributions as defined in the United States Internal Revenue Code,
as from time to time amended, in such amounts as the directors may determine to
be reasonable.
20. To do any and all acts and things in this Article Third set forth,
to the same extent as an individual might or could do, as principal, factor,
consignee, agent, contractor or otherwise, and either alone or in conjunction
or jointly with any corporation, association, trust, firm or individual; and,
in general, to do any and all acts and things and to engage in any and all
businesses whatsoever, necessary, suitable, advantageous or proper for or in
connection with or incidental to the exercise, transaction, promotion or
carrying on of any of the businesses, powers, purposes or objects in this
Article Third set forth; excepting in every case all acts, things and
businesses forbidden by law.
21. In this Article Third the word "securities" means, to the extent
that the context permits, stocks, shares, bonds, notes, debentures and other
evidences of interest in or indebtedness of any corporation, association, trust
or firm, and notes and other evidences or indebtedness of any individual, and
bonds, notes, debentures and other evidences of indebtedness of any country,
state, county, city, town or other governmental body or agency.
22. In this certificate of incorporation, unless it is otherwise
expressly provided, the statements of the businesses, objects and purposes of
this corporation shall be construed both as objects and powers, the enumeration
of specific powers shall not be held to limit or restrict in any manner the
exercise by this corporation of the general powers conferred upon corporations
by the laws of the State of Delaware, and no statement of any business, object
or purpose shall be deemed to limit or be exclusive of any other stated
business, object or purpose, but all are separate and cumulative and all may be
transacted, promoted and carried on separately or together and at any time and
from time to time.
7
8
FOURTH: The total number of shares of common stock which this
corporation shall have authority to issue is eighty million shares and the par
value of each of such shares is one dollar ($1.00) amounting in the aggregate
to Eighty Million Dollars ($80,000,000).
The total number of shares of preferred stock which this corporation
shall have authority to issue is two million shares and the par value of each
of such shares is One Dollar ($1.00) amounting in the aggregate to Two Million
Dollars ($2,000,000). The Board of Directors may provide for the issuance of
such preferred stock in one or more series, each series to have such voting
powers, full or limited, or no voting powers, such designations, preferences
and relative participating, optional or other special rights, and such
qualifications, limitations or retrictions thereof, and to be subject to such
terms of redemption, if any, as shall be specified by the Board of Directors
and stated and expressed in the vote or votes of the Board of Directors
providing for the issue of such preferred stock.
The holders of the common stock shall be entitled to one vote for each
share of common stock registered in their respective names on the books of this
corporation.
The board of directors may from time to time, in connection with any
employee stock option or purchase plan, fix limitations and restrictions on the
transfer of any or all of the authorized but unissued shares of this
corporation made available for such stock option or purchase plan, such
restrictions to take effect upon the issue of such shares. No such limitation
or restriction shall be valid unless notice thereof is given on the certificate
or certificates representing such shares.
8
9
No stockholder of this corporation shall by reason of his holding
shares of any class have any pre-emptive or preferential purchase or subscribe
to any shares of any class of this corporation, now or hereafter to be
authorized, or any notes, debentures, bonds, or other securities convertible
into or carrying options or warrants to purchase shares of any class, now or
hereafter to be authorized, whether or not the issue of any such shares, or such
notes, debentures, bonds or other securities would adversely affect the dividend
or voting rights of such stockholder, other than such rights, if any, as the
board of directors, in its discretion from time to time may grant, and at such
price as the board of directors in its discretion may fix; and the board of
directors may issue shares of any class of this corporation, or any notes,
debentures, bonds, or other securities convertible into or carrying options or
warrants to purchase shares of any class, without offering any such shares or
securities, either in whole or in part, to the existing stockholders of any
class.
FIFTH: The minimum amount of capital with which the corporation will
commence business is One Thousand Dollars ($1,000.00).
The board of directors, without the assent of or other action by the
stockholders, may from time to time authorize the issue and sale of shares of
stock of this corporation now or hereafter authorized, for such consideration
and upon such terms as the board of directors may determine, or the board of
directors may authorize such consideration and terms to be fixed in whole or in
part by any officer or officers of this corporation.
SIXTH: This corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders shall not be subject
to the payment of corporate debts to any extent whatever.
9
10
EIGHTH: The following provisions are inserted for the regulation and
conduct of the affairs of this corporation, and it is expressly provided that
they are intended to be in furtherance and not in limitation or exclusion of
the powers elsewhere conferred herein or in the by-laws or conferred by law:
(a) Except as may be otherwise expressly required by law or by other
provisions of this certificate of incorporation or by the by-laws, the
board of directors shall have and may exercise, transact, manage, promote
and carry on all of the powers, authorities, businesses, objects and
purposes of this corporation.
(b) The directors who are not directors emeritus shall be divided into
three classes of approximately equal size. At the annual meeting to be
held January 21, 1969, one class shall be elected to a term of three years,
another class to a term of two years, and the third class to a term of one
year; and at each subsequent annual election the successors to directors
whose terms shall expire that year shall each be elected to a term of three
years. The directors emeritus, if any, shall be elected or appointed for
such terms and shall have such duties not contrary to law as may from time
to time be provided for in the by-laws. No director need be a stockholder.
The election of directors need not be by ballot unless the by-laws shall so
require.
(c) By-laws may be made, altered, amended or repealed by a vote of the
stockholders or a vote of the majority of the directors then in office at
any annual, regular, or special stockholders or directors meeting, called
for that purpose, the notice of which shall specify the subject matter of
the proposed new by-law or the alteration, amendment, or repeal of an
existing by-law, or the articles to be affected thereby. Any
10
11
by-law whether made, altered, amended, or repealed by the stockholders or
directors may be repealed, amended, further amended, or reinstated, as the
case may be, by either the stockholders or the directors as aforesaid.
(d) The board of directors may at any time set apart out of any of the
funds of this corporation available for dividends a reserve or reserves for
any proper purpose and may at any time reduce or abolish any such reserve.
Any other proper reserves may also be carried.
(e) This corporation may purchase, hold, sell and transfer shares of
its own capital stock, but shall not use its funds or property for the
purchase of its own shares of capital stock when such use would cause any
impairment of the capital of this corporation, subject always to the right
of this corporation to reduce its capital or to redeem any preferred or
special shares out of capital as permitted by law. Shares of its own
capital stock belonging to this corporation shall not be voted upon
directly or indirectly.
(f) The board of directors may from time to time authorize and
maintain bonus, profit sharing or other types of incentive or compensation
plans or pension or retirement plans for the employees (including officers
and directors) of this corporation or of its subsidiaries, affiliates or
any other corporation, association, trust or firm wherever organized,
created or located in whose affairs or prosperity this corporation has any
lawful interest and fix the amount of the profits to be distributed or
shared and determine the persons to participate in any such plans and the
amounts of their respective participation or benefits.
11
12
(g) The board of directors may from time to time determine whether and
to what extent and at what times and places and under what conditions and
regulations the accounts and books and papers of this corporation, or any
of them, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account, book or document
of this corporation, except as and to the extent expressly provided by law
with reference to the right of stockholders to examine the original or
duplicate stock ledger, or otherwise expressly provided by law, or except
as expressly authorized by resolution of the board of directors.
(h) The directors of this corporation are likely to be connected with
other corporations, partnerships, associations or firms with which from
time to time this corporation may have business dealings. No contract or
other transaction between this corporation and any other corporation,
partnership, association or firm and no act of this corporation shall be
affected by the fact that directors of this corporation are pecuniarily or
otherwise interested in, or are directors, members, or officers of such
other corporation, partnership, association or firm. Any director
individually, or any firm of which such director may be a member, may be a
party to or may be pecuniarily or otherwise interested in any contract or
transaction of this corporation, provided that the fact that he or such
firm is so interested shall be disclosed or shall have been known to the
board of directors or a majority thereof. Every contract, act or
transaction which at any annual meeting of the stockholders, or at any
special meeting of the stockholders called for the purpose, among others,
of considering such contract, act or transaction, shall be authorized,
approved or ratified by vote of the holders of a majority of the shares of
the capital stock of this corporation present in person or represented by
proxy at such meeting
12
13
(provided that a quorum of stockholders be there present or represented by
proxy) shall be as valid and binding upon this corporation and upon all its
stockholders as though such a contract, act or transaction had been
expressly authorized, approved and ratified by every stockholder of this
corporation.
(i) No person shall be liable to this corporation for any loss
or damage suffered by it on account of any action taken or omitted to be
taken by him in good faith as a director, member of a directors' committee
or officer of this corporation, if such person exercised or used the same
degree of care and skill as a prudent man would have exercised or used
under the circumstances in the conduct of his own affairs. Without
limitation of the foregoing, any such person shall be deemed to have
exercised or used such degree of care and skill if he took or omitted to
take such action in reliance in good faith upon advice of counsel for this
corporation, or the books of account or other records of this corporation,
or reports or information made or furnished to this corporation by any
official, accountant, engineer, agent, or employee of this corporation, or
by any independent public accountant or auditor, counsel, engineer,
appraiser or other expert retained or employed by this corporation and
selected with reasonable care by the board of directors, by any such
committee or by any authorized officer of this corporation.
(j) The Company shall indemnify any person who was or is party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (and whether or not by or in the right of the corporation) 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 company,
13
14
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of The State of Delaware as
amended from time to time. Such indemnification (unless ordered by a
court) shall be made as authorized in a specific case upon a determination
that indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standards of
conduct set forth in the General Corporation Law of the State of Delaware.
Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such quorum is not obtainable,
or even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
The foregoing right of indemnification shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
NINTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
14
15
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court directs. If
a majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all of the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this corporation, as the case may be,
and also on this corporation.
TENTH: This corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ELEVENTH: The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed
sum for attendance at each meeting of the board of directors or a stated salary
as director. No such payment shall preclude any director from serving this
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
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16
This Restated Certificate of Incorporation restates and integrates the
corporation's Certificate of Incorporation as heretofore amended by
Certificates of Amendment as filed with the Secretary of State of the State of
Delaware on May 7, 1968, January 21, 1969, March 8, 1971, February 21, 1978 and
October 8, 1980, and eliminates certain provisions that under the General
Corporation Law of Delaware are no longer required to be included in the
Certificate of Incorporation. Except for such provisions so eliminated, this
Restated Certificate of Incorporation does not further amend the corporation's
Certificate of Incorporation as heretofore amended and no discrepancy exists
between those provisions and the provisions of this Restated Certificate of
Incorporation.
IN WITNESS WHEREOF, CABOT CORPORATION has caused this Restated
Certificate of Incorporation to be duly executed this 14th day of October, 1983
by Robert A. Charpie, its President, and attested by Walter F. Greeley, its
Secretary.
CABOT CORPORATION
By: /S/ ROBERT A. CHARPIE
----------------------------
ATTEST: Robert A. Charpie, President
By /S/ WALTER F. GREELEY
-----------------------------
Walter F. Greeley, Secretary
16
17
CERTIFICATE OF SECRETARY
The undersigned, Waiter F. Greeley, hereby certifies that he is the
duly elected, Qualified and acting Secretary of CABOT CORPORATION, a
corporation organized and existing under the laws of the State of Delaware, and
that the foregoing 16 numbered pages are a true, correct and complete copy of
the Restated Certificate of Incorporation of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and impressed the
corporate seal of CABOT CORPORATION on this 14th day of October, 1983.
/S/ WALTER F. GREELEY
- --------------------------
Secretary [ Corporate Seal ]
17
1
Exhibit 3(a)
CERTIFICATE OF AMENDMENT
------------------------
OF
--
RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------
CABOT CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, by
unanimous written consent and agreement in lieu of a formal meeting,
dated as of November 21, 1984, adopted a vote setting forth the
proposed amendment to the Restated Certificate of Incorporation of
said Corporation, declaring said amendment to be advisable and
recommending the adoption of said amendment by vote of the
stockholders of the Corporation at its Annual Meeting of
Stockholders called for February 8, 1985. The vote setting forth
the proposed amendment is as follows:
VOTED: That the Restated Certificate of Incorporation of this Corporation
be amended, subject to stockholder approval, as follows:
1. by renumbering the present Articles "TENTH" and "ELEVENTH" as
"ELEVENTH" and "TWELFTH".
2. by adding the following language at the end of newly numbered Article
ELEVENTH:
"Notwithstanding any provision of law, this restated
certificate of incorporation or the by-laws of this corporation
(and notwithstanding the fact that a lesser percentage may be
specified by law, this restated certificate of incorporation or
the by-laws of this corporation), and in addition to any
affirmative vote of the holders of any class of preferred stock of
this corporation outstanding or any other class of capital stock
of this corporation or any series of any of the foregoing then
outstanding which is required by law or by or pursuant to this
2
restated certificate of incorporation, the affirmative vote of the
holders of 66-2/3 percent or more of the voting power of the
shares of the then outstanding shares of stock of all classes and
series of this corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be
required to alter, amend or repeal paragraph (a), (b) or (c) of
Article EIGHTH or Article TENTH of this restated certificate of
incorporation or to adopt any provision inconsistent therewith."
3. by adding a new Article TENTH as follows:
"TENTH: 1. Vote Required for Certain Business Combinations.
In addition to any affirmative vote required by law or this
restated certificate of incorporation, and except as otherwise
expressly provided in section 2 of this Article TENTH:
(a) Any merger or consolidation of this corporation or any
subsidiary (as hereinafter defined) with (1) any interested
stockholder (as hereinafter defined) or (2) any other corporation
or other person (whether or not itself an interested stockholder)
which is, or after such merger or consolidation would be, an
affiliate (as hereinafter defined) of an interested stockholder; or
(b) Any plan of exchange for all outstanding shares of this
corporation or any subsidiary or for any class of shares of either
with (1) any interested stockholder or (2) any other corporation
or other person (whether or not itself an interested stockholder)
which is, or after such plan of exchange would be, an affiliate of
an interested stockholder; or
3
(c) Any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions)
to or with any interested stockholder or any affiliate of any
interested stockholder of any assets of this corporation or any
subsidiary having an aggregate fair market value (as hereinafter
defined) of $20,000,000 or more; or
(d) The issuance or transfer by this corporation or any
subsidiary (in one transaction or a series of transactions) of any
securities of this corporation or any subsidiary to any interested
stockholder or any affiliate of any interested stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $20,000,000 or
more; or
(e) The adoption of any plan or proposal for the liquidation
or dissolution of this corporation proposed by or on behalf of an
interested stockholder or any affiliate of any interested
stockholder; or
(f) Any reclassification of securities (including any reverse
stock split), or recapitalization of this corporation, or any
merger or consolidation of this corporation with any of its
subsidiaries or any other transaction (whether or not with or into
or otherwise involving an interested stockholder) which has the
effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of stock or
securities convertible into stock of this corporation or any
subsidiary which is directly or indirectly owned by any interested
stockholder or any affiliate of any interested stockholder;
shall require the affirmative vote of the holders of at least 66 2/3
percent of the combined voting power of the then outstanding shares of
4
stock of all classes and series of this corporation entitled to vote
generally in the election of directors (the "voting stock"), in each
case voting together as a single class. 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 by this restated
certificate of incorporation or any vote or votes adopted pursuant to
Article THIRD of this restated certificate of incorporation or in any
agreement with any national securities exchange or otherwise.
2. When Higher Vote is not Required. The provisions of this
Article TENTH shall not be applicable to any particular business
combination (as hereinafter defined), and such business combination
shall require only such affirmative vote as is required by law, any
other provision of this restated certificate of incorporation, any
preferred stock designation or any agreement with any national
securities exchange, if, all of the conditions specified in either of
the following paragraphs (a) and (b) are met:
(a) Approval by Continuing Directors. The business combination
shall have been approved by a majority of the continuing directors (as
hereinafter defined), it being understood that this condition shall
not be capable of satisfaction unless there is at least one continuing
director; or
(b) Price and Procedure Requirements. All of the following
conditions shall have been met:
(1) The aggregate amount of the cash and the fair market
value as of the date of the consummation of the business
combination of any consideration other than cash to be received
per share by holders of common stock (as hereinafter defined) in
such business combination shall be at least equal to the highest
of the following:
5
(A) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the interested stockholder for any
shares of common stock acquired by it (i) within the two-year
period immediately prior to the first public announcement of
the proposal of the business combination (the "announcement
date") or (ii) in the transaction in which it became an
interested stockholder, whichever is higher; or
(B) the fair market value per share of common stock on the
announcement date or on the date on which the interested
stockholder became an interested stockholder (such latter date
is referred to in this Article TENTH as the "determination
date"), whichever is higher; or
(C) (if applicable) the price per share equal to the fair
market value per share of common stock determined pursuant to
paragraph (b)(1)(B) above, multiplied by the ratio of (i) the
highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by the
interested stockholder for any shares of common stock acquired
by it within the two-year period immediately prior to the
announcement date to (ii) the fair market value per share of
common stock on the first day in such two-year period upon
which the interested stockholder acquired any shares of common
stock; and
(2) The consideration to be received by holders of a
particular class or series of outstanding voting stock (including
common stock) shall be in cash or in the same form as the
interested stockholder has previously paid for shares of such
class. If the interested stockholder has paid for shares of
voting stock with varying forms of consideration, the form of
6
consideration to be received by holders of such class or series of
voting stock shall be either cash or the form used to acquire
beneficially the largest number of shares of such class or series
of voting stock previously acquired by it; and
(3) After such interested stockholder has become an
interested stockholder and prior to the consummation of such
business combination:
(A) except as approved by a majority of the continuing
directors, there shall have been no failure to declare and pay at
the regular date therefor any full quarterly dividends (whether or
not cumulative) on any outstanding preferred stock;
(B) there shall have been (i) no reduction in the annual
rate of dividends paid on the common stock (except as necessary to
reflect any subdivision of the common stock), except as approved
by a majority of the continuing directors, and (ii) an increase in
such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of the
common stock, unless the failure so to increase such annual rate
is approved by a majority of the continuing directors; and
(C) such interested stockholder shall not have become the
beneficial owner of any additional shares of voting stock except
as part of the transaction in which it became an interested
stockholder; and
(4) After such interested stockholder has become an
interested stockholder, such interested stockholder shall not have
received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances,
7
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 business
combination or otherwise; and
(5) A proxy or information statement describing the proposed
business combination and complying with the requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and the rules and
regulations thereunder (or any subsequent provisions replacing
such 1934 Act, rules or regulations) shall be mailed to public
stockholders of the corporation at least 30 days prior to the
consummation of such business combination (whether or not such
proxy or information statement is required to be mailed pursuant
to the 1934 Act or subsequent provisions).
3. Certain Definitions. For the purposes of this Article TENTH:
(a) "affiliate" or "associate" has the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the 1934 Act, as in effect on February 8, 1985.
(b) "board" means the board of directors of this corporation.
(c) A person is a "beneficial owner" of any voting stock:
(1) which such person or any of its affiliates or
associates beneficially owns, directly or indirectly; or
(2) which such person or any of its 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 or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (B) the right to vote or
direct the vote pursuant to any agreement, arrangement or
understanding; or
8
(3) which are 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.
(d) The term "business combination" means any transaction
which is referred to in any one or more of paragraphs (a) through
(f) of Section 1.
(e) "common stock" means the common capital stock of this
corporation.
(f) "continuing director" means any member of the board who
is unaffiliated with and not a nominee of the interested
stockholder and was a member of the board prior to the time that
the interested stockholder became an interested stockholder, and
any successor of a continuing director who is unaffiliated with,
and not a nominee of the interested stockholder and who is
recommended to succeed a continuing director by a majority of
continuing directors then on the board.
(g) "fair market value" means: (1) 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 1934 Act on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing
price or bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the
9
National Association of Securities Dealers, 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 a majority of
the continuing directors in good faith; and (2) in the case of
stock that is not traded on any United States registered
securities exchange nor in any over-the-counter market or 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 a
majority of the continuing directors in good faith.
(h) "interested stockholder" means any person (other than
this corporation or any subsidiary) who or which:
(1) is the beneficial owner, directly or indirectly, of
more than 10 percent of the combined voting power of the then
outstanding voting stock; or
(2) 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 percent or more of the voting power of the then outstanding
voting stock; or
(3) is an assignee of or has otherwise succeeded to the
beneficial ownership of 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 interested
stockholder, 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 1933.
10
For the purpose of determining whether a person is an
interested stockholder pursuant to this paragraph (h) of this
Section 3, the number of shares of voting stock deemed to be
outstanding shall include shares deemed owned through application
of paragraph (c) of this section 3 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.
(i) A "person" means any individual, firm, corporation, group
(as such term is used in Rule 13d of the General Rules and
Regulations under the 1934 Act as in effect on February 8, 1985)
or other entity.
(j) "subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by
this corporation; provided, however, that for the purposes of the
definition of interested stockholder set forth in paragraph (h) of
this section 3, the term "subsidiary" means only a corporation of
which a majority of each class of equity security is owned,
directly or indirectly, by this corporation.
4. Powers of the Board. A majority of the continuing directors
shall have the power and duty to determine for the purposes of this
Article TENTH, on the basis of information known to them after
reasonable inquiry, all facts necessary to determine compliance with
this Article TENTH, including without limitation, (a) whether a person
is an interested stockholder; (b) the number of shares of voting stock
beneficially owned by any person; (c) whether a person is an affiliate
or associate of another person; (d) whether the requirements of
section 2.(b) of this Article TENTH have been met with respect to any
proposed business combination, and (e) whether the assets which are
the subject of any business combination have, or the consideration to
11
be received for the issuance or transfer of securities by this
corporation or any subsidiary in any business combination has, an
aggregate fair market value of $20,000,000 or more. Any such
determination made in good faith shall be binding and conclusive for
all purposes of this Article TENTH.
5. No Effect on Fiduciary Obligations of Interested
Stockholders. Nothing contained in this Article TENTH shall be
construed to relieve any interested stockholder from any fiduciary
obligation imposed by law."
SECOND: That thereafter, pursuant to vote of its Board of Directors,
the Annual Meeting of Stockholders of said Corporation was duly called
and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary
number of shares as required by statute were voted in favor of the
amendment.
THIRD: That said amendments were duly adopted in accordance with the
applicable provision of Section 242 of the General Corporation Law of the
State of Delaware.
FOURTH: That the capital of said Corporation shall not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said CABOT CORPORATION has caused this
certificate to be signed by Robert A. Charpie, its President, and
attested by Henley R. Webb, its Assistant Secretary this 11th day of
February, 1985.
ATTEST: CABOT CORPORATION
/s/ Henley R. Webb By /s/ Robert A. Charpie
- ---------------------- ----------------------
Assistant Secretary President
1
EXHIBIT 3(a)
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CABOT CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Robert A. Charpie, President, and Walter F. Greeley, Secretary, of
Cabot Corporation, a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions
of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation, as amended, of the said Corporation,
the said Board of Directors on November 14, 1986, adopted the following
resolution creating a series of 800,000 shares of Preferred Stock designated as
Series A Junior Participating Preferred Stock:
VOTED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, as amended, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 800,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) 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
2
funds legally available for the purpose, quarterly dividends payable in cash
on the eleventh day of January, March, June and September 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) $25 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 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 (but not withdrawn)
on the common stock, par value $1.00 per share, of the Corporation (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 November
14, 1986 (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.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A)
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 $25 per share on
the Series A
2
3
Junior Participating Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) 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 entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the 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.
Section 3. VOTING RIGHTS. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. 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 number of votes per share to which
3
4
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.
(B) Except as otherwise provided herein, by the Restated Certificate of
Incorporation, as amended, 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
stockholders of the Corporation.
(C) (i) 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.
(ii) 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 (iii) of this Section 3(C) or
at any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, 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 one-third 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
4
5
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.
(iii) 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 stockholder or stockholders 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 paragraph (C) (iii)
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 stockholder or stockholders 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 paragraph
(C)(iii), 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
stockholders.
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6
(iv) 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 paragraph (C)(ii) of this Section 3) 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 paragraph (C) 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 foregoing sentence.
(v) 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 certificate of incorporation or by-laws irrespective
of any increase made pursuant to the provisions of paragraph (C)(ii) of this
Section 3 (such number being subject, however, to change thereafter in any
manner provided by law or in the certificate of incorporation or by-laws). 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.
(D) 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 extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
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Section 4. CERTAIN RESTRICTIONS.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 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
(i) 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;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on a parity
(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;
(iii) 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;
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating
Preferred Stock, or any
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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.
(B) 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 (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. 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.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) 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 $225 per share, plus an amount equal to accrued and
unpaid dividends and distributions 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
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amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph C below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii) immediately above being referred to as 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 one (1) with respect to such Preferred Stock and Common Stock, on a
per share basis, respectively.
(B) 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.
(C) 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 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.
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Section 7. 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 100 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.
Section 8. REDEMPTION. The outstanding shares of Series A Junior
Participating Preferred Stock may be redeemed at the option of the Board of
Directors as a whole, but not in part, at any time, or from time to time, at a
cash price per share equal to 105 percent of (i) the product of the Adjustment
Number times the Average Market Value (as such term is hereinafter defined)
of the Common Stock, plus (ii) all dividends which on the redemption date have
accrued on the shares to be redeemed and have not been paid, or declared and a
sum sufficient for the payment thereof set apart, without interest. The
"Average Market Value" is the average of the closing sale prices of the Common
Stock during the 30 day period immediately preceding the date before the
redemption date 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, as amended, on which such
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stock is listed, or, if such stock is not listed on any such exchange, the
average of the closing sale prices with respect to a share of Common Stock
during such 30-day period, as quoted on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then in use, or if no
such quotations are available, the fair market value of the Common Stock as
determined by the Board of Directors in good faith.
Section 9. RANKING. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
Section 10. AMENDMENT. The Restated Certificate of Incorporation, as
amended, 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.
Section 11. 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 holders 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.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 2nd day
of December , 1986.
/s/ Robert A. Charpie
----------------------
President
Attest:
/s/ Walter F. Greeley
- ----------------------
Secretary
11
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Exhibit 3(a)
CERTIFICATE OF AMENDMENT
------------------------
OF
--
RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------
CABOT CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, at a meeting
duly held on November 14, 1986, adopted votes setting forth proposed
amendments to the Restated Certificate of Incorporation of said
Corporation, declaring said amendments to be advisable and recommending
the adoption of said amendments by vote of the stockholders of the
Corporation at its Annual Meeting of Stockholders called for February 13,
1987. The votes setting forth the proposed amendments are as follows:
VOTED: That it is advisable for this Corporation to amend its
Restated Certificate of Incorporation by the proposed amendments
described below and that this board recommends the adoption of such
proposed amendments by vote of the Corporation at its Annual Meeting of
Stockholders called for February 13, 1987:
a. To delete paragraph (i) of Article EIGHTH and insert in its place the
new paragraph (i) of Article EIGHTH as follows:
(i)(1) No director of this corporation shall be personally liable to
the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to this corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, as the
same exists or hereafter may be amended, or (iv) for any transaction
from which the director derived an improper personal benefit. If the
Delaware General Corporation Law is hereafter amended to authorize
the further elimination or limitation of this liability of directors,
then the liability of a director of the corporation, in addition to
the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the amended Delaware
General Corporation Law. Any repeal or modification of this Article
by the stockholders of this corporation shall be prospective only,
and shall not adversely affect any limitation on the personal
liability of a director of this corporation for acts or omissions
prior to such repeal or modification.
2
(2) No officer or employee of this corporation shall be liable to
this corporation for any loss or damage suffered by it on account of
any action taken or omitted to be taken by him in good faith as an
officer or employee of this corporation, if such person exercised or
used the same degree of care and skill as a prudent man would have
exercised or used under the circumstances in the conduct of his own
affairs.
(3) For purposes of determining compliance with this paragraph
(i) , any director, officer or employee of this corporation shall be
deemed to have taken actions or omitted to take actions in good faith
if the action taken or omitted to be taken by him or her was taken or
omitted in reliance in good faith upon the advice of counsel for this
corporation, or the books of account or other records of this
corporation, or reports or information made or furnished to this
corporation by any official, accountant, engineer, agent, or employee
of this corporation, or by any independent public accountant or
auditor, counsel, engineer, appraiser, investment banker or other
expert retained or employed by this corporation, by the directors, by
any committee of the board of directors of this corporation or by any
authorized officer of this corporation.
b. To delete paragraph (j) of Article EIGHTH and insert in its place a
new paragraph (j) of Article EIGHTH as follows:
(j) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (and whether or not by or in the
right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another company, partnership, joint venture,
trust or other enterprise, or is or was serving as a fiduciary of any
employee benefit plan, fund or program sponsored by the corporation
or such other company, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, to the
extent and under the circumstances permitted by the General
Corporation Law of The State of Delaware as amended from time to
time. Such indemnification (unless ordered by a court) shall be made
as authorized in a specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standards of
conduct set forth in the General Corporation Law of the State of
Delaware Such determination shall be made (1) by the board of
directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such
quorum is not obtainable, or even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders. The foregoing right of
indemnification shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or
otherwise, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such a person.
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VOTED That it is advisable for this Corporation to amend its
Restated Certificate of Incorporation by the proposed amendments
described below and that this board recommends the adoption of such
proposed amendments by vote of the Corporation at its Annual Meeting of
Stockholders called for February 13, 1987:
a. To delete paragraph (c) of Article EIGHTH and insert in its place the
new paragraph (c) of Article EIGHTH as follows:
(c) By-laws may be made, altered, amended or repealed by (i) the
affirmative vote of the holders of at least seventy-five percent
(75%) of the voting power of the shares of the then outstanding
shares of stock of all classes and series of this corporation
entitled to vote generally in the election of directors voting
together as a single class or (ii) a vote of the majority of the
directors then in office at any annual, regular, or special
stockholders or directors meeting, called for that purpose, the
notice of which shall specify the subject matter of the proposed new
by-law or the alteration, amendment, or repeal of an existing by-law,
or the articles to be affected thereby. Any by-law whether made,
altered, amended, or repealed by the stockholders or directors may be
repealed, amended, further amended, or reinstated, as the case may
be, by either the stockholders or the directors as aforesaid.
b. To add a new paragraph (k) to Article EIGHTH of the Restated
Certificate of Incorporation as follows:
(k) Any action required or permitted to be taken by the stockholders
of the corporation must be taken at a duly called annual or special
meeting of the stockholders of the corporation and may not be taken
by any consent in writing by such stockholders.
c. To delete the last paragraph of Article ELEVENTH commencing with the
word "Notwithstanding" and insert the following in its place:
Notwithstanding any provision of law, this restated certificate of
incorporation or the by-laws of this corporation (and notwithstanding
the fact that a lesser percentage may be specified by law, this
restated certificate of incorporation or the by-laws of this
corporation), and in addition to any affirmative vote of the holders
of any class of preferred stock of this corporation outstanding or
any other class of capital stock of this corporation or any series of
any of the foregoing then outstanding which is required by law or by
or pursuant to this restated certificate of incorporation, the
affirmative vote of the holders of seventy--five percent (75%) or more
of the voting power of the shares of the then outstanding shares of
stock of all classes and series of this corporation entitled to vote
generally in the election of directors, voting together as a single
class, shall be required to alter, amend or repeal paragraph (a),
(b), (c) or (k) of Article EIGHTH, Article TENTH or this Article
ELEVENTH of this restated certificate of incorporation or to adopt
any provision inconsistent therewith.
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SECOND: That thereafter, pursuant to vote of its Board of Directors,
the Annual Meeting of Stockholders of said Corporation was duly called
and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary
number of shares as required by statute were voted in favor of the
amendments.
THIRD: That said amendments were duly adopted in accordance with the
applicable provision of Section 242 of the General Corporation Law of the
State of Delaware.
FOURTH: That the capital of said Corporation shall not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said CABOT CORPORATION has caused this
certificate to be signed by Robert A. Charpie, its Chairman, and attested
by Charles D. Gerlinger, its Assistant Secretary this 13th day of
February, 1987.
ATTEST: CABOT CORPORATION
/s/ Charles D. Gerlinger By /s/ Robert A. Charpie
- ------------------------ ----------------------
Assistant Secretary Chairman
1
EXHIBIT 3(a)
CERTIFICATE OF DESIGNATIONS
SERIES B ESOP CONVERTIBLE PREFERRED STOCK
of
CABOT CORPORATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------------
I, Samuel W. Bodman, Chairman of the Board of the
Cabot Corporation ("Company"), a corporation organized and
existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 151
thereof, DO HEREBY CERTIFY that, pursuant to the authority
conferred upon the Board of Directors by the Restated
Certificate of Incorporation of the Company, as amended, the
Board of Directors authorized the series of Preferred Stock
hereinafter provided for and established the voting powers
thereof and authorized an Executive Committee of the Board of
Directors to adopt, and said Committee has adopted, the
following resolution creating a series of 200,000 shares of
Preferred Stock, $1.00 par value, designated as Series B ESOP
Convertible Preferred Stock:
VOTED: That, pursuant to the authority vested in
the Board of Directors of the Company in accordance with the
provisions of its Restated Certificate of Incorporation, as
amended, and pursuant to the authority vested in the
2
Executive Committee by the Board of Directors a series of
Preferred Stock of the Company be, and it hereby is, created,
and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional or
other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof, are as
follows:
Section 1. Designation and Amount; Special Purpose
------- ---------------------------------------
Restricted Transfer Issue.
- -------------------------
(A) The shares of this series of Preferred Stock
shall be designated as Series B ESOP Convertible Preferred
Stock ("Series B Preferred Stock") and the number of shares
constituting such series shall be 200,000.
(B) Shares of Series B Preferred Stock shall be
issued only to a trustee or trustees (or to any successor
trustee or trustees) acting on behalf of one or more employee
stock ownership plans or other employee benefit plans of the
Company (the "Trustee"). Certificates representing shares of
Series B Preferred Stock shall be legended to reflect any
restrictions on transfer imposed on such shares at the time
of issuance. Notwithstanding the foregoing provisions of
this paragraph (B) of Section 1, shares of Series B Preferred
Stock (i) may be converted into shares of Common Stock as
provided by Section 5 hereof and the shares of Common Stock
issued upon such conversion may be transferred by the holder
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thereof as permitted by law and (ii) shall be redeemable by
the Company or by the holder upon the terms and conditions
provided by Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distributions.
------- ---------------------------
(A) Subject to the provisions for adjustment
hereinafter set forth, the holders of shares of Series B
Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally
available therefor, cash dividends ("Preferred Dividends") in
an amount per share equal to $ 77.50 per share per annum, and
no more, payable quarterly, in arrears, one-quarter on the
last business day of each calendar quarter (each a "Dividend
Payment Date") commencing on December 30, 1988, to holders of
record at the start of business on such Dividend Payment
Date. Preferred Dividends shall begin to accrue on
outstanding shares of Series B Preferred Stock from the date
of issuance of such shares of Series B Preferred Stock.
Preferred Dividends shall accrue on a daily basis whether or
not declared and whether or not the Company shall have
earnings or surplus out of which such dividends could be paid
at the time, and Preferred Dividends accrued on the shares of
Series B Preferred Stock for any period less than a full
quarterly period between Dividend Payment Dates shall be
computed on the basis of a 360-day year of 30-day months.
Accumulated but unpaid Preferred Dividends shall cumulate as
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of the Dividend Payment Date on which they first became
payable, but no interest shall accrue on accumulated but
unpaid Preferred Dividends.
(B) So long as any Series B Preferred Stock shall
be outstanding, no dividend shall be declared or paid or set
apart for payment on any other series of stock ranking on a
parity with the Series B Preferred Stock as to dividends,
unless there shall also be or have been declared and paid or
set apart for payment on the Series B Preferred Stock like
dividends for all dividend payment periods of the Series B
Preferred Stock ending on or before the dividend payment date
of such parity stock, ratably in proportion to the respective
amounts of dividends accumulated and unpaid through such
dividend payment period on the Series B Preferred Stock and
accumulated and unpaid or payable on such parity stock
through the dividend payment period on such parity stock
ending on such dividend payment date. In the event that full
cumulative dividends on the Series B Preferred Stock have not
been declared and paid or set apart for payment when due, the
Company shall not declare or pay or set apart for payment any
dividends or make any other distributions on, or make any
payment on account of the purchase, redemption or other
retirement of, any other class of stock or series thereof of
the Company ranking, as to dividends or as to distributions
in the event of a liquidation, dissolution or winding-up of
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the Company, junior to the Series B Preferred Stock until
full cumulative dividends on the Series B Preferred Stock
shall have been declared and paid or declared and set aside
for payment; PROVIDED, HOWEVER, that the foregoing shall not
apply to (i) any dividend payable solely in any shares of any
stock ranking, as to dividends or as to distributions in the
event of a liquidation, dissolution or winding-up of the
Company, junior to the Series B Preferred Stock, (ii) the
purchase of shares of any stock ranking, as to dividends or
as to distributions in the event of a liquidation,
dissolution or winding-up of the Company, junior to the
Series B Preferred Stock either (A) pursuant to any employee
or director incentive or benefit plan or arrangement
(including any employment, severance or consulting agreement)
of the Company or any subsidiary of the Company heretofore or
hereafter adopted or (B) in exchange solely for shares of any
other stock ranking, as to dividends or as to distributions
in the event of a liquidation, dissolution or winding up of
the Company, junior to the Series B Preferred Stock, or (iii)
any payment made in respect of the purchase or redemption of
the Rights, as defined in paragraph (F) of Section 5 hereof,
or any rights similar thereto.
SECTION 3. VOTING RIGHTS. The holders of
shares of Series B Preferred Stock shall have the following
voting rights:
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(A) The holders of Series B Preferred Stock shall
be entitled to vote on all matters submitted to a vote of the
holders of Common Stock of the Company, voting together with
the holders of Common Stock (and holders of any other class
or series of stock which may similarly be entitled to vote
with the shares of Common Stock) as one class. Each share of
the Series B Preferred Stock shall be entitled to the number
of votes equal to the number of shares of Common Stock into
which such share of Series B Preferred Stock could be
converted on the record date for determining the stockholders
entitled to vote, rounded down to the nearest vote; it being
understood that whenever the "Conversion Price" (as defined
in Section 5 hereof) is adjusted as provided in Section 9
hereof, the voting rights of the Series B Preferred Stock
shall also be similarly adjusted.
(B) Except as otherwise required by law or set
forth herein, holders of Series B Preferred Stock shall have
no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with
holders of Common Stock and holders of any other class or
series of stock which may similarly be entitled to vote with
the shares of Common Stock) for the taking of any corporate
action. Any increase or decrease in the authorized class of
Preferred Stock (but not below the number of shares thereof
then outstanding) shall not be deemed to alter or change the
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powers, preferences, or special rights of the shares of Series
B Preferred Stock so as to affect them adversely within the
meaning of the General Corporation Law of the State of
Delaware.
Section 4. Liquidation, Dissolution or Winding Up.
---------------------------------------
(A) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of Series
B Preferred Stock shall be entitled to receive out of the
assets of the Company which remain after satisfaction in full
of all valid claims of creditors of the Company and which are
available for payment to stockholders and subject to the rights
of the holders of any stock of the Company ranking senior to or
on a parity with the Series B Preferred Stock in respect of
distributions upon liquidation, dissolution or winding up of
the Company, before any amount shall be paid or distributed
among the holders of Common Stock or any other shares ranking
junior to the Series B Preferred Stock in respect of
distributions upon liquidation, dissolution or winding up of
the Company, liquidating distributions in the amount of $1,000
per share, plus an amount equal to all accumulated and unpaid
dividends (including dividends declared and set aside) and
accrued dividends thereon to the date fixed for distribution,
and no more. If upon any liquidation, dissolution or winding
up of the Company, the amounts payable with respect to the
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Series B Preferred Stock and any other stock ranking as to
any such distribution on a parity with the Series B Preferred
Stock are not paid in full, the holders of the Series B
Preferred Stock and such other stock shall share ratably in
any distribution of assets in proportion to the full
respective preferential amounts to which they are entitled.
After payment of the full amount to which they are entitled
as provided by the foregoing provisions of this paragraph
4(A), the holders of shares of Series B Preferred Stock shall
not be entitled to any further right or claim to any of the
remaining assets of the Company.
(B) Neither the merger or consolidation of the
Company with or into any other corporation or other entity,
nor the merger or consolidation of any other corporation or
other entity with or into the Company, nor the sale, transfer
or lease of all or any portion of the assets of the Company,
shall be deemed to be a liquidation, dissolution or winding
up of the Company for purposes of this Section 4, but the
holders of Series B Preferred Stock shall nevertheless be
entitled in the event of any such merger or consolidation to
the rights provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the Company,
stating the payment date or dates when, and the place or
places where, the amounts distributable to holders of Series
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B Preferred Stock in such circumstances shall be payable,
shall be given by first-class mail, postage prepaid, mailed
not less than twenty (20) days prior to any payment date
stated therein, to the holders of Series B Preferred Stock,
at the address shown on the books of the Company or any
transfer agent for the Series B Preferred Stock.
Section 5. Conversion into Common Stock.
------- ----------------------------
(A) A holder of shares of Series B Preferred Stock
shall be entitled, at any time prior to the close of business
on the date fixed for redemption of such shares pursuant to
Section 6, 7 or 8 hereof, to cause any or all of such shares
to be converted into shares of Common Stock, initially at a
conversion rate equal to the ratio of $1,000 to the amount
which initially shall be $ 45.73 and which shall be adjusted
as hereinafter provided (such amount, as so adjusted, is
hereinafter sometimes referred to as the "Conversion Price")
(that is, a conversion rate initially equivalent to 21.8675
shares of Common Stock for each share of Series B Preferred
Stock so converted but that is subject to adjustment as the
Conversion Price is adjusted as hereinafter provided).
(B) Any holder of shares of Series B Preferred
Stock desiring to convert such shares into shares of Common
Stock shall surrender the certificate or certificates
representing the shares of Series B Preferred Stock being
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converted, duly assigned or endorsed for transfer to the
Company (or accompanied by duly executed stock powers
relating thereto), at the principal executive office of the
Company or the offices of the transfer agent for the Series B
Preferred Stock or such office or offices in the continental
United States of an agent for conversion as may from time to
time be designated by notice to the holders of the Series B
Preferred Stock by the Company or the transfer agent for the
Series B Preferred Stock, accompanied by written notice of
conversion, on any day which is a business day in the city of
Boston, Massachusetts. Such notice of conversion shall
specify (i) the number of shares of Series B Preferred Stock
to be converted and the name or names in which such holder
wishes the certificate or certificates for Common Stock to be
issued and for any shares of Series B Preferred Stock not to
be so converted to be issued (subject to compliance with
applicable legal requirements if any of said certificates are
to be issued in a name other than the name of the holder),
and (ii) the address to which such holder wishes delivery to
be made of such new certificates to be issued upon such
conversion.
(C) Upon surrender of a certificate representing a
share or shares of Series B Preferred Stock for conversion,
the Company shall, as promptly as practicable after such
surrender, issue and send by hand delivery (with receipt to
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be acknowledged) or by first class mail, postage prepaid, to
the holder thereof or to such holder's designee, at the
address designated by such holder, a certificate or
certificates for the number of shares of Common Stock to
which such holder shall be entitled upon conversion. In the
event that there shall have been surrendered a certificate or
certificates representing shares of Series B Preferred Stock,
only part of which are to be converted, the Company shall
issue and deliver to such holder or such holder's designee a
new certificate or certificates representing the number of
shares of Series B Preferred Stock which shall not have been
converted.
(D) A conversion of shares of Series B Preferred
Stock into shares of Common Stock made at the option of the
holder thereof shall be effective as of the close of business
on the day on which the Company receives written notice of
conversion pursuant to paragraph (B) of this Section 5. On
and after the effective day of conversion, the shares of
Series B Preferred so converted shall no longer be deemed to
be outstanding for any purpose, and the person or persons
entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock, but no
allowance or adjustment shall be made in respect of dividends
payable to holders of Common Stock of record on any date
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prior to such effective date. The Company shall not be obligated
to pay any dividends which shall have been declared and shall be
payable to holders of shares of Series B Preferred Stock on a
Dividend Payment Date if such Dividend Payment Date for such
dividend shall be on or subsequent to the effective date of
conversion of such shares, unless such declared dividends have
been set aside for payment prior to the effective date of
conversion of such shares, which dividends shall be paid on the
effective date of conversion.
(E) The Company shall not be obligated to deliver to
holders of Series B Preferred Stock any fractional shares of
Common Stock issuable upon any conversion of such shares of
Series B Preferred Stock, but in lieu thereof may make a cash
payment in respect thereof in any manner permitted by law. Such
cash payment shall be in an amount equal to such fraction
multiplied by the Fair Market Value per share of the Common Stock
(as defined in Section 9 hereof) at the close of business on the
day of conversion.
(F) Prior to the Distribution Date (as defined in Section
3(a) of the Rights Agreement (defined below), if the Company
shall issue shares of Common Stock upon conversion of shares of
Series B Preferred Stock as contemplated by this Section 5, the
Company shall issue together with each such share of Common Stock
one right (a "Right", and collectively the "Rights") to purchase
Series A Junior Participating Preferred Stock of the Company (or
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other securities in lieu thereof) pursuant to the Rights
Agreement dated as of November 14, 1986, and amended and
restated as of August 12, 1988, between the Company and The
First National Bank of Boston, as Rights Agent, as such
agreement may from time to time be amended (the "Rights
Agreement"), or any rights issued to holders of Common Stock
of the Company in addition thereto or in replacement
therefor.
(G) The Company shall at all times reserve and
keep available out of its authorized and unissued Common
Stock, solely for issuance upon the conversion of shares of
Series B Preferred Stock as herein provided, free from any
preemptive rights, such number of shares of Common Stock as
shall from time to time be issuable upon the conversion of
all the shares of Series B Preferred Stock then outstanding.
Notwithstanding the foregoing, the Company shall be entitled
to deliver upon conversion of shares of Series B Preferred
Stock, as herein provided, shares of Common Stock reacquired
and held in the treasury of the Company (in lieu of the
issuance of authorized and unissued shares of Common Stock),
so long as any such treasury shares are free and clear of all
liens, charges, security interests or encumbrances. The
Company shall prepare and shall use its best efforts to
obtain and keep in force such governmental or regulatory
permits or other authorizations as may be required by law,
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and shall comply with all requirements as to registration or
qualification of the Common Stock (and all requirements to
list the Common Stock which are at the time applicable) as
shall from time to time be sufficient to effect the
conversion of all shares of Series B Preferred Stock then
outstanding and convertible into shares of Common Stock.
Section 6. Redemption At the Option of the Company.
------- ---------------------------------------
(A) The Series B Preferred Stock shall be redeemable,
in whole or in part, at the option of the Company at any time
after November 18, 1991, or on or before November 18, 1991 if
permitted by paragraph (C) or (D) of this Section 6, at the
following redemption prices per share (or, if pursuant to
paragraph (C) of this Section 6, at the redemption price set
forth therein):
DURING THE TWELVE-
MONTH PERIOD PRICE PER
BEGINNING NOVEMBER 19 SHARE
--------------------- ---------
1988 .......... $1077.50
1989 .......... $1069.75
1990 .......... $1062.00
1991 .......... $1054.25
1992 .......... $1046.50
1993 .......... $1038.75
1994 .......... $1031.00
1995 .......... $1023.25
1996 .......... $1015.50
1997 .......... $1007.75
and thereafter at $1,000 per share, plus, in each case, an
amount equal to all accumulated and unpaid dividends and
accrued dividends thereon to the date fixed for redemption.
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Payment of the redemption price shall be made by the Company in
cash or shares of Common Stock, or a combination thereof, as
permitted by paragraph (E) of this Section 6. From and after
the close of business on the date fixed for redemption,
dividends on shares of Series B Preferred Stock called for
redemption will cease to accrue, such shares will no longer be
deemed to be outstanding and all rights in respect of such
shares of the Company shall cease, except the right to receive
the redemption price, provided that shares of Series B Preferred
Stock may be converted pursuant to Section 5 hereof at any time
prior to the close of business on the date fixed for redemption
of such shares pursuant to Sections 6, 7 or 8 hereof. If less
than all of the outstanding shares of Series B Preferred Stock
are to be redeemed, the Company shall either redeem a portion of
the shares of each holder determined pro rata based on the
number of shares held by each holder or shall select the shares
to be redeemed by lot or by any other manner deemed equitable,
as may be determined by the Board of Directors of the Company.
(B) Unless otherwise required by law, notice of
redemption with respect to a redemption under this Section 6
(but not Section 7 or 8) will be sent to the holders of Series B
Preferred Stock at the address shown on the books of the Company
or any transfer agent for the Series B Preferred Stock by first
class mail, postage prepaid, mailed not less than twenty (20)
days nor more than sixty (60) days prior to the redemption date.
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Each such notice shall state: (i) the redemption date; (ii)
the total number of shares of the Series B Preferred Stock
to be redeemed and, if fewer than all the shares held by
such holder are to be redeemed, the number of such shares to
be redeemed from such holder; (iii) the redemption price;
(iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price;
(v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date; and (vi) the conversion
rights of the shares to be redeemed, the period within which
conversion rights may be exercised, and the Conversion Price
and number of shares of Common Stock issuable upon
conversion of a share of Series B Preferred Stock at the
time. Upon surrender of the certificates for any shares
called for redemption pursuant to the provisions of this
Section 6 or the provisions of Sections 7 or 8 hereof, which
shares have not previously been converted (properly endorsed
or assigned for transfer, if the Board of Directors of the
Company shall so require and the notice shall so state),
such shares shall be redeemed by the Company at the date
fixed for redemption and at the applicable redemption price
set forth in this Section 6 or in Sections 7 or 8 hereof.
(C) In the event (i) of a change in the federal tax
law of the United States of America which has the effect of
precluding the Company from claiming any of the tax deductions
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for dividends paid on the Series B Preferred Stock when such
dividends are used as provided under Section 404(k)(2) of the
Internal Revenue Code of 1986, as amended and in effect on the
date shares of Series B Preferred Stock are initially issued,
(ii) that shares of Series B Preferred Stock are held by an
employee benefit plan intended to qualify as an employee stock
ownership plan within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended, and such plan does not so
qualify, or (iii) that the Company, in good faith after
consultation with counsel to the Company, determines that the
voting provisions contained herein are not in compliance with
Rule 19c-4 promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, the
Company may, in its sole discretion and notwithstanding anything
to the contrary in paragraph (A) of this Section 6, elect to
redeem such shares at a redemption price equal to the amount
payable in respect of the shares upon liquidation of the Company
pursuant to Section 4 hereof (including the amount equal to all
accumulated and unpaid dividends and accrued dividends thereon to
the date fixed for redemption, as provided by Section 4 hereof).
(D) Notwithstanding anything to the contrary in
paragraph (A) of this Section 6, the Company may, in its sole
discretion, elect to redeem any or all of the shares of
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Series B Preferred Stock at any time on or prior to November
18, 1991 on the terms and conditions set forth in paragraphs
(A) and (B) of this Section 6, if the last reported sales
price, regular way, of a share of Common Stock, as reported
on the New York Stock Exchange Composite Tape or, if the
Common Stock is not listed or admitted to trading on the New
York Stock Exchange, on the principal national securities
exchange on which such stock is listed or admitted to trading
or, if the Common Stock is not listed or admitted to trading
on any national securities exchange, on the National Market
System of the National Association of Securities Dealers,
Inc. Automated Quotation System ("NASDAQ") or, if the Common
Stock is not quoted on such National Market System, the
average of the closing bid and asked prices in over-the-
counter market as reported by NASDAQ, for at least twenty
(20) trading days within a period of thirty (30) consecutive
trading days ending within five (5) days of the notice of
redemption, equals or exceeds one hundred forty percent
(140%) of the Conversion Price (giving effect equitably in
making such calculation to any adjustments required by
Section 9 hereof).
(E) The Company, at its option, may make payment
of the redemption price required upon redemption of shares of
Series B Preferred Stock in cash or in shares of Common Stock
(or fractional shares thereof), or in a combination of such
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shares and cash, any such shares to be valued for such
purpose at their Fair Market Value (as defined in paragraph G
of Section 9 hereof, provided, however, that in calculating
their Fair Market Value the Adjustment Period shall be deemed
to be the five (5) consecutive trading days preceding, and
including, the date of redemption), except that any payment
required to be made under paragraph (C) of Section 8 shall be
made in cash.
Section 7. Other Redemption Rights.
------- -----------------------
(A) Shares of Series B Preferred Stock shall be
redeemed by the Company for cash or, if the Company so
elects, in shares of Common Stock (or fractional shares
thereof), or a combination of such shares and cash, any such
shares of Common Stock to be valued for such purpose at their
Fair Market Value (as defined in paragraph (G) of Section 9
hereof, provided, however, that in calculating their Fair
Market Value the Adjustment Period shall be deemed to be the
five (5) consecutive trading days preceding, and including,
the date of redemption), at the redemption prices per share
set forth in paragraph (B) of this Section 7, at the option
of the holder, at any time and from time to time upon notice
to the Company given not less than five (5) business days
prior to the date fixed by the holder in such notice for such
redemption, when and to the extent necessary (i) for such
holder to provide for distributions required to be made
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under, or to satisfy an investment election provided to
participants in accordance with, the Cabot Corporation Employee
Stock Ownership Plan and Trust Agreement, dated as of November
16, 1988, as the same may be amended or any successor plan (the
"Plan"), or (ii) for such holder to make payment of principal,
interest or premium due and payable (whether as scheduled or
upon acceleration) (a) on the $75,000,000 aggregate principal
amount of ESOP Notes Due December 31, 2013 of the trust under
the Plan (but only if to remedy or prevent a default under such
ESOP Notes or related loan documentation, in each case as
amended), or (b) on any other indebtedness incurred by the
holder for the benefit of the Plan (but only if to remedy or
prevent a default thereunder).
(B) For the purposes of clause (i) of paragraph (A)
of this Section 7, the redemption price of a share of Series B
Preferred Stock shall be an amount equal to the Fair Market
Value (as defined in paragraph G of Section 9 hereof) of such
share of Series B Preferred Stock. For the purposes of clause
(ii) of paragraph (A) of this Section 7, the redemption price
of a share of Series B Preferred Stock shall be equal to the
amount payable in respect of such share upon liquidation of the
Company pursuant to Section 4 hereof (including the amount
equal to all accumulated and unpaid dividends and accrued
dividends thereon to the date fixed for redemption as provided
by Section 4 hereof).
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Section 8. Consolidation, Merger, etc.
------- --------------------------
(A) In the event that the Company shall consummate
any consolidation or merger or similar transaction, however
named, pursuant to which the outstanding shares of Common
Stock are by operation of law exchanged solely for or
changed, reclassified or converted solely into stock of any
successor or resulting company (including the Company) that
constitutes "qualifying employer securities" with respect to
a holder of Series B Preferred Stock within the meaning of
Section 409(e) of the Internal Revenue Code of 1986, as
amended, and Section 407(c)(5) of the Employee Retirement
Income Security Act of 1974, as amended, or any successor
provisions of law, and, if applicable, for a cash payment in
lieu of fractional shares, if any, the shares of Series B
Preferred Stock of such holder shall be assumed by and shall
become preferred stock of such successor or resulting
company, having in respect of such company insofar as
possible the same powers, preferences and relative,
participating, optional or other special rights (including
the redemption rights provided by Sections 6, 7 and 8
hereof), and the qualifications, limitations or restrictions
thereon, that the Series B Preferred Stock had immediately
prior to such transaction, except that after such transaction
each share of the Series B Preferred Stock shall be
convertible, otherwise on the terms and conditions provided
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by Section 5 hereof, into the qualifying employer securities
so receivable by a holder of the number of shares of Common
Stock into which such shares of Series B Preferred Stock
could have been converted immediately prior to such
transaction if such holder of Common Stock failed to exercise
any rights of election to receive any kind or amount of
stock, securities, cash or other property (other than such
qualifying employer securities and a cash payment, if
applicable, in lieu of fractional shares) receivable upon
such transaction (provided that, if the kind or amount of
qualifying employer securities receivable upon such
transaction is not the same for each non-electing share, then
the kind and amount of qualifying employer securities
receivable upon such transaction for each non-electing share
shall be the kind and amount so receivable per share by a
plurality of the non-electing shares). The rights of the
Series B Preferred Stock as preferred stock of such successor
or resulting company shall successively be subject to
adjustments pursuant to Section 9 hereof after any such
transaction as nearly equivalent as practicable to the
adjustments provided for by such section prior to such
transaction. The Company shall not consummate any such
merger, consolidation or similar transaction unless all then
outstanding shares of the Series B Preferred Stock shall be
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assumed and authorized by the successor or resulting company
as aforesaid.
(B) In the event that the Company shall consummate
any consolidation or merger or similar transaction, however
named, pursuant to which the outstanding shares of Common
Stock are by operation of law exchanged for or changed,
reclassified or converted into other stock or securities or
cash or any other property, or any combination thereof, other
than any such consideration which is constituted solely of
qualifying employer securities (as referred to in paragraph
(A) of this Section 8) and cash payments, if applicable, in
lieu of fractional shares, each outstanding share of Series B
Preferred Stock shall, without any action on the part of the
Company or any holder thereof (but subject to paragraph (C)
of this Section 8), be deemed converted by virtue of such
merger, consolidation or similar transaction immediately
prior to such consummation into the number of shares of
Common Stock into which such share of Series B Preferred
Stock could have been converted at such time and each share
of Series B Preferred Stock shall, by virtue of such
transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the
aggregate amount of stock, securities, cash or other property
(payable in like kind) receivable by a holder of the number
of shares of Common Stock into which such share of Series B
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Preferred Stock could have been converted immediately prior
to such transaction if such holder of Common Stock failed to
exercise any rights of election as to the kind or amount of
stock, securities, cash or other property receivable upon
such transaction (provided that, if the kind or amount of
stock, securities, cash or other property receivable upon
such transaction is not the same for each non-electing share,
then the kind and amount of stock, securities, cash or other
property receivable upon such transaction for each non-
electing share shall be the kind and amount so receivable per
share by a plurality of the non-electing shares).
(C) In the event the Company shall enter into any
agreement providing for any consolidation or merger or
similar transaction described in paragraph (B) of this
Section 8, then the Company shall as soon as practicable
thereafter (and in any event at least ten (10) business days
before consummation of such transaction) give notice of such
agreement and the material terms thereof to each holder of
Series B Preferred Stock and each such holder shall have the
right to elect, by written notice to the Company, to receive,
upon consummation of such transaction (if and when such
transaction is consummated), from the Company or the
successor of the Company, in lieu of what would otherwise be
the result under paragraph (B) of this Section 8 (and in
redemption and retirement of such share of Series B Preferred
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Stock, but without any premium), a cash payment equal to the
amount payable in respect of such share of Series B Preferred
Stock upon liquidation of the Company pursuant to Section 4
hereof, (including an amount equal to all accumulated and
unpaid dividends and accrued dividends thereon to the date
fixed for redemption as provided by Section 4 hereof). No
such notice of redemption shall be effective unless given to
the Company prior to the close of business on the fifth
business day prior to consummation of such transaction,
unless the Company or the successor of the Company shall
waive such prior notice, but any notice of redemption so
given prior to such time may be withdrawn by notice of
withdrawal given to the Company prior to the close of
business on the fifth business day prior to consummation of
such transaction.
Section 9. Anti-dilution Adjustments.
------- -------------------------
(A) In the event the Company shall, at any time or
from time to time while any of the shares of Series B
Preferred Stock are outstanding, (i) pay a dividend or make a
distribution in respect of the Common Stock, to the extent
that such dividend or distribution consists of shares of
Common Stock, (ii) subdivide the outstanding shares of Common
Stock, or (iii) combine the outstanding shares of Common
Stock into a smaller number of shares, in each case whether
by reclassification of shares, recapitalization of the
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Company (excluding a recapitalization effected by a merger or
consolidation to which Section 8 hereof applies) or
otherwise, the Conversion Price in effect immediately prior
to such action shall be adjusted by multiplying such
Conversion Price by the fraction the numerator of which is
the number of shares of Common Stock outstanding immediately
before such event and the denominator of which is the number
of shares of Common Stock outstanding immediately after such
event. An adjustment made pursuant to this paragraph 9(A)
shall be given effect, upon payment of such a dividend or
distribution, as of the record date for the determination of
shareholders entitled to receive such dividend or
distribution (on a retroactive basis) and in the case of a
subdivision or combination shall become effective immediately
as of the effective date thereof.
(B) In the event that the Company shall, at any
time or from time to time while any of the shares of Series B
Preferred Stock are outstanding, issue to holders of shares
of Common Stock as a dividend or distribution, including by
way of a reclassification of shares or a recapitalization of
the Company, rights or warrants to purchase shares of Common
Stock (but not including as such rights or warrants the
Rights (as defined in Section 5 hereof) or any securities
convertible into or exchangeable for shares of Common Stock)
at a purchase price per share less than the Fair Market Value
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(as hereinafter defined) of a share of Common Stock on the
date of issuance of such rights or warrants, to the extent
that such dividend or distribution consists of such rights or
warrants, then, subject to the provisions of paragraphs (E)
and (F) of this Section 9, the Conversion Price shall be
adjusted by multiplying such Conversion Price by the fraction
the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such issuance of
rights or warrants plus the number of shares of Common Stock
which could be purchased at the Fair Market Value of a share
of Common Stock at the time of such issuance for the maximum
aggregate consideration payable upon exercise in full of all
such rights or warrants and the denominator of which shall be
the number of shares of Common Stock outstanding immediately
before such issuance of rights or warrants plus the maximum
number of shares of Common Stock that could be acquired upon
the exercise in full of all such rights and warrants.
(C) In the event the Company shall, at any time or
from time to time while any of the shares of Series B
Preferred Stock are outstanding, make an Extraordinary
Distribution (as hereinafter defined) in respect of the
Common Stock, whether by dividend, distribution,
reclassification of shares or recapitalization of the Company
(excluding a recapitalization or reclassification effected by
a merger or consolidation to which Section 8 hereof applies)
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or effect a Pro Rata Repurchase (as hereinafter defined) of
Common Stock where the aggregate amount paid in the
Extraordinary Distribution or the aggregate premium paid in
the Pro Rata Repurchase over the Fair Market Value of the
shares of Common Stock repurchased (as determined on the
expiration date (including all extensions thereof) of the
applicable tender offer or exchange offer), either alone or
when combined with aggregate amounts or premiums paid in
respect of any other Extraordinary Distributions or Pro Rata
Repurchases effected within the preceding twelve-month period
(which other Extraordinary Distributions or Pro Rata
Repurchases have not been previously taken into account for
the purpose of adjusting the Conversion Price pursuant to
this paragraph (C) of Section 9) exceeds twelve and one-half
percent (12 - 1/2%) of the aggregate Fair Market Value of all
shares of Common Stock outstanding on the record date in
respect of such Extraordinary Distribution or on the
expiration date (including all extensions thereof) of the
applicable tender offer or exchange offer in respect of such
Pro Rata Repurchase, as the case may be, the Conversion Price
in effect immediately prior to such Extraordinary
Distribution or Pro Rata Repurchase shall, subject to
paragraphs (E) and (F) of this Section 9, be adjusted by
multiplying such Conversion Price by the fraction the
numerator of which is (i) the product of (x) the number of
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shares of Common Stock outstanding immediately before such
Extraordinary Distribution or Pro Rata Repurchase multiplied
by (y) the Fair Market Value of a share of Common Stock on
the record date with respect to an Extraordinary
Distribution, or on the expiration date (including all
extensions thereof) of the applicable tender offer or
exchange offer with respect to a Pro Rata Repurchase minus
(ii) the Fair Market Value of the Extraordinary Distribution
or the aggregate purchase price of the Pro Rata Repurchase,
as the case may be, and the denominator of which shall be the
product of (A) the number of shares of Common Stock
outstanding immediately before such Extraordinary
Distribution or Pro Rata Repurchase minus, in the case of a
Pro Rata Repurchase, the number of shares of Common Stock
repurchased by the Company multiplied by (B) the Fair Market
Value of a share of Common Stock on the record date with
respect to an Extraordinary Distribution or on the expiration
date (including all extensions thereof) of the applicable
tender offer or exchange offer. The Company shall send each
holder of Series B Preferred Stock (i) notice of its intent
to make any Extraordinary Distribution and (ii) notice of any
offer by the Company to make a Pro Rata Repurchase, in each
case at the same time as, or as soon as practicable after,
such offer is first communicated (including by announcement
of a record date in accordance with the rules of any stock
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exchange on which the Common Stock is listed or admitted to
trading) to holders of Common Stock. Such notice shall
indicate the intended record date and the amount and nature
of such Extraordinary Distribution, or the number of shares
subject to such offer for a Pro Rata Repurchase and the
purchase price payable by the Company pursuant to such offer,
as well as the Conversion Price and the number of shares of
Common Stock into which a share of Series B Preferred Stock
may be converted at such time.
(D) In the event the Company shall, at any time or
from time to time while any of the shares of Series B
Preferred Stock are outstanding, issue, sell or exchange
shares of Common Stock (other than pursuant to any employee
or director incentive or benefit plan or arrangement,
including any employment, severance or consulting agreement,
of the Company or any subsidiary of the Company heretofore or
hereafter adopted) for a consideration having a Fair Market
Value on the date of such issuance, sale or exchange of fifty
percent (50%) or less of the Fair Market Value of such shares
on the date of such issuance, sale or exchange, then, subject
to the provisions of paragraphs (E) and (F) of this Section
9, the Conversion Price shall be adjusted by multiplying such
Conversion Price by the fraction the numerator of which shall
be the sum of (i) the Fair Market Value of all the shares of
Common Stock outstanding on the day immediately preceding
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such issuance, sale or exchange plus (ii) the Fair Market
Value of the consideration received by the Company in respect
of such issuance, sale or exchange of shares of Common Stock,
and the denominator of which shall be the product of (i) the
Fair Market Value of a share of Common Stock on the day
immediately preceding such issuance, sale or exchange
multiplied by (ii) the sum of the number of shares of Common
Stock outstanding on such day plus the number of shares of
Common Stock so issued, sold or exchanged by the Company.
(E) Notwithstanding any other provisions of this
Section 9, the Company shall not be required to make
immediately any adjustment of the Conversion Price unless
such adjustment would require an increase or decrease of at
least one percent (1%) in the Conversion Price. Any lesser
adjustment shall be carried forward and shall be made no
later than the earlier of (i) three years after the event
which gives rise to such adjustment and (ii) the time of the
next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to
an increase or decrease of at least one percent (1%) in the
Conversion Price.
(F) If the Company shall make any dividend or
distribution on the Common Stock or issue any Common Stock,
other capital stock or other security convertible into or
exchangeable for capital stock of the Company or any rights
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or warrants to purchase or acquire any such security, which
transaction does not result in an adjustment to the
Conversion Price pursuant to the foregoing provisions of this
Section 9, the Board of Directors of the Company may
consider, but shall be under no legal obligation to consider,
whether such action is of such a nature that an adjustment to
the Conversion Price should equitably be made in respect of
such transaction. If in such case the Board of Directors of
the Company determines that an adjustment to the Conversion
Price should be made, an adjustment shall be made effective
as of such date, as determined by the Board of Directors of
the Company. The determination of the Board of Directors of
the Company as to whether an adjustment to the Conversion
Price should be made pursuant to the foregoing provisions of
this paragraph 9(F), and, if so, as to what adjustment should
be made and when, shall be final and binding on the Company
and all stockholders of the Company. Without limiting the
foregoing, the Company shall be entitled to make such
additional adjustments in the Conversion Price, in addition
to those required by the foregoing provisions of this Section
9, as shall be necessary in order that any dividend or
distribution in shares of capital stock of the Company,
subdivision, reclassification or combination of shares of
stock of the Company or any recapitalization of the Company
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or other event shall not be taxable to holders of the Common
Stock.
(G) For purposes of this Resolution, the following
definitions shall apply:
"Extraordinary Distribution" shall mean any dividend
or other distribution (i) of cash, including for this purpose
regular quarterly cash dividends declared and paid by the
Company, and (ii) of any shares of capital stock of the Company
(other than shares of Common Stock referred to in clause (i) of
paragraph (A) of this Section 9), other securities of the
Company (other than rights or warrants of the type referred to
in paragraph (B) of this Section 9), evidence of indebtedness
of the Company or any other person or any other property
(including shares of any subsidiary of the Company), or any
combination thereof, each as valued at Fair Market Value.
"Fair Market Value" shall mean (a) as to cash, the
amount of cash, and (b) as to shares of Common Stock or any
other class of capital stock or securities of the Company or
any other issuer which are publicly traded, the average of the
Current Market Prices (as hereinafter defined) of such shares
or securities for each day of the Adjustment Period (as
hereinafter defined). "Current Market Price" of publicly
traded shares of Common Stock or any other class of capital
stock or other security of the Company or any other issuer for
a day shall mean the last reported sales price, regular way,
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or, in case no sale takes place on such day, the average of
the reported closing bid and asked prices, regular way, in
either case as reported on the New York Stock Exchange
Composite Tape or, if such security is not listed or admitted
to trading on the New York Stock Exchange, on the principal
national securities exchange on which such security is listed
or admitted to trading, or if not listed or admitted to
trading on any national securities exchange, on the NASDAQ
National Market System or, if such security is not quoted on
such National Market System, the average of the closing bid
and asked prices on such day in the over-the-counter market
as reported by NASDAQ or, if bid and asked prices for such
security on such day shall not have been reported through
NASDAQ, the average of the bid and asked prices for such day
as furnished by any New York Stock Exchange member firm
regularly making a market in such security selected for such
purpose by the Board of Directors of the Company or a
committee thereof on each trading day during the Adjustment
Period. "Adjustment Period" shall mean the period of five
(5) consecutive trading days, selected by the Board of
Directors of the Company or a committee thereof, during the
20 trading days preceding, and including, the date as of
which the Fair Market Value of a security is to be
determined. The "Fair Market Value" of any security which is
not publicly traded or of any other property shall mean the
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fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of
such securities or property selected in good faith by the
Board of Directors of the Company or a committee thereof, or,
if no such investment banking or appraisal firm is in the
good faith judgment of the Board of Directors or such
committee available to make such determination, as determined
in good faith by the Board of Directors of the Company or
such committee.
"Pro Rata Repurchase" shall mean any purchase of
shares of Common Stock by the Company or any subsidiary
thereof, whether for cash, shares of capital stock of the
Company, other securities of the Company, evidences of
indebtedness of the Company or any other person or any other
property (including shares of a subsidiary of the Company),
or any combination thereof, pursuant to any tender offer or
exchange offer subject to Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision of law.
(H) Whenever an adjustment to the Conversion Price
and the related voting rights of the Series B Preferred Stock
is required pursuant to this Resolution, the Company shall
forthwith place on file with the transfer agent for the
Common Stock and the Series B Preferred Stock if there be
one, and with the Secretary of the Company, a statement
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signed by two officers of the Company stating the adjusted
Conversion Price determined as provided herein and the
resulting conversion ratio, and the voting rights (as
appropriately adjusted), of the Series B Preferred Stock.
Such statement shall set forth in reasonable detail such
facts as shall be necessary to show the reason and the manner
of computing such adjustment, including any determination of
Fair Market Value involved in such computation. Promptly
after each adjustment to the Conversion Price and the related
voting rights of the Series B Preferred Stock, the Company
shall mail a notice thereof and of the then prevailing
conversion ratio to each holder of shares of Series B
Preferred Stock.
Section 10. Ranking; Retirement of Shares.
------- -----------------------------
(A) The Series B Preferred Stock shall rank senior
to the Series A Junior Participating Preferred Stock and the
Common Stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution and
winding-up of the Company, and, unless otherwise provided in
the Restated Certificate of Incorporation of the Company, as
amended, or a Certificate of Designations relating to a
subsequent series of Preferred Stock, $1.00 par value, of the
Company, the Series B Preferred Stock shall rank junior to
all other series of the Company's Preferred Stock, $1.00 par
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value, as to the payment of dividends and the distribution of
assets on liquidation, dissolution or winding-up.
(B) Any shares of Series B Preferred Stock
acquired by the Company by reason of the conversion or
redemption of such shares as provided by this Resolution, or
otherwise so acquired, shall be retired as shares of Series B
Preferred Stock and restored to the status of authorized but
unissued shares of Preferred Stock, $1.00 par value, of the
Company, undesignated as to series, and may thereafter be
reissued as part of a new series of such Preferred Stock as
permitted by law.
Section 11. Miscellaneous.
---------- -------------
(A) All notices referred to herein shall be in
writing, and all notices hereunder shall be deemed to have
been given upon the earlier of receipt thereof or three (3)
business days after the mailing thereof if sent by registered
mail (unless first-class mail shall be specifically permitted
for such notice under the terms of this Resolution) with
postage prepaid, addressed: (i) if to the Company, to its
office at 950 Winter Street, Waltham, Massachusetts 02254 or
to the transfer agent for the Series B Preferred Stock, or
other agent of the Company designated as permitted by this
Resolution, or (ii) if to any holder of the Series B
Preferred Stock or Common Stock, as the case may be, to such
holder at the address of such holder as listed in the stock
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record books of the Company (which may include the records of
any transfer agent for the Series B Preferred Stock or Common
Stock, as the case may be) or (iii) to such other address as
the Company or any such holder, as the case may be, shall
have designated by notice similarly given.
(B) The term "Common Stock" as used in this
Resolution means the Company's Common Stock of $1.00 par
value, as the same exists at the date of filing of a
Certificate of Designations relating to Series B Preferred
Stock or any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting
solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that,
at any time as a result of an adjustment made pursuant to
Section 9 of this Resolution, the holder of any share of
Series B Preferred Stock upon thereafter surrendering such
shares for conversion shall become entitled to receive any
shares or other securities of the Company other than shares
of Common Stock, the Conversion Price in respect of such
other shares or securities so receivable upon conversion of
shares of Series B Preferred Stock shall thereafter be
adjusted, and shall be subject to further adjustment from
time to time, in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to Common Stock
contained in Section 9 hereof, and the provisions of Sections
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1 through 8 and 10 and 11 of this Resolution with respect to
the Common Stock shall apply on like or similar terms to any
such other shares or securities.
(C) The Company shall pay any and all stock
transfer and documentary stamp taxes that may be payable in
respect of any issuance or delivery of shares of Series B
Preferred Stock or shares of Common Stock or other securities
issued on account of Series B Preferred Stock pursuant hereto
or certificates representing such shares or securities. The
Company shall not, however, be required to pay any such tax
which may be payable in respect of any transfer involved in
the issuance or delivery of shares of Series B Preferred
Stock or Common Stock or other securities in a name other
than that in which the shares of Series B Preferred Stock
with respect to which such shares or other securities are
issued or delivered were registered, or in respect of any
payment to any person with respect to any such shares or
securities other than a payment to the registered holder
thereof, and shall not be required to make any such issuance,
delivery or payment unless and until the person otherwise
entitled to such issuance, delivery or payment has paid to
the Company the amount of any such tax or has established, to
the satisfaction of the Company, that such tax has been paid
or is not payable.
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(D) In the event that a holder of shares of Series
B Preferred Stock shall not by written notice designate the
name in which shares of Common Stock to be issued upon
conversion of such shares should be registered or to whom
payment upon redemption of shares of Series B Preferred Stock
should be made or the address to which the certificate or
certificates representing such shares, or such payment,
should be sent, the Company shall be entitled to register
such shares, and make such payment, in the name of the holder
of such Series B Preferred Stock as shown on the records of
the Company and to send the certificate or certificates
representing such shares, or such payment, to the address of
such holder shown on the records of the Company.
(E) Unless otherwise provided in the Restated
Certificate of Incorporation, as amended, of the Company, all
payments in the form of dividends, distributions on voluntary
or involuntary dissolution, liquidation or winding-up or
otherwise made upon the shares of Series B Preferred Stock
and any other stock ranking on a parity with the Series B
Preferred Stock with respect to such dividends or
distributions shall be made pro rata, so that amounts paid
per share on the Series B Preferred Stock and such other
stock shall in all cases bear to each other the same ratio
that the required dividends, distributions or payments, as
the case may be, then payable per share on the shares of the
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Series B Preferred Stock and such other stock bear to each
other.
(F) The Company may appoint, and from time to time
discharge and change, a transfer agent for the Series B
Preferred Stock. Upon any such appointment or discharge of a
transfer agent, the Company shall send notice thereof by
first-class mail, postage prepaid, to each holder of record
of Series B Preferred Stock.
IN WITNESS WHEREOF, I have executed and subscribed
this Certificate of Designations and do affirm the foregoing
as true under the penalties of perjury this 17th day of
November, 1988.
/s/ Samuel W. Bodman
----------------------
Samuel W. Bodman
Chairman of the Board
ATTEST:
/s/ Charles Gerlinger
- ------------------------
Charles Gerlinger
Secretary
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EXHIBIT 3(a)
AMENDED CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK OF CABOT CORPORATION
(Pursuant to Section 151
of the General Corporation Law of the State of Delaware)
We, Kennett F. Burnes, President, and Charles D. Gerlinger,
Secretary of Cabot Corporation (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY as
follows:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the said Corporation, said
Board of Directors on November 10, 1995, voted to create a series of 1,000,000
shares of Preferred Stock designated as Series A Junior Participating Preferred
Stock:
VOTED, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation in accordance with the provisions of
the Corporation's Certificate of Incorporation and Section 151(g) of the General
Corporation Law of the State of Delaware, the Board of Directors hereby approves
and adopts an amendment to the Certificate of Designation, Preferences and
Rights of the Series A Junior Participating Preferred Stock of Cabot
Corporation, which Certificate is hereby amended in its entirety, and hereby
states the designation and number of shares, and fixes the relative rights,
preferences and limitations thereof (in addition to the provisions set forth in
the Corporation's Certificate of Incorporation which are applicable to the
Preferred Stock of all classes and series) as follows:
Section 1. Designation and Amount. There shall be a series of
Preferred Stock, par value $1.00 per share, of the Corporation which shall be
designated as "Series A Junior Participating Preferred Stock," par value $1.00
per share, and the number of shares constituting such series shall be 1,000,000.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; provided, that no decrease shall reduce the number of shares of
Series A Junior Participating Preferred Stock to a number less than that of the
shares then outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) 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
Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A
2
Junior Participating Preferred Stock in preference to the holders of shares of
Common Stock, par value $1.00 per share (the "Common Stock"), of the Corporation
and any other junior 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 the last day of each fiscal
quarter of the Corporation in each year or such other dates as the Board of
Directors of the Corporation shall approve (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) $18.00 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 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 November 24, 1995 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide (by a stock split or otherwise) the outstanding Common
Stock, or (iii) combine (by a reverse stock split or otherwise) 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.
(B) The Corporation shall declare a dividend or distribution
on the Series A Junior Participating Preferred Stock as provided in paragraph
(A) above at the time 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 $18.00 per share on
the Series A Junior Participating Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(C) So long as any shares of the Series A Junior Participating
Preferred Stock are outstanding, no dividends or other distributions shall be
declared, paid or distributed, or set aside for payment or distribution, on the
Common Stock unless, in each
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case, the dividend required by this Section 2 to be declared on the Series A
Junior Participating Preferred Stock shall have been declared.
(D) The holders of the shares of the Series A Junior
Participating Preferred Stock shall not be entitled to receive any dividends or
other distributions except as provided herein.
(E) 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 entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total 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 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. 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 (by a stock split or
otherwise) the outstanding Common Stock, or (iii) combine (by a reverse stock
split or otherwise) 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.
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(B) 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 stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to at least
six (6) full quarterly dividends (whether or not declared and whether or not
consecutive) 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
at least six (6) full quarterly dividends (whether or not declared and whether
or not consecutive) thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) Directors.
(ii) 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 (iii) of this
Section 3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, 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 one-third (1/3) 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.
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(iii) 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 stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number 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 Chairman of the Board or the
President 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
paragraph (C)(iii) 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 10 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 stockholder or
stockholders 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 paragraph (C)(iii), 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 stockholders.
(iv) 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 paragraph (C)(ii) of this Section 3) be filled by a 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 become vacant.
References in this paragraph (C) 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 foregoing sentence.
(v) 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 Certificate of Incorporation
or By-laws irrespective of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the Certificate of
Incorporation or By-laws). 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.
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(D) 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 extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 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:
(i) 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;
(ii) Declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (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;
(iii) 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
(iv) 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 Junior
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.
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(B) 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 (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. 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.
Section 6. Liquidation, Dissolution or Winding Up.
(A) 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 per share, the amount of $18.00, plus an
amount equal to accrued and unpaid dividends and distributions 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 (i)
the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as
set forth in paragraph (C) below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock) (such number
in clause (ii), 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.
(B) In the event 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.
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In the event 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.
(C) 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 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.
Section 7. Consolidation, Merger, etc. If 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 event 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 the Adjustment Number 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.
Section 8. No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the Corporation's
Preferred Stock as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise.
Section 10. 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.
Section 11. Amendment. The Certificate 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
-8-
9
of a majority or more of the outstanding shares of Series A Junior Participating
Preferred Stock, voting separately as a class.
Section 12. Effective Date. This Amended Certificate of
Designation, Preferences and Rights of Series A Junior Participating Preferred
Stock of Cabot Corporation shall be effective at 5:00 P.M., Eastern Standard
Time, on November 24, 1995.
IN WITNESS WHEREOF, I have executed and subscribed this
Certificate and do affirm the foregoing as true under penalties of perjury this
10th day of November, 1995.
By:/s/ Kennett F. Burnes
------------------------
Kennett F. Burnes
President
Attest:
/s/ Charles D. Gerlinger
- --------------------------
Charles D. Gerlinger
Secretary
-9-
1
EXHIBIT 10(b)(ii)
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of January 13, 1995 among CABOT CORPORATION (the
"Borrower"), the BANKS listed on the signature pages hereof (the "Banks") and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of January 13, 1994 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement to provide
for an extension of the term of the facility provided for therein and a
reduction of the pricing.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement shall
have the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof refer to the
Agreement as amended hereby.
SECTION 2. Amendment of Section 1.01 of the Agreement. Section 1.01 of
the Agreement is amended by
(a) replacing the definition of "Facility Fee Rate" with the
following:
2
"Facility Fee Rate" means (i) .08 of 1% per annum for any day
on which Investment Level I Status exists, (ii) .10 of 1% per annum for
any day on which Investment Level II Status exists, (iii) .125 of 1%
per annum for any day on which Investment Level III Status exists, (iv)
.15 of 1% per annum for any day on which Investment Level IV Status
exists and (v) .20 of 1% per annum for any day on which Investment
Level V Status exists.
(b) replacing the definitions of "Investment Level I Status",
"Investment Level II Status", "Investment Level III Status" and "Investment
Level IV Status" with the following:
"Investment Level I Status" exists at any date if, at such day
(x) the Borrower's outstanding senior unsecured long-term debt
securities are (i) rated A (without a minus sign) or better by S&P and
(ii) rated A2 or better by Moody's and (y) Investment Level V Status
does not exist.
"Investment Level II Status" exists at any date if, at such
date (x) the Borrower's outstanding senior unsecured long-term debt
securities are (i) rated A- or better by S&P and (ii) rated A3 or
better by Moody's and (y) neither Investment Level I Status nor
Investment Level V Status exists.
"Investment Level III Status" exists at any date if, at such
date, (x) the Borrower's outstanding senior unsecured long-term debt
securities are (i) rated BBB+ or better by S&P and (ii) rated Baa1 or
better by Moody's and (y) none of Investment Level I Status, Investment
Level II Status nor Investment Level Status V exists.
"Investment Level IV Status" exists at any date if, at such
date, (x) the Borrower's outstanding senior unsecured long-term debt
securities are (i) rated BBB (without a minus sign) or better by S&P
and (ii) rated Baa2 or better by Moody's and (y) none of Investment
Level I Status, Investment Level II Status, Investment Level III Status
and Investment Level V Status exists.
"Investment Level V Status" exists at any date if, at such
date, (x) the Borrower's outstanding senior unsecured long-term debt
securities are (i) rated BBB- or lower by S&P or (ii) rated Baa3 or
lower by Moody's or (y) if the Borrower's commercial paper rating is A3
by S&P or P3 by Moody's.
(c) by replacing the date "January 13, 1997" where it appears in the
definition of "Termination Date" with the date "January 13, 2000".
2
3
SECTION 3. Amendment of Section 2.07 of the Agreement. The definitions
of "CD Margin" and "Euro-Dollar Margin" in Section 2.07 of the Agreement are
amended to read as follows:
"CD Margin" means, for any day, the percentage per annum equal to the
applicable CD Margin set forth in the table below.
If the Investment Level Status is: The CD Margin is:
---------------------------------- -----------------
Investment Level Status I .295 of 1%
Investment Level Status II .375 of 1%
Investment Level Status III .40 of 1%
Investment Level Status IV .425 of 1%
Investment Level Status V .675 of 1%
"Euro-Dollar Margin" means, for any day, the percentage per annum equal
to the applicable Euro-Dollar Margin set forth in the table below.
If the Investment Level Status is: The Euro-Dollar Margin is:
---------------------------------- --------------------------
Investment Level Status I .17 of 1%
Investment Level Status II .25 of 1%
Investment Level Status III .275 of 1%
Investment Level Status IV .30 of 1%
Investment Level Status V .55 of 1%
SECTION 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts; Effectiveness. This Amendment may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective as of the date hereof when the Agent shall
have received duly executed counterparts hereof signed by the Borrower and the
Banks (or, in the case of any party as to which an executed counterpart shall
not have been received, the Agent shall have received telegraphic, telex or
other written confirmation from such party of execution of a counterpart hereof
by such party).
3
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
CABOT CORPORATION
By/s/ John G.L. Cabot
---------------------------------
Title: Vice Chairman of the Board
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By/s/ Deborah A. Brodheim
---------------------------------
Title: Vice President
THE FIRST NATIONAL BANK
OF BOSTON
By/s/ Harvey H. Thayer, Jr.
---------------------------------
Title: Director
4
5
CITIBANK, N.A.
By/s/ Gian Paolo Potsios
---------------------------------
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By/s/ Robert Ivosevich
---------------------------------
Title: Senior Vice President
CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By/s/ Robert Ivosevich
---------------------------------
Title: Authorized Signature
ABN AMRO BANK N.V.
By/s/ James E. Davis
---------------------------------
Title: Vice President
By/s/ Charles J. Wahle
---------------------------------
Title: Corporate Banking Officer
CHEMICAL BANK
By/s/ William J. Caggiano
---------------------------------
Title: Managing Director
MIDLAND BANK PLC NEW YORK
BRANCH
By/s/ Jonathan Morris
---------------------------------
Title: Vice President
5
6
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By/s/ Robert W. Ramage, Jr.
---------------------------------
Title: Senior Vice President
BROWN BROTHERS HARRIMAN & CO.
By/s/ William J. Whalen, Jr.
---------------------------------
Title: Manager
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By/s/ Deborah A. Brodheim
---------------------------------
Title: Vice President
60 Wall Street
New York, New York 10260
Attention: Mark Connor
Telex number: 177615
Telecopy number: (302) 634-1091
6
1
Exhibit 10(e)(v)
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
==============================================================================
2
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
TABLE OF CONTENTS
-----------------
1. In General........................................................ 1
----------
2. Defined Terms..................................................... 1
-------------
3. Deferral Election................................................. 3
-----------------
(a) In general............................................... 3
----------
(b) First year of participation.............................. 3
---------------------------
(c) Limits................................................... 3
------
(d) Form of election; irrevocability......................... 3
--------------------------------
4. Accounts; Credits................................................. 4
-----------------
(a) Deferral credits......................................... 4
----------------
(b) Notional earnings........................................ 4
-----------------
(c) FICA/Medicare taxes, etc. ............................... 4
------------------------
5. Payment of Deferred Amounts....................................... 5
---------------------------
(a) Form and timing of distributions; in general............. 5
--------------------------------------------
(b) Distributions upon death................................. 6
------------------------
(c) Hardship................................................. 6
--------
(d) Other Withdrawals........................................ 7
-----------------
(e) Computation of installment payments, etc................. 7
----------------------------------------
(f) Section 162(m)........................................... 7
--------------
(g) Taxes.................................................... 7
-----
6. Assignment........................................................ 7
----------
- -------------------------------------------------------------------------------
i
3
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
7. Plan To Be Unfunded, etc. ........................................ 8
------------------------
8. No Contract of Employment......................................... 8
-------------------------
9. Amendment and Termination......................................... 8
-------------------------
10. Administration of the Plan........................................ 9
--------------------------
- -------------------------------------------------------------------------------
ii
4
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
CABOT CORPORATION
-----------------
DEFERRED COMPENSATION PLAN
--------------------------
1. IN GENERAL. Cabot Corporation (the "Company") has established this
Deferred Compensation Plan (the "Plan") to further its business interests by
providing eligible employees an opportunity to defer some or all of their
compensation on an unfunded, nonqualified basis as hereinafter provided. The
Plan shall be effective January 1, 1995.
2. DEFINED TERMS. As used in the Plan, the following terms have the
meanings associated with them below:
- "Account": A memorandum account maintained by the
Administrator to reflect the Employer's unfunded deferred
compensation obligation to a Participant hereunder, including
where the context requires any sub-account.
- "Administrator": The Benefits Committee of the Company,
whose members are appointed by the Board and serve at the Board's
pleasure, or such other committee, person or persons as the Board
may designate. The term "Administrator" shall also include
delegates of any of the foregoing.
- "Board": The Board of Directors of the Company.
- "Code": The federal Internal Revenue Code, as amended.
- "Consultant": An individual performing consulting
services for an Employer (other than as an employee) who is
designated by the Administrator as eligible to participate in the
Plan, provided that such designation has not been revoked by the
Administrator.
- "CRISP": The Cabot Retirement Incentive Savings Plan
as from time to time amended and in effect.
- -------------------------------------------------------------------------------
1
5
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
- "Earnings Measure": An interest rate, stock index, bond
index, mutual fund or other objective external measure of
investment performance specified by the Administrator for
purposes of measuring and crediting notional earnings under
Section 4(b) below.
- "Eligible Employee": An individual employed by an
Employer who is (i) determined by the Administrator to qualify as
a "highly compensated or management" employee for purposes of
Sections 201(a)(2), 301(a)(3) and 401(a)(1) of ERISA, and (ii)
designated by the Administrator as eligible to participate in the
Plan, provided that such designation has not been revoked by the
Administrator.
- "Eligible Pay": Except as otherwise determined by the
Administrator, Eligible Pay shall include (i) in the case of an
Eligible Employee: base salary, amounts payable under the
Company's short-term incentive program, and sales incentive
bonuses; and (ii) in the case of a Consultant: the consulting
fees payable by the Employer. The Administrator in its
discretion may include other categories of remuneration in, or
exclude categories of remuneration from, the definition of
"Eligible Pay," either in general or in particular cases.
- "Employer": The Company and its Subsidiaries, or any of
them. Except as otherwise specified by the Administrator,
however, participation in the Plan shall be limited to Eligible
Employees employed by, or Consultants providing services to, the
Company or one of the Subsidiaries listed in Appendix A hereto.
- "ERISA": The Employee Retirement Income Security Act of
1974, as amended.
- "Moody's Rate": The rate described in Section 5(e) below.
- "Participant": A Consultant or an Eligible Employee who
participates in the Plan.
- "Subsidiary": A corporation in which the Company holds,
directly or indirectly, stock possessing 50% of the total voting
power, and any other corporation or unincorporated trade or
business that the Board designates as a Subsidiary for purposes
of the Plan.
- -------------------------------------------------------------------------------
2
6
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
3. Deferral Election
(a) IN GENERAL. Each Eligible Employee and Consultant may elect to
defer hereunder a specified portion or percentage of his or her Eligible
Pay to be earned in any calendar year. Except as the Administrator may
otherwise determine, Eligible Pay is earned in a year if (i) in the case
of base salary or Consultant's fees paid on a periodic basis, it would
normally be paid in that year; or (ii) in the case of other Eligible
Pay, it is neither vested nor determinable at the beginning of the year
but becomes determinable at some point during the year. Each such
deferral election shall be made by the Participant's delivery to the
Administrator of a deferral election form on or before the date
specified by the Administrator, but in any case (except as provided in
(b) below) prior to the first day of the calendar year to which the
deferral election relates.
(b) FIRST YEAR OF PARTICIPATION. Notwithstanding (a) above, an
individual who first becomes eligible to participate in the Plan during
the course of a calendar year may elect to defer a specified portion or
percentage of his or her Eligible Pay for the remainder of the year by
delivering to the Administrator a deferral election form within 30 days
of being notified of eligibility, such election to take effect as of the
first day of the month next following receipt by the Administrator of
such form or forms (the "initial effective date"). An election under
this paragraph shall be effective only as to Eligible Pay earned in the
period commencing on the initial effective date and ending on the last
day of the year, as determined by the Administrator under principles
similar to those set forth in (a)(i) and (a)(ii) above.
(c) LIMITS. Except as otherwise determined by the Administrator, the
maximum amount of Eligible Pay that an Eligible Employee may elect to
defer for any year shall be 50% of his or her base salary plus 100% of
any other Eligible Pay. An Eligible Employee who elects to defer any
Eligible Pay for a year must defer at least $2,000. The $2,000 minimum
shall apply on a prorated basis with respect to a partial year election
under (b) above. A Consultant may defer any portion or all of his or
her consulting fees for any year.
(d) FORM OF ELECTION; IRREVOCABILITY. Each deferral election shall be
made in writing on a form prescribed by the Administrator. The
Administrator may condition the effectiveness of any election upon the
delivery by the Participant of such other form or forms as the
Administrator may prescribe. A deferral election applicable to Eligible
Pay to be earned in a particular calendar year shall be irrevocable once
that year has begun (or, in the case of an initial year of participation
described in (b) above, once the 30-day election period has expired).
- -------------------------------------------------------------------------------
3
7
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
4. ACCOUNTS; CREDITS. For each Participant, the Administrator shall
maintain one or more Accounts reflecting deferrals and notional earnings as
hereinafter provided.
(a) DEFERRAL CREDITS. Each amount deferred by a Participant under
Section 3 above shall be credited to the Participant's Account in the
year the amount would have been paid absent the deferral. In addition,
there shall be credited to the Account of each Participant who is an
Eligible Employee: (i) for the year to which the Participant's deferral
election relates, an amount equal to 10% of any base salary elected to
be deferred by the Participant from that year; provided, that
Participants who also participate in the Company's supplemental plans
(or any of them) shall not be eligible for the additional credit
described in this clause; and (ii) subject to Treas. Regs. Section
1.401(k)-1(e)(6), if the Participant is a participant in CRISP, an
additional credit equal to the amount, if any, of matching contributions
that would have been made for the benefit of such Participant under
CRISP but for a reduction thereunder attributable to the limitations of
Sections 401(k) and 401(m) of the Code, provided that the Participant
has elected to participate in CRISP to the maximum extent permitted by
Section 401(k) of the Code. Notional earnings under (b) below shall be
calculated as though all amounts deferred under the preceding two
sentences for a calendar year had been credited to the Participant's
Account as of the first day of such year (or as of the date
participation in the Plan commences, in the case of a Participant's
first year of participation described in Section 3(b) above).
(b) NOTIONAL EARNINGS. Not less frequently than annually, the
Administrator shall adjust each Participant's Account to reflect
notional earnings. Notional earnings shall be based on such Earnings
Measures as the Administrator shall specify. The Administrator may, but
need not, permit Participants to (i) select the Earnings Measures that
will apply to their Accounts from among those specified by the
Administrator, and (ii) change such Measures prospectively at any time.
The Administrator shall have the absolute discretion at any time to
alter or amend the Earnings Measures used in valuing and adjusting
Accounts; provided, that the Administrator may not, without the written
consent of the affected Participant, alter any Earnings Measure
retroactively to the extent that the effect of such alteration would be
to reduce the balance of the Participant's Account below what it was
immediately prior to such alteration. Nothing herein shall be construed
as obligating the Administrator or any Employer to set aside assets or
establish a trust or other fund for purposes of the Plan.
(c) FICA/MEDICARE TAXES, ETC. To the extent any amount deferred or
credited hereunder to the Account of a Participant is treated as "wages"
for FICA/Medicare or FUTA tax purposes on a current basis rather than
when distributed, all as determined by
- -------------------------------------------------------------------------------
4
8
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
the Administrator, then the Administrator shall require that the
Participant either (i) timely pay such taxes in cash by separate check
to the Employer, or (ii) make other arrangements satisfactory to the
Employer (e.g., additional withholding from other wage payments) for the
payment of such taxes. To the extent a Participant fails to pay or
provide for such taxes as required, the Administrator may suspend the
Participant's participation in the Plan or reduce amounts credited or to
be credited hereunder.
5. PAYMENT OF DEFERRED AMOUNTS. The Participant's Employer shall make
distributions of Account balances as provided in this Section. All
distributions shall be in cash.
(a) FORM AND TIMING OF DISTRIBUTIONS; IN GENERAL. Amounts credited to
a Participant's Account for any year under Section 4(a) above (the
"deferral year"), adjusted for notional earnings under Section 4(b)
above, shall be paid as the Participant elects either
(i) upon the expiration of a fixed period of years, but in no event
earlier than the third anniversary of the beginning of the deferral
year (a "fixed-period election"), or
(ii) upon termination of the Participant's employment or consulting
relationship with the Employer.
A fixed-period election shall not be effective for any deferral year
unless made prior to the beginning of the deferral year or within 30
days of being notified of eligibility to participate, in the case of an
initial year of participation described in Section 3(b) above, and once
made shall be irrevocable. Amounts distributable pursuant to a
fixed-period election shall be paid in a lump sum. If the Participant's
employment or consulting relationship with the Employer terminates prior
to the payment date specified in any fixed-period election, amounts that
would otherwise have been payable under (i) above pursuant to such
election shall instead be paid in a lump sum upon such termination.
A Participant shall be deemed to have elected a distribution under (ii)
above as to any portion of his or her Account for which an effective
fixed-period election has not been made. Subject to such rules as the
Administrator may prescribe, a Participant may elect to have amounts
distributable under (ii) above paid either in a lump sum or in equal
monthly installments over a period of five, ten or fifteen years (a
"form of payment election"), and may change such election at any time
prior to termination of employment or termination of the consulting
relationship. However, a Participant may have only one form of payment
election in effect at any time, and it shall control the manner in which
the entirety of the Participant's Account distributable under (ii) above
will be paid. Moreover, except for a Participant's initial form of
payment election made in connection
- -------------------------------------------------------------------------------
5
9
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
with his or her commencement of participation in the Plan, no such
election or change in election shall be effective unless made more than
three years prior to termination of the Participant's employment or
consulting relationship with the Company. In the absence of any
effective form of payment election, all amounts distributable to a
Participant under the Plan shall be paid in a lump sum. The
Adminisitrator may also in its discretion accelerate the distribution
under (ii) above, including payment of a lump sum, to a Participant who
elected an installment payout and who terminates employment prior to age
55 with less than 10 years of service with all Employers.
(b) DISTRIBUTIONS UPON DEATH. Each Participant shall designate in
writing, on such form as the Administrator shall prescribe, a
beneficiary or beneficiaries to receive any amounts remaining to be paid
hereunder at the Participant's death; but if no such beneficiary
designation is in effect at the time of the participant's death, or if
the Participant's beneficiary(ies) do(es) not survive the Participant,
the Administrator shall cause any such remaining benefits to be paid to
the executor or administrator of the Participant's estate. If death
occurs prior to the commencement or completion of installment
distributions to the Participant, the Administrator reserves the right
to distribute the remaining balance of the decedent's Account to the
designated beneficiary(ies), or to the decedent's estate where
applicable, in a lump sum or other form of payment. The spouse of a
married Participant who has not consented in writing, on such form as
the Administrator may prescribe, to a designation by the Participant of
one or more non-spouse beneficiary(ies) shall be treated as the
designated primary beneficiary for 50% of any portion of the
Participant's Account remaining undistributed at the Participant's death
(or such larger amount as the Participant shall have specified in his or
her beneficiary designation, if any, in effect at the time of the
Participant's death). If application of the preceding sentence results
in the Participant's spouse being treated as the designated primary
beneficiary for any portion of the Participant's Account which would
otherwise have been distributed to others, the Administrator shall
reduce the amount payable to the other designated beneficiary(ies), if
any, in such equitable manner as it deems appropriate under the
circumstances.
(c) HARDSHIP. If a Participant suffers an unforeseeable financial
emergency (caused by an event beyond the Participant's control) prior to
the payment in full of his or her Account, the Participant may apply in
writing for an extraordinary distribution under this paragraph. If the
Administrator in its discretion determines that an unforeseeable
financial emergency has occurred, the Participant's Employer will pay
the Participant an amount equal to the lesser of (i) the then balance of
the Participant's Account, or (ii) the amount determined by the
Administrator to be necessary to meet the emergency (including
applicable taxes).
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6
10
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
(d) OTHER WITHDRAWALS. A Participant may at any time elect to
withdraw the entirety of his or her Accounts less a 10% withdrawal
penalty (in addition to any applicable tax withholding). Any such
election shall be made in such manner and upon such prior notice as the
Administrator may prescribe. A Participant who elects a withdrawal
under this Section 5(d) shall thereby be barred from future
participation in the Plan and shall cease to be a Participant.
(e) COMPUTATION OF INSTALLMENT PAYMENTS, ETC. If any Account is to be
distributed in installments, the amount of each such installment shall
be determined so as to result in equal installments over the installment
period, applying the following special rules and assumptions: (i) the
Earnings Measure used to measure notional earnings with respect to the
declining Account balance over the course of the installment period
shall be a fixed rate equal to the average of the Moody's Rate for the
year in which the installment distributions are to commence and the
preceding four calendar years, and (ii) notional earnings (calculated
using the Earnings Measure described in (i) above) shall be determined
by assuming that the Account is reduced at the beginning of each year in
the installment period by the aggregate amount of the installment
payments to be made for that year. For purposes of this paragraph, the
Moody's Rate for any calendar year is the interest rate specified in
Moody's Bond Record under the heading of "Moody's Corporate Bond Yield
Averages -- Av. Corp.", as published for the month of November preceding
the calendar year.
(f) SECTION 162(m). Notwithstanding any other provision of the Plan,
prior to a Change in Control (as that term is defined in CRISP as in
effect immediately prior to such a Change) the Administrator may defer
payment of any portion of a distribution hereunder if in the judgment of
the Administrator such deferral is necessary to avoid disallowance of a
deduction under Section 162(m) of the Code. Amounts so deferred shall
continue to be credited with notional earnings under Section 4(b) and
shall be paid on the earlier of (i) the date Section 162(m) would no
longer limit the deductibility of such payment, as reasonably determined
by the Administrator, or (ii) the date of the Change in Control (as so
defined).
(g) TAXES. All distributions under the Plan shall be subject to
reduction for applicable tax withholding.
6. ASSIGNMENT. Each Employer's obligations under the Plan shall be
binding upon its successors and assigns. The rights of Participants and
beneficiaries under the Plan are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of such Participants and beneficiaries.
- -------------------------------------------------------------------------------
7
11
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
Any attempt by any person other than Participants or their beneficiaries to
bring a claim under the Plan shall be null and void.
7. PLAN TO BE UNFUNDED, ETC. The Plan is intended to be a "pension
plan" (within the meaning of Section 3(2) of ERISA) that is unfunded for ERISA
and tax purposes and that qualifies for the exemptions described in ERISA
Sections 201(a)(2), 301(a)(3) and 401(a)(1). The Administrator shall be the
"plan administrator" of the Plan and shall have discretion to construe its
terms and determine each Eligible Employee's or Participant's eligibility for
deferrals or distributions hereunder. If any person claims any benefit
hereunder, the Administrator shall make and communicate its decision with
respect to the claim within 90 days from the date the claim was received.
Where special circumstances require additional time for processing the claim,
the ninety-day response period may be extended by the Administrator to 180
days. If the Administrator does not render a written determination prior to
the expiration of such 90-day (or 180-day) period, the claim will be deemed
denied. If a claim hereunder is denied, the claimant may, within 60 days of
such denial, appeal the denial by written request for review delivered to the
Board or its designate, which request may include a request to review pertinent
documents and to submit issues and comments in writing. The Board or its
designate shall render a decision on the appeal within 60 days (or, if special
circumstances require an extension of the time for processing, 120 days) after
receipt of the request for review; but if no written decision is rendered
within such period(s), the appeal will be deemed denied.
Nothing in this Section or in Section 4(b) shall be construed as prohibiting
the Employer from establishing and maintaining a "rabbi trust" or similar trust
or account in connection with the Plan, so long as the maintenance and funding
of such a trust or account does not jeopardize the unfunded status of the Plan
under ERISA or effective tax deferral under the Code.
8. NO CONTRACT OF EMPLOYMENT. By participanting in the Plan, each
Participant expressly acknowledges and agrees that (i) nothing in the Plan in
its operation, including deferrals hereunder, limits the right of the Company
or any other Employer to terminate the employment or other services of the
Participant at any time, with or without cause, and that (ii) neither he or
she, nor his or her beneficiaries, will claim lost compensation or tax benefits
associated with discontinuance of participation in the Plan as damages or as a
measure of damages in connection with any termination of employment or other
services.
9. AMENDMENT AND TERMINATION. The Board may terminate the Plan at any
time and may amend the Plan at any time and from time to time, including
amendments with retroactive effect; provided, that no such action shall,
without the consent of the affected Participant, reduce the balance of any
Participant's Account below what it was immediately prior to the taking of such
- -------------------------------------------------------------------------------
8
12
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
action; and further provided, that upon and following a Change in Control (as
defined in CRISP as in effect immediately prior to such a Change), no amendment
shall result in the further deferral of payments that have been delayed by
reason of the operation of Section 5(e) above. If it determines such action to
be necessary to preserve or reinstate the Plan's status as a "top hat" plan
under Sections 201(a)(2), 301(a)(3) or 401(a)(1) of ERISA, or to ensure
effective tax deferral under the Plan, the Administrator may at any time
exclude any individual from participation in the Plan and cause his or her
Account to be promptly distributed, or may make such changes in the deferral or
distribution rules hereunder as are reasonably determined by the Administrator
to be necessary to accomplish such result or results. Upon termination of the
Plan in general or as to any Participant or group of Participants, the
Administrator may, but need not, provide for immediate distribution of Accounts
to the affected Participants.
10. ADMINISTRATION OF THE PLAN. The Administrator shall have full
power to interpret and administer the Plan and determine the eligibility of any
person for benefits hereunder and the amount of any such benefit, in its
discretion. Without limiting the foregoing, the Administrator shall have full
discretionary power and authority, not inconsistent with the express provisions
of the Plan, to select those individuals who may participate in the Plan; to
determine their remuneration eligible for deferral under the Plan; to determine
their eligibility to commence receipt of benefits and the form of benefits
(including, without limitation, any determination as to the proper treatment of
leaves of absence and other periods of service to the Employer); to adopt,
alter, and repeal such rules, guidelines and procedures for administration of
the Plan and for its own acts and proceedings as it shall deem advisable; to
prescribe the form of any election under the Plan; and otherwise to supervise
the administration of the Plan.
IN WITNESS WHEREOF, the Company has signed this Plan Document as of the
1st day of January 1995.
By: Karen M. Morrissey
-----------------------------------------
Its: Vice President
----------------------------------------
- -------------------------------------------------------------------------------
9
13
CABOT CORPORATION
Deferred Compensation Plan
Master Plan Document
===============================================================================
Appendix A
Employers Participating in the Plan
- -----------------------------------
Cabot Corporation
Distrigas of Massachusetts Corporation
TUCO INC.
- --------------------------------------------------------------------------------
10
1
EXHIBIT 11
CABOT CORPORATION
Earnings per Common Share for the Year Ended September 30, 1995
Statement Re: Computation of Per Share Earnings
(In thousands, except per share amounts)
Primary Fully Diluted
------- -------------
Shares of common stock outstanding at October 1, 1994,
less treasury stock 37,991 37,991
Plus net weighted shares of treasury stock issued 16 16
Plus common stock equivalents:
Effect of convertible preferred stock conversion - 3,075
Effect of equity incentive awards 719 858
-------- --------
Weighted average shares outstanding 38,726 41,940
======== ========
Income applicable to common shares $168,381 $168,381
Dividends on preferred stock - 3,551
Preferred stock conversion compensation shortfall - (2,315)
-------- --------
Earnings applicable to common shares $168,381 $169,617
======== ========
Earnings per common share $ 4.35 $ 4.04
======== ========
1
EXHIBIT 12
CABOT CORPORATION AND CONSOLIDATED SUBSIDIARIES
Statement Re: Computation of Ratios of Earnings to Fixed Charges
(Dollar amounts in thousands)
Years ended September 30
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Earnings:
Pre-tax income from continuing operations $256,342 $118,325 $ 67,900 $116,599 $ 62,362
Distributed income of affiliated companies 11,699 5,638 5,988 5,766 4,688
Add fixed charges:
Interest on indebtedness 35,639 41,668 44,043 41,714 38,661
Portion of rents representative of
the interest factor 5,515 5,879 4,838 4,933 5,715
-------- -------- -------- -------- --------
Income as adjusted $309,195 $171,510 $122,769 $169,012 $111,426
Fixed charges:
Interest on indebtedness $ 35,639 $ 41,668 $ 44,043 $ 41,714 $ 38,661
Capitalized interest _ _ _ 3,963 8,745
Portion of rents representative of
the interest factor 5,515 5,879 4,838 4,933 5,715
-------- -------- -------- -------- --------
Total fixed charges $ 41,154 $ 47,547 $ 48,881 $ 50,610 $ 53,121
Ratio of earnings to fixed charges 7.51 3.61 2.51 3.34 2.10
======== ======== ======== ======== ========
1
EXHIBIT 21
CABOT CORPORATION
Significant Subsidiaries
As of September 30, 1995
Jurisdiction of
Name Incorporation
- ---- -------------
Cabot Carbon Limited England
Cabot G.B. Limited England
Cabot B.V. Netherlands
Cabot International Capital Corporation Delaware
Cabot Safety Corporation Delaware
1
Exhibit 24
POWER OF ATTORNEY
We, the undersigned directors and officers of Cabot Corporation, hereby
severally constitute and appoint Robert Rothberg and Charles D. Gerlinger, and
each of them, our true and lawful attorneys with full power to (i) sign for us
and in our names in the capacities indicated below Annual Reports on Form 10-K
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 of Cabot
Corporation for the fiscal year ended September 30, 1995, and subsequent years,
and any and all amendments thereto, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or either of them, to
said Reports and to any and all amendments to said Reports; and (ii) to file
such Reports and amendments with the Securities and Exchange Commission on
behalf of Cabot Corporation.
WITNESS our hands and common seal on the date set forth below.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Samuel W. Bodman Director and Chairman November 10, 1995
- -------------------------- (Chief Executive Officer)
Samuel W. Bodman
/s/ Kennett F. Burnes Director and President November 10, 1995
- --------------------------
Kennett F. Burnes
/s/ Kenyon C. Gilson Vice President November 10, 1995
- -------------------------- (Chief Financial Officer)
Kenyon C. Gilson
/s/ Paul J. Gormisky Vice President and Controller November 10, 1995
- -------------------------- (Principal Accounting Officer)
Paul J. Gormisky
/s/ Jane C. Bradley Director November 10, 1995
- --------------------------
Jane C. Bradley
2
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ John G.L. Cabot Director November 10, 1995
- --------------------------
John G.L. Cabot
/s/ Robert A. Charpie Director November 10, 1995
- --------------------------
Robert A. Charpie
/s/ Arthur L. Goldstein Director November 10, 1995
- --------------------------
Arthur L. Goldstein
/s/ Robert P. Henderson Director November 10, 1995
- --------------------------
Robert P. Henderson
/s/ Arnold S. Hiatt Director November 10, 1995
- --------------------------
Arnold S. Hiatt
/s/ Gerrit Jeelof Director December 5, 1995
- --------------------------
Gerrit Jeelof
/s/ John H. McArthur Director November 10, 1995
- --------------------------
John H. McArthur
/s/ John F. O'Brien Director November 10, 1995
- --------------------------
John F. O'Brien
/s/ David V. Ragone Director November 10, 1995
- --------------------------
David V. Ragone
/s/ Charles P. Siess, Jr. Director November 10, 1995
- --------------------------
Charles P. Siess, Jr.
2
3
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Morris Tanenbaum Director December 5, 1995
- --------------------------
Morris Tanenbaum
/s/ Lydia W. Thomas Director December 5, 1995
- --------------------------
Lydia W. Thomas
3
5
1,000
U.S. DOLLARS
YEAR
SEP-30-1995
SEP-30-1995
SEP-30-1995
1
90,792
0
297,984
5,207
253,110
677,859
1,447,653
741,132
1,654,333
402,379
306,443
67,775
0
75,336
1,080,281
1,654,333
1,830,393
1,840,885
1,258,964
1,258,964
87,872
0
35,639
256,342
101,080
171,932
0
0
0
171,932
4.35
4.04
