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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_______________________
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________to____________
Commission file number 0-7154
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QUAKER CHEMICAL CORPORATION
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-0993790
-------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Elm and Lee Streets, Conshohocken, Pennsylvania 19428 - 0809
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-832-4000
-------------
Not Applicable
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date.
Number of Shares of Common Stock
Outstanding on November 10, 1997 8,712,695
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PART I. FINANCIAL INFORMATION
QUAKER CHEMICAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION
The following condensed financial statements are filed as part of this
quarterly report on Form 10-Q:
Consolidated Balance Sheet at September 30, 1997 and
December 31, 1996
Consolidated Statement of Operations for the nine months
ended September 30, 1997 and 1996
Consolidated Statement of Operations for the three months
ended September 30, 1997 and 1996
Consolidated Statement of Cash Flows for the nine months
ended September 30, 1997 and 1996.
* * * * * * * * * *
NOTE TO CONDENSED FINANCIAL INFORMATION
The attached condensed financial information has been prepared in
accordance with instructions for Form 10-Q and, therefore, does not include
all financial note information which might be necessary for a fair
presentation in accordance with generally accepted accounting principles. Such
condensed financial information is unaudited, but in the opinion of
management, includes all adjustments, consisting only of normal recurring
adjustments and accruals, necessary for a fair presentation of results for the
periods indicated. The net income reported for the periods should not
necessarily be regarded as indicative of net income on an annualized basis
(see accompanying Management's Discussion and Analysis-Other Significant
Items); however, significant variations from the results for the same period
of the previous year, if any, have been disclosed in the accompanying
Management's Discussion and Analysis. Certain reclassifications of prior
years= data have been made to improve comparability.
- 2 -
Quaker Chemical Corporation
Consolidated Balance Sheet
(dollars in thousands)
September 30, December 31,
1997 1996
(Unaudited) *
Assets
Current assets
Cash and cash equivalents $ 9,854 $ 8,525
Accounts receivable 47,153 45,564
Inventories
Raw materials and supplies 9,398 9,094
Work in process and finished goods 11,641 11,947
Deferred income taxes 4,404 4,840
Prepaid expenses and other current assets 7,548 6,582
-------- --------
Total current assets 89,998 86,552
-------- --------
Investments in and advances to associated companies 4,679 3,941
-------- --------
Property, plant and equipment, at cost
Land 5,904 6,586
Buildings and improvements 31,349 32,680
Machinery and equipment 57,657 58,220
Construction in progress 1,439 1,476
-------- --------
96,349 98,962
Less accumulated depreciation 55,405 55,002
-------- --------
Total property, plant and equipment 40,944 43,960
-------- --------
Goodwill, net 14,585 16,222
Deferred income taxes 9,504 9,278
Other noncurrent assets 4,486 5,655
-------- --------
Total noncurrent assets 28,575 31,155
-------- --------
$164,196 $165,608
======== ========
* Condensed from audited financial statements.
- 3 -
Quaker Chemical Corporation
Consolidated Balance Sheet
(dollars in thousands)
September 30, December 31,
1997 1996
(Unaudited) *
Liabilities
Current liabilities
Short-term borrowings, current
portion of long-term debt,
notes payable and capital leases $ 14,071 $ 17,404
Accounts payable 22,077 23,386
Dividends payable 1,560 1,508
Accrued liabilities 21,137 19,843
Estimated taxes on income 3,505 1,893
-------- --------
Total current liabilities 62,350 64,034
-------- --------
Long-term debt, notes payable and capital leases 5,205 5,182
Deferred income taxes 3,230 3,222
Accrued postretirement benefits 8,979 8,898
Other noncurrent liabilities 5,447 6,255
-------- --------
Total noncurrent liabilities 22,861 23,557
-------- --------
Total liabilities 85,211 87,591
-------- --------
Minority interest in equity of subsidiaries 3,583 3,763
-------- --------
Shareholders' equity
Common stock, $1 par value; authorized
30,000,000 shares; issued (including
treasury shares) 9,664,009 shares 9,664 9,664
Capital in excess of par value 869 634
Retained earnings 80,252 74,317
Unearned compensation (892) (459)
Foreign currency translation adjustments 615 6,475
-------- --------
90,508 90,631
Treasury stock, shares held at cost;
1997 - 953,516; 1996 - 1,044,452 (15,106) (16,377)
-------- --------
Total shareholders' equity 75,402 74,254
-------- --------
$164,196 $165,608
======== ========
* Condensed from audited financial statements
- 4 -
Quaker Chemical Corporation
Consolidated Statement of Operations
Nine Months Ended September 30,
Unaudited
(dollars in thousands
except per share data)
1997 1996
Net sales $177,542 $179,802
-------- --------
Costs and expenses
Cost of goods sold 99,519 103,862
Selling, administrative and
general expenses 64,908 64,264
Repositioning charges 13,100
Gain on sale of European pulp
and paper business 2,621 -
-------- --------
161,806 181,226
-------- --------
Income (loss) from operations 15,736 (1,424)
Other income, net 1,414 1,154
Interest expense (1,168) (1,476)
Interest income 200 275
-------- --------
Income (loss) before taxes 16,182 (1,471)
Taxes on income 6,342 197
-------- --------
9,840 (1,668)
Equity in net income of associated
companies 941 287
Minority interest in net income of
subsidiaries (238) (176)
-------- --------
Net income (loss) $ 10,543 $ (1,557)
======== ========
Per share data:
Net income (loss) $1.22 ($0.18)
Dividends declared $0.53 $0.515
Based on weighted average number
of shares outstanding 8,661,836 8,588,918
- 5 -
Quaker Chemical Corporation
Consolidated Statement of Operations
Three Months Ended September 30,
Unaudited
(dollars in thousands
except per share data)
1997 1996
Net sales $ 58,687 $ 61,813
-------- --------
Costs and expenses
Cost of goods sold 32,362 35,672
Selling, administrative and
general expenses 21,260 21,760
Repositioning charges 13,100
-------- --------
53,622 70,532
-------- --------
Income (loss) from operations 5,065 (8,719)
Other income, net 432 334
Interest expense (374) (468)
Interest income 95 79
-------- --------
Income (loss) before taxes 5,218 (8,774)
Taxes on income 2,081 (2,724)
-------- --------
3137 (6,050)
Equity in net income of associated
companies 321 185
Minority interest in net income of
subsidiaries (139) (16)
-------- --------
Net income (loss) $ 3,319 $ (5,881)
======== ========
Per share data:
Net income (loss) $0.38 ($0.68)
Dividends declared $0.18 $0.34
Based on weighted average number
of shares outstanding 8,704,525 8,558,223
- 6-
Quaker Chemical Corporation
Consolidated Statement of Cash Flows
For the Nine Months Ended September 30,
Unaudited
(dollars in thousands)
1997 1996
Cash flows from operating activities
Net income
$10,543 $(1,557)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 3,630 4,632
Amortization 1,435 1,633
Equity in net income of associated companies (941) (287)
Minority interest in earnings of subsidiaries 210 176
Deferred income taxes 33 (2,672)
Deferred compensation and other postretirement benefits 592 583
Repositioning charges, net 12,600
Net change in repositioning liability (2,767) (764)
Gain on sale of European pulp and paper business (2,621) -
Other, net 428 (263)
Increase (decrease) in cash from changes in current assets
and liabilities net of acquisitions and divestitures:
Accounts receivable (4,547) (5,415)
Inventories (577) 1,153
Prepaid expenses and other current assets (3,904) 1,454
Accounts payable and accrued liabilities 4,519 7,199
Estimated taxes on income 2,758 2,893
------- -------
Net cash provided by operating activities 8,791 21,365
------- -------
Cash flows from investing activities
Dividends from associated companies 603 1,158
Investments in property, plant, equipment and other assets (3,753) (4,076)
Investments in and advances to associated companies (318) (1,073)
Proceeds from the sale of assets - 683
Preceeds from sale of European pulp and paper business 3,053 -
Other, net (146) -
------- -------
Net cash used in investing activities (561) (3,308)
------- -------
Cash flows from financing activities
Net increase in short-term borrowings and notes payable 821 1,032
Repayment of long-term debt, notes payable and capital leases (4,090) (4,091)
Dividends paid (4,608) (4,427)
Treasury stock issued 1,506 323
Treasury stock acquired - (1,587)
------- -------
Net cash used in financing activities (6,371) (8,750)
------- -------
Effect of exchange rate changes on cash (530) (818)
------- -------
Net increase in cash and cash equivalents 1,329 8,489
Cash and cash equivalents at beginning of period 8,525 7,230
------- -------
Cash and cash equivalents at end of period $ 9,854 $15,719
======= =======
Supplemental cash flow information
Cash paid for income taxes and interest was as follows:
Income taxes $5,802 $ 5,125
Interest 1,265 1,645
- 7 -
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
Net cash flow provided by operating activities amounted to $8.8 million
in the first nine months of 1997 compared to $21.3 million in the same period
of 1996. The decrease was principally due to the timing of a tax refund in
1996, the timing of payments related to the 1996 repositioning program and
other operating working capital changes.
The Company's net cash position (cash and cash equivalents plus
short-term investments less short-term borrowings and current portion of
long-term debt and capital leases) increased $4.7 million from December 31,
1996 primarily as a result of decreased short-term borrowings, proceeds
received from the sale of the European pulp and paper business and improved
operating performance. The current ratio at September 30, 1997 was 1.4 to 1,
unchanged from December 31, 1996.
Operations
Comparison of Nine Months 1997 with Nine Months 1996
Through nine months, consolidated net sales decreased by 1% as compared
to the same period of 1996. The decrease in sales was the net result of a 1%
increase due to pricing initiatives and product sales mix and a 4% increase in
volume offset by a 6% decrease due to foreign currency translation rates.
Operating income was $15.7 million as compared to a loss of ($1.6)
million in 1996 The loss in 1996 was due to a pretax repositioning charge
of $13.1 million (approximately $8.6 million after tax) taken in the third
quarter of 1996. Excluding the repositioning charge, 1997 operating income
was 16% higher than 1996. The improvement was mainly attributable to a
one-time gain of $2.6 million from the sale of the European pulp and paper
business, higher gross margins resulting from an improved sales mix, benefits
associated with the 1996 repositioning of operations and lower overall
selling, general and administrative expenses. The Company's gross profit
margin as a percentage of sales increased 2% mainly due to the benefits
associated with the consolidation of manufacturing operations in the United
States, a generally improved sales mix in the United States and Europe, stable
raw material costs and pricing initiatives implemented over the past year,
primarily in Europe. Selling, administrative and general expenses as a
percentage of sales increased 1% over 1996 due mainly to planned spending
to support strategic initiatives.
Net interest costs decreased slightly due to reduced financing costs
associated with lower overall debt levels. Other income increased due to
higher license fee income and gains from foreign exchange transactions. The
increase in equity in net income from associated companies was primarily due
to reduced losses incurred by the Company's Fluid Recycling Services joint
venture. Earnings per share were $1.22 as compared to ($0.18) in 1996.
Excluding the 1997 gain on the sale of the European pulp and paper business
and the 1996 repositioning charge earnings per share increased 23% to $1.02
from $0.83. Excluding a negative foreign currency translation impact of
approximately $.16 per share due to the strengthening of the dollar, primarily
against the Dutch guilder earnings per share improved 42% over last year.
- 8 -
Comparison of Third Quarter 1997 with Third Quarter 1996
Consolidated net sales for the third quarter of 1997 decreased 5% versus
the third quarter of 1996. The decrease was the net result of a 1% increase
in price and sales mix and a 1% volume increase offset by a 7% decrease from
currency translation. Operating income, excluding the aforementioned
third quarter 1996 repositioning charge of $13.1 million, increased 16%. The
increase was due mainly to higher gross margins resulting from an improved
sales mix, manufacturing consolidation savings and lower overall selling,
general and administrative expenses.
The reasons for changes in operating margin percentages, net interest
costs, and equity in net income of associated companies in the third quarter
1997 versus the third quarter 1996 are basically the same as those previously
mentioned for the comparative nine-month periods. Other income increased in
the quarter mainly as a result of gains from foreign exchange transactions.
Excluding the 1996 repositioning charge earnings per share for the three
months ended September 30, 1997 and 1996 were $0.38 and $0.33, respectively.
The represents a 15% increase over the prior year despite a negative foreign
currency translation impact of approximately $0.06 (33% increase excluding the
negative impact) per share due to the strengthening of the dollar, primarily
against the Dutch guilder.
Other Significant Items:
In February 1997, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards (SFAS) No. 128 - Earnings Per
Share." This Standard becomes effective for the Company in the fourth quarter
of 1997 and requires two presentations of earnings per share, "basic" and
"diluted". Had this standard been in effect for the third quarter of 1997,
earnings per share on a pro forma basis would have been:
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
------------------- ------------------
Basic (same as reported) $0.38 $1.22
Diluted $0.38 $1.21
"Diluted Earnings Per Share" is less than "Basic Earnings Per Share" ,
principally due to the assumed increase in the number of average shares
outstanding resulting from outstanding options where the average market price
of the company's stock was in excess of the related option prices.
During 1997 the Financial Accounting Standards Board issued SFAS No. 130 -
Reporting Comprehensive Income and SFAS No. 131 - Disclosures about Segments
of an Enterprose and Related Information. SFAS No. 130 and SFAS No. 131 are
effective in 1998. The Company is currently assessing the impact these new
standards will have on its financial statements. SFAS No. 130 requires that
the components of comprehensive income be reported in the financial
statements. SFAS No. 131 requires the disclosure of segment information
utilizing the approach that the Company uses to manage its internal
organization. Also, SFAS No. 131 requires the reporting of segment
information on a condensed basis for interim periods beginning in 1999.
- 9 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On or about October 24, 1996, Petrolite Corporation and its
subsidiary, Petrolite Holdings, Inc. (collectively,
"Petrolite") filed a Demand for Arbitration with the American
Arbitration Association and a Petition with the Circuit Court
for the County of St. Louis, State of Missouri, against the
Registrant and certain of its subsidiaries (collectively, the
"Company"). The actions arise out of a Technology Purchase
Agreement (the "Agreement") between Petrolite and the Company
dated April 13, 1993, as amended, pursuant to which the Company
sold various assets, including a patent (the "Patent"), to
Petrolite for a purchase price of approximately $8.5 million
plus an obligation to pay royalties. In a suit brought by
Petrolite against Baker Hughes, Inc., et al. for infringement
of the Patent, the United States District Court for the Western
District of Oklahoma (No. CIV-94-311-M) affirmed by the United
States Court of Appeals for the Federal Circuit (No. 95-1447)
declared all of the claims of the Patent invalid as a result of
sales allegedly made by the Company more than one year prior to
the filing of the Patent application. In its actions against
the Company, Petrolite seeks damages in an unspecified amount,
rescission of the Agreement, costs, and other relief. The
Company believes that it has complete and meritorious defenses
to the Petrolite actions and intends to vigorously defend the
actions and deny liability and to pursue a claim against
Petrolite for royalties. The bases for the Company's position
include, but are not limited to, the Company specifically made
no representations or warranties with respect to the validity
of the Patent, all sales made by the Company prior to filing
the Patent application were disclosed to Petrolite prior to
closing under the Agreement and the findings made by the Court
in Petrolite's suit with Baker Hughes, Inc. were the result of
the failure of Petrolite's counsel to take certain required
actions in the handling of the case.
Items 2, 3, 4 and 5 are inapplicable and have been omitted.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 10(o)-Amendment to Employment Agreement by and
between Registrant and Ronald J. Naples. Incorporated by
reference to Exhibit 10(I) as filed by Registrant with
Form 10-Q for the quarter ended September 30, 1995.*
Exhibit 10(p)-Employment Agreement by and between
Registrant and Joseph F. Virdone.*
Exhibit 27-Financial Data Schedule
- 10 -
(b) Reports on Form 8-K.
No report on Form 8-K was filed during the quarter for
which this report is filed.
* * * * * * * * *
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUAKER CHEMICAL CORPORATION
---------------------------
(Registrant)
/s/ Richard J. Fagan
--------------------------------
Richard J. Fagan, officer duly
authorized to sign this report,
Controller, Treasurer and Chief
Accounting Officer.
Date: November 14, 1997
* A copy of Exhibit will be furnished upon request to:
Quaker Chemical Corporation
ATTENTION: Irene M. Kisleiko
Assistant Corporate Secretary
Elm and Lee Streets
Conshohocken, PA 19428
- 11 -
Exhibit 10(o)
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
DATED AUGUST 14, 1995 BETWEEN
QUAKER CHEMICAL CORPORATION AND RONALD J. NAPLES
AMENDMENT NO. 1 ("Amendment"), dated and effective as of January 1, 1997,
between QUAKER CHEMICAL CORPORATION, a Pennsylvania corporation (the
"Company"), and RONALD J. NAPLES ("Executive").
BACKGROUND:
The Company and Executive entered into an Employment Agreement dated
August 14, 1995 (the "Employment Agreement"). The Company and Executive
desire, by this Amendment No. 1, to amend the Employment Agreement in certain
respects.
NOW, THEREFORE, intending to be legally bound hereby, the Company and
Executive agree as follows:
1. Paragraph 4(b) of the Employment Agreement is hereby amended by
adding thereto the following sentence:
"Notwithstanding anything contained in this Paragraph 4(b) to the
contrary, this Paragraph 4(b) shall not apply to and Executive shall
not participate in the Quaker Annual Incentive Compensation Plan for
the years 1997 and 1998."
2. The Employment Agreement is hereby amended by adding thereto a new
Paragraph 4.1 which reads as follows:
"4.1 1997 and 1998 Restricted Stock Awards.
(a) On or before June 30, 1997, the Company shall cause to be
issued in Executive's name 35,000 shares of the Company's Common
Stock as a restricted stock award for the years 1997 and 1998 (the
"Award Shares"). Certificates representing the Award Shares shall
be deposited with the Company together with stock powers endorsed by
Executive in blank to be held in custody by the Company for the
Executive's account. The certificates representing the Award Shares
shall bear the following legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions of Paragraph 4.1 of an Employment Agreement between
Quaker Chemical Corporation and Ronald J. Naples dated August
14, 1995, as amended. A copy of such Employment Agreement is
on file in the offices of Quaker Chemical Corporation."
(b) On or before May 1 of each of the years 1997 and 1998, the
Compensation Committee shall establish "Operating Income Financial
Performance Criteria" for the Company for each of those years, and
shall set levels thereof to be achieved so as to permit the delivery
of 30%, 40% or 50% of the Award Shares to Executive for each such
year.
- 12 -
(c) The Company shall deliver Award Shares to Executive free
of the aforesaid legend and of all restrictions (except as otherwise
provided in this Paragraph 4.1) in two installments of up to 17,500
Award Shares each on March_31, 1998 and 1999, provided that
Executive is employed by the Company on the immediately preceding
December 31. The number, if any, of Award Shares to be delivered to
Executive in each such installment shall be determined by comparing
the Company's actual results for the years 1997 and 1998, as the
case may be, with the Operating Income Financial Performance
Criteria established and levels set for such year pursuant to
Paragraph 4.1(b). Interpolation shall be applied to determine the
exact number of Award Shares to be delivered if the Company's
results fall between the levels for a 30%, 40% or 50% delivery.
If by March 31, 1998, less than 17,500 Award Shares have been
delivered or are deliverable to Executive, the difference between
the number of Award Shares so delivered or deliverable and 17,500
shall be forfeited and transferred to the Company without further
action by Executive or the Company.
If by March 31, 1999, less than 35,000 Award Shares have been
delivered or are deliverable to Executive, the difference between
the number of Award Shares so delivered or deliverable and 35,000
shall be forfeited and transferred to the Company without further
action by Executive or the Company.
(d) During the period Award Shares are held in custody by the
Company, Executive shall generally have the rights and privileges of
a shareholder as to the Award Shares including the right to all cash
or stock dividends paid with respect to the Award Shares and the
right to vote the Award Shares, except that none of the Award Shares
may be sold, transferred, assigned, pledged, or otherwise encumbered
or disposed of by Executive except by will or the laws of dissent
and distribution. Subject to Paragraph 4.1(e), all of the Award
Shares remaining in the custody of the Company shall be forfeited to
the Company and all rights of Executive to the Award Shares shall
terminate without further obligation on the part of the Company upon
the termination of Executive's employment with the Company. Upon
such forfeiture of any Award Shares, the forfeited shares shall be
transferred to the Company without further action by Executive or
the Company.
(e) Notwithstanding anything contained in this Paragraph 4.1
to the contrary, if prior to December 31, 1998 Executive's
employment with the Company shall terminate by reason of his death
or by reason of his disability or if the Company shall terminate
Executive's employment with the Company without "Cause", or
Executive shall terminate his employment with the Company for "Good
Reason", or there shall occur a "First Event" or a "Significant
Transaction" (as each of said terms are defined in this Agreement),
then, and in any such event, the Company shall, within thirty days
after the occurrence of such event, pay and deliver to Executive or
his personal representative, as the case may be, free of all
restrictions (except as otherwise provided in this Paragraph 4.1),
the remaining Award Shares in the custody of the Company which have
not been delivered to Executive. The termination of Executive's
employment on or after December 31, 1998 shall not affect his right,
if any, to receive the delivery of Award Shares pursuant to
Paragraph 4.1(c).
- 13 -
(f) In the event of a change in the outstanding shares of the
Company's Common Stock through reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up,
stock dividend, stock consolidation or otherwise, or in the event of
a sale of all or substantially all of the assets of the Company,
appropriate and proportionate adjustments shall be made by the
Compensation Committee in the number and kind of shares of capital
stock to be paid by the Company.
(g) The Company shall determine the appropriate amount of
Federal, state and local withholding taxes or charges due as a
result of the payment of the Award Shares, which amount the Company
shall transmit to the appropriate taxing authority (the "Withholding
Amount"). Executive may satisfy any such withholding tax obligation
by any of the following means or by a combination of such means:
(a) authorizing the Company to deduct from the number of Award
Shares otherwise deliverable hereunder, such number of Award Shares
as shall have a fair market value equal to the Withholding Amount;
(b) delivering to the Company such number of unencumbered shares of
the Company's Common Stock as shall have an aggregate fair market
value equal to the Withholding Amount; or (c) tendering a cash
payment.
(h) Award Shares will not be paid and delivered to Executive
hereunder except in compliance with all applicable Federal and state
laws and regulations including, without limitation, compliance with
all Federal and state securities laws, withholding tax requirements
and the rules of all stock exchanges, if any, on which the Company's
Common Stock may be listed.
(i) Executive represents and warrants to the Company that he
is and will be acquiring the Award Shares to be paid and delivered
to him hereunder for investment for his own account and not with a
view to the resale, distribution or public offering thereof.
Executive acknowledges that he has been informed and is aware that
the Award Shares are not and may not be registered under the
Securities Act of 1933 and applicable state securities laws (and
that the Company has no obligation to effect such registration) and
must be held indefinitely until they are subsequently registered
under said Act or an exemption from such registration is available;
and that routine sales of securities made in reliance upon SEC Rule
144 can be made only in limited amounts in accordance with the terms
and conditions of that Rule and subject to compliance with Section
16 of the Securities Exchange Act of 1934.
(j) Any share certificate delivered to Executive hereunder may
bear such legends and statements as the Company shall deem advisable
to assure compliance with Federal and state laws and regulations.
The Company may require Executive to execute and deliver to the
Company an agreement or other instrument evidencing Executive's
acceptance of the terms and conditions hereof or as may be deemed
necessary to effectuate the provisions of this Agreement."
- 14 -
3. Except as specifically provided herein, the Employment Agreement
remains in full force and effect without further modification or amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment No. 1 as of the day and year first above written.
QUAKER CHEMICAL CORPORATION
By:
------------------------------------
--------------------------------------
RONALD J. NAPLES
- 15 -
Exhibit 10(p)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made and entered into as of the 17th_day of
July 1996, by and between QUAKER CHEMICAL CORPORATION, a Pennsylvania
corporation (hereinafter referred to as "QUAKER"), and JOSEPH F. VIRDONE
(hereinafter referred to as "VIRDONE").
W I T N E S S E T H:
WHEREAS, QUAKER wishes to employ VIRDONE, and VIRDONE wishes to be
employed by QUAKER.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. QUAKER agrees to employ VIRDONE, and VIRDONE agrees to serve as Vice
President, U.S. Commercial Operations of QUAKER. He shall perform all duties
consistent with such position as well as any other duties which are assigned
to him from time to time by the Board of Directors or President of QUAKER.
VIRDONE covenants and agrees that he will, during the term of this Employment
Agreement or any extension or renewal thereof, devote his knowledge, skill,
and working time solely and exclusively to the business and interests of
QUAKER.
2. The term of VIRDONE's employment shall continue until December 31,
1996 and continuing thereafter until either party hereto shall have given the
other at least ninety (90) days' written notice of a desire to terminate.
3. QUAKER shall pay to VIRDONE and VIRDONE shall accept an annual rate
of salary as set forth in Exhibit A attached hereto, payable semi-monthly,
during the term of this Employment Agreement or any extension or renewal
thereof.
4. VIRDONE shall participate in such QUAKER Incentive Programs as
described and set forth in Exhibit A. As an Officer of QUAKER, the
particulars of Exhibit A may be amended by the Board of Directors at any time
as to any matter set forth therein including rate of annual salary,
eligibility to participate in any given QUAKER incentive plan, the level of
participation in any QUAKER incentive plan, and the terms and conditions of
any QUAKER incentive plan. Any changes to Exhibit A shall not affect any of
the other terms and conditions hereof including, without limitation, the
provisions of Paragraphs 7 through 9. For the purposes of this Agreement, the
term "QUAKER Incentive Program" shall refer to each individual as well as the
combined incentive programs approved by the Board of Directors. Revisions to
Exhibit A shall become effective upon notification in writing by QUAKER and
VIRDONE's acceptance by his signature on the notification.
5. (a) With respect to Quaker's Long-Term Performance Incentive Plan
(the "Incentive Plan"), VIRDONE shall be eligible to participate in the
1995-1998 performance award period under the terms and conditions of the
Incentive Plan. In connection therewith, he has been granted Stock Options
to purchase 5,000 shares (to be priced as of the close of business July 17,
1996). He is also eligible for an award of 7,000 performance units.
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(b) VIRDONE shall be entitled to his current vacation eligibility,
paid holidays, and such other employee benefits, including insurance, medical
benefits, profit sharing, and retirement benefits as are made generally
available to all QUAKER employees. In addition, VIRDONE shall be eligible to
participate in Quaker's Supplemental Retirement Income Program.
(c) QUAKER shall reimburse VIRDONE for all reasonable expenses
incurred by VIRDONE on behalf of QUAKER in the course of VIRDONE's employment
under this Employment Agreement, provided that such expenses shall have been
approved by QUAKER in accordance with such expense reimbursement procedures as
shall be adopted by QUAKER.
6. In the event of the death of VIRDONE while this Employment Agreement
is in effect and as to which no notice of termination has been given by either
party, QUAKER shall (i) continue to pay a sum of money equal to the salary
that would have been paid to him for four months following his death just as
if he were living, and (ii) QUAKER shall pay a death benefit equal to his then
current annual salary plus $30,000 to be paid in three equal payments, without
interest, on the 16, 28, and 40 month anniversary of the date of his death.
Payments made pursuant to this Paragraph 6 shall be made to the person or
persons who may be designated by VIRDONE, in writing, and, in the event he
fails to so designate to whom payments shall be made, payments shall be made
to VIRDONE's personal representatives.
7. VIRDONE acknowledges that information concerning the method and
conduct of QUAKER's (and any affiliates') business, including, without
limitation, strategic and marketing plans, budgets, corporate practices and
procedures, financial statements, customer and supplier information, formulae,
formulation information, application technology, manufacturing information,
and laboratory test methods and all of QUAKER's (and any affiliates') manuals,
documents, notes, letters, records, and computer programs are QUAKER's (and/or
QUAKER's affiliates', as the case may be) trade secrets ("Trade Secrets") and
are the sole and exclusive property of QUAKER (and/or QUAKER's affiliates, as
the case may be). VIRDONE agrees that at no time during or following his
employment with QUAKER will he use, divulge, or pass on, directly or through
any other individual or entity, any Trade Secrets. Upon termination of
VIRDONE'S employment with QUAKER, or at any other time upon QUAKER's request,
VIRDONE agrees to forthwith surrender to QUAKER any and all materials in his
possession or control which include or contain any such Trade Secrets. The
words "Trade Secrets" do not include information already known to the public
through no act or failure to act on the part of VIRDONE, required by law to be
disclosed, or which can be clearly shown to have been known by VIRDONE prior
to the commencement of his employment with QUAKER.
8. VIRDONE agrees that during his employment and for a period of one
(1) year thereafter, regardless of the reason for the termination of VIRDONE's
employment hereunder, he will not:
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(a) directly or indirectly, together or separately or with any
third party, whether as an individual proprietor, partner, stockholder,
officer, director, joint venturer, investor, or in any other capacity
whatsoever engage in business or assist anyone or any firm in business as a
manufacturer, seller, or distributor of specialty chemical products or
chemical management services which are the same, like, similar to, or which
compete with the products and services offered by QUAKER (or any of its
affiliates);
(b) recruit or solicit any employee of QUAKER or otherwise induce
such employee to leave the employ of QUAKER or to become an employee or
otherwise be associated with his or any firm, corporation, business or other
entity with which he is or may become associated; and
(c) solicit, directly or indirectly, for himself or as agent or
employee of any person, partnership, corporation, or other
entity (other than for QUAKER) any then or former customer,
supplier, or client of QUAKER.
VIRDONE acknowledges and agrees that all of the foregoing
restrictions are reasonable as to the period of time and scope. However, if
any paragraph, sentence, clause, or other provision is held invalid or
unenforceable by a court of competent and relevant jurisdiction, such
provision shall be deemed to be modified in a manner consistent with the
intent of such original provision so as to make it valid and enforceable, and
this Agreement and the application of such provision to persons and
circumstances other than those with respect to which it would be invalid or
unenforceable shall not be affected thereby. VIRDONE agrees and recognizes
that in the event of a breach or threatened breach of the provisions of the
restrictive covenants contained in Paragraph 7 or in this Paragraph 8, QUAKER
may suffer irreparable harm, and monetary damages may not be an adequate
remedy. Therefore, if any breach occurs or is threatened, in addition to all
other remedies available to QUAKER at law or in equity, Quaker shall be
entitled as a matter of right to specific performance of the covenants of
Quaker contained herein by way of temporary or permanent injunctive relief.
In the event of any breach of the restrictive covenant contained in this
Paragraph 8, the term of the restrictive covenant specified herein shall be
extended by a period of time equal to that period beginning on the date such
violation commenced and ending when the activities constituting such violation
cease.
9. (a) Definitions. For the purposes of this agreement, the following
definitions shall apply and will be used:
(i) "Act" means the Securities Exchange Act of 1934, as
amended;
(ii) "QUAKER's Common Stock" means shares of Common Stock,
$1.00 par value, of QUAKER;
(iii) "Termination for Cause" means VIRDONE's employment
with QUAKER shall have been terminated by QUAKER by reason of either:
(1) The willful and continued failure by VIRDONE to
execute his duties under this Employment Agreement; or
(2) The willful engaging by VIRDONE in a continued
course of misconduct which is materially injurious to QUAKER, monetarily or
otherwise.
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VIRDONE shall have been given notice thereof from QUAKER's
Board of Directors and an opportunity (with counsel) to be heard by said Board
of Directors, and the Board of Directors shall have made a reasonable and good
faith finding that VIRDONE was guilty of the conduct set forth in clause (1)
or (2) hereof.
(iv) "Termination for Good Reason" means VIRDONE's employment
with QUAKER shall have been terminated by VIRDONE by reason of a material
change announced or promulgated by QUAKER in the terms, conditions, duties,
compensation, or benefits of VIRDONE's employment with QUAKER and not agreed
to by VIRDONE.
(b) The purpose of this Paragraph 9 is to reinforce and encourage
the continued dedication and attention of VIRDONE to VIRDONE's assigned duties
under this Employment Agreement without distraction as a result of
circumstances which may arise from the possibility of a change of control or
an attempt to change the control of QUAKER.
(i) Upon the occurrence of a "First Event," QUAKER will
deposit in an escrow account at CoreStates Bank, N.A. (or such other bank as
QUAKER may hereafter designate) (the "Bank") an amount equal to VIRDONE's then
current annual salary for an eighteen (18) month period ("Termination Pay").
A First Event for the purposes of this Agreement shall mean any one of the
following events.
(1) Shares of QUAKER's Common Stock are acquired (other
than directly from QUAKER in exchange for cash or property) by any person (as
used in Sections 13 and 14 of the Act) other than a person who is a present
Officer or Director of QUAKER, who thereby becomes the beneficial owner (as
defined in Rule 13d-3 under the Act) of more than 10% of the issued and
outstanding shares of QUAKER's Common Stock.
(2) Any person, firm, or corporation (including a
shareholder of QUAKER) makes a tender offer or exchange offer for, or a
request or invitation for tenders or exchanges of, shares of QUAKER's Common
Stock.
(ii) If a "Second Event" shall occur and thereafter (but within
three (3) years after date of the occurrence of the First Event) VIRDONE's
employment with QUAKER shall terminate for a reason other than (1) VIRDONE's
death, (2) VIRDONE's normal retirement for age, (3) VIRDONE's physical or
mental disability in accordance with prevailing QUAKER policy, (4) by QUAKER
as a Termination for Cause, or (5) by VIRDONE other than as a Termination for
Good Reason, VIRDONE may demand that the Bank pay VIRDONE the Termination Pay
(the "Demand").
A "Second Event" for the purposes of this Agreement shall
mean any of the following events occurring after a First Event:
(1) A new Director of QUAKER is elected in an
election in which the acquirer of the shares or the offeror or the requester
voted, in person or by proxy, and such new Director was not nominated as a
candidate in a proxy statement forwarded to shareholders by QUAKER's
management prior to the occurrence of the First Event.
- 19 -
(2) More than 20% of the issued and outstanding shares of
QUAKER's Common Stock are owned by one person (as used in Sections 13 and 14
of the Act) other than a person who is a present Officer or Director of
QUAKER.
(3) During any period of two (2) consecutive calendar
years, individuals who at the beginning of such period constitute QUAKER's
Board of Directors cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for election by QUAKER's
shareholders of each new Director was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office who were Directors at
the beginning of the two (2) year period.
(iii) After the receipt of the Demand, the Bank will pay
VIRDONE the Termination Pay in eighteen (18) equal consecutive monthly
installments, the first such installment to be paid within thirty (30) days
from the date of the demand. VIRDONE shall not be required to diminish the
amount of any payment to which he is entitled under this subparagraph (c) by
seeking other employment or otherwise, nor shall the amount of any payment
provided for in this subparagraph (c) be reduced by any compensation earned by
VIRDONE as the result of employment by another employer after the date of
termination.
(iv) QUAKER may withdraw the deposited Termination Pay if three
(3) years elapse from the date of deposit thereof and if no demand has been
made. If, prior to the expiration of said three (3) year period, there shall
occur another First Event, QUAKER will not be required to make an additional
deposit of Termination Pay, but the three (3) year period described herein
shall be deemed to commence on the date of the occurrence of the last such
First Event.
(v) QUAKER shall pay the usual and customary charges of the
Bank for acting as escrow agent. QUAKER will be entitled to the payment of
any and all interest and other income earned by the Bank through the
investment of the deposited Termination Pay. Said interest shall be paid to
QUAKER as earned. The escrow arrangement may be subject to the Bank's usual
rules and procedures, and QUAKER will indemnify the Bank against any loss or
liability for any action taken by it in good faith as escrow agent.
10. In the event that QUAKER, in its sole discretion and at any time
terminates this Agreement with VIRDONE (other than for Termination for Cause),
QUAKER agrees to provide VIRDONE with reasonable out-placement assistance and
a severance payment (contingent upon VIRDONE executing a form of release
satisfactory to Quaker) in an amount equal to three (3) months' salary
calculated at VIRDONE'S then current rate plus an additional one (1) month for
each additional year of employment up to a maximum of twelve (12) months'
compensation
11. Termination. This Employment Agreement also can be terminated at
any time by "Termination for Cause" or "Termination for Good Reason" as
defined in Paragraph 9.
12. VIRDONE represents and warrants to QUAKER that:
(a) there are no restrictions, agreements, or understandings
whatsoever to which VIRDONE is a party which would prevent or make unlawful
his execution of this Employment Agreement or his employment hereunder; and
- 20 -
(b) his execution of this Employment Agreement and his employment
hereunder shall not constitute a breach of any contract, agreement, or
understanding, oral or written, to which he is a party or by which he is
bound.
13. This Employment Agreement contains all the agreements and
understandings between the parties hereto with respect to VIRDONE's employment
by QUAKER and supersedes all prior or contemporaneous agreements with respect
thereto and shall be binding upon and for the benefit of the parties hereto
and their respective personal representatives, successors, and assigns. This
Employment Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania without regard to any conflict of
laws.
IN WITNESS WHEREOF, QUAKER has caused this Employment Agreement to be
signed by its President, thereunto duly authorized, and its corporate seal to
be hereunto affixed and attested by its Corporate Secretary, and VIRDONE has
hereunto set his hand and seal all as of the day and year first above written.
ATTEST: QUAKER CHEMICAL CORPORATION
[SEAL]
By:______________________________ ______________________________
Karl H. Spaeth Ronald J. Naples
Corporate Secretary President and Chief Executive Officer
WITNESS:
_________________________________ ______________________________
Joseph F. Virdone
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EMPLOYMENT AGREEMENT
EXHIBIT A
Effective: July 17, 1996
Name of Employee: Joseph F. Virdone
Address: 654 Creighton Road
Villanova, Pennsylvania 19085
Title: Vice President, U.S. Commercial Operations
Term of Employment: To December 31, 1996 and continuing thereafter until
either party gives ninety (90) days' written notice of
termination
Annual Rate of
Salary at
Starting Date: $140,000
Participation in Quaker Incentive Programs for 1996 Only:
Incentive Bonus Plan
Bonus will be based on the newly-adopted Incentive Bonus Plan
Business Unit - Corporation -- 41% of mid-point
Discretionary - 9% of mid-point
Incentive Award Amount - 50% of mid-point - $136,980
Long-Term Performance Incentive Plan 1995-1998
Type of stock options offered - Qualified and Non-Qualified Stock Options
Number of shares subject to option - 5,000
Performance Units - 7,000
Option price per share - Closing price on July 17, 1996
Participation under and subject to the terms of a Stock Option Agreement
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