Exhibit 99
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company consists of 200,000,000 shares
of Common Stock, par value $1.00 per share, and 20,000,000 shares of Class A
Preferred Stock, without par value. The following description of the capital
stock of the Company is a summary, and as such, it does not purport to be
complete and is subject, and qualified in its entirety by reference to, the more
complete descriptions contained in (i) the Articles of Incorporation of the
Company, as amended (the "Articles"), the Bylaws of the Company, as amended (the
"Bylaws"), and the Rights Agreement, effective March 21, 1996, between the
Company and Chemical Mellon Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agreement"), copies of each of which are incorporated by reference as
exhibits to this Current Report, and (ii) the certificate of designation
relating to each series of Preferred Stock.
Common Stock
Dividends. Subject to the rights and preferences that may be applicable to
any outstanding Preferred Stock, the holders of Common Stock are entitled to
receive dividends, when, if and as declared by the Board of Directors of the
Company, out of funds legally available therefor.
Voting Rights. The holders of Common Stock are entitled to one vote per
share on all matters to be voted upon by shareholders, except that shareholders
are entitled to cumulate their votes in the election of directors. Under
cumulative voting, a shareholder has the right to multiply the total number of
shares which the shareholder is entitled to vote by the number of directors to
be elected and to cast the whole number of votes so determined for one nominee
or to distribute them among different nominees. The Bylaws require shareholders
desiring to nominate persons for election as a director to give advance notice
of such nominations to the Company.
Other than in the election of directors, whenever any corporate action is
to be taken by vote of the shareholders of the Company, it will be decided by
the vote of the shareholders present, in person or by proxy, entitled to cast at
least a majority of the votes which all shareholders present are entitled to
cast. The Articles and Bylaws require, however, the approval by the holders of
at least 80% of the votes which all shareholders of the Company would be
entitled to cast at an annual election of directors, voting together as a single
class, for the removal of any director, class of directors or the entire Board
of Directors (subject to nonremoval if sufficient votes are cast against
removal) or for any change to any provision of the Articles or Bylaws providing
for the number of directors, the classification of directors or the filling of
vacancies on the Board of Directors, unless any such change is unanimously
approved by the Board of Directors of the Company. In addition, the Bylaws of
the Company may be amended
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only by a vote of two-thirds of the Board of Directors then in office, subject
to the power of the shareholders to change such action.
The Bylaws provide for the Board of Directors to be divided into three
classes of directors, each class as nearly equal in number as possible, with one
class being elected each year for a three-year term. The classification of the
Board helps to ensure continuity and stability of corporate leadership and
policy; however, it also has the effect of making it more difficult for a person
to acquire control of the Company because at least two annual meetings are
necessary to effect a change in a majority of the Company's directors. Further,
while cumulative voting enables minority shareholders to gain representation on
the Board, the existence of a classified Board increases the number of shares
required to elect at least one director.
Other Information. The Common Stock does not carry preemptive rights, is
not redeemable, does not have any conversion rights, is not subject to further
calls and is not subject to any sinking fund provisions. The shares of Common
Stock currently outstanding are freely alienable, fully paid and nonassessable.
Except in certain circumstances as discussed below under "Certain Provisions
Affecting Control of the Company," the Common Stock is not subject to
discriminatory provisions based on ownership thresholds.
Liquidation. In the event of a liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after the payment of the liabilities and the liquidation
preferences of any outstanding Preferred Stock.
Class A Preferred Stock
The Class A Preferred Stock, other than Series One Preferred Stock and ESOP
Preferred Stock as discussed below, is issuable in one or more series, and will
have the dividend, conversion, redemption, voting and liquidation rights set
forth in the resolution of the Board of Directors establishing any such series.
Such terms may include: (i) the title of the series, and the number of shares in
the series offered; (ii) the price at which such Preferred Stock will be issued;
(iii) the dividend rate (or method of calculation), the dates on which dividends
shall be payable and the dates from which dividends shall commence to
accumulate; (iv) any redemption or sinking fund provisions of such series; (v)
any conversion provisions of such series; (vi) the voting rights, if any, of
such series; (vii) the liquidation preference of such series; and (viii) any
additional dividend, liquidation, redemption, sinking fund and other special or
relative rights, preferences, qualifications, privileges, limitations, options
and restrictions of such series. The Class A Preferred Stock is available for
possible future financing and acquisition transactions, to pay stock dividends
or make distributions, to fund employee benefit plans and for other general
corporate purposes. Under certain circumstances, the Class A Preferred Stock
could be used to create voting impediments for persons seeking to gain control
of the Company.
The Preferred Stock will be preferred over the Common Stock (but may be
subordinated as to the other series of Preferred Stock) as to the payment of
dividends and as to assets available for distribution in the event of a
liquidation of the Company.
Other Information. Unless otherwise provided in a resolution of the Board
of Directors establishing a series of Preferred Stock, the Preferred Stock will
not carry any preemptive rights,
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will not be, upon issuance, subject to further calls and will not be, upon
issuance, subject to any sinking fund provisions. The Preferred Stock will be,
when issued, fully paid and nonassessable. Unless otherwise provided in the a
resolution of the Board of Directors establishing a series of Preferred Stock,
and except in certain circumstances as discussed below under "Certain Provisions
Affecting Control of the Company," the Preferred Stock will not be, upon
issuance, subject to discriminatory provisions based on ownership thresholds.
Series One Preferred Stock and Preferred Stock Purchase Rights
Preferred Stock Purchase Rights. The Series One Preferred Stock, which is
a series of Class A Preferred Stock, is issuable pursuant to the exercise of
rights to purchase Series One Preferred Stock ("Rights"). On March 21, 1996,
the Board of Directors of the Company paid a distribution of one Right for each
outstanding share of Common Stock of the Company to shareholders of record on
January 19, 1996, and with respect to each share of Common Stock that may be
issued by the Company prior to the date on which the Rights first become
exercisable (or the earlier redemption or expiration of the Rights), subject to
adjustment in certain events. In general, the Rights become exercisable ten
days after a person or group either acquires beneficial ownership of shares
representing 20% or more of the voting power of the Company or announces a
tender or exchange offer that would result in such person or group beneficially
owning shares representing 28% or more of the voting power of the Company. When
the Rights become exercisable, each Right entitles its holder (other than such
20% shareholder or tender or exchange offeror) to buy one one-hundredth of a
newly issued share of Series One Preferred Stock at a purchase price of $300,
subject to adjustment. If, after the Rights become exercisable, any person or
group becomes the beneficial owner of 28% or more of the voting power of the
Company or if the Company is the surviving corporation in a merger with a person
or group that owns 20% or more of the voting power of the Company, then each
owner of a Right (other than such 20% or 28% shareholder) will be entitled to
purchase shares of Armstrong's Common Stock having a value equal to twice the
exercise price of the Right. In addition, if, after the Rights become
exercisable, the Company is a party to a merger and is not the surviving company
or 50% or more of the Company's assets or earnings power are sold in a single or
series of related transactions, then each owner of a Right will be entitled to
purchase shares of the acquiring person having a value equal to twice the
exercise price of the Right. Until the Rights first become exercisable, the
Rights attach to and trade with shares of the Company's Common Stock.
Generally, the Rights are redeemable at the option of the Company for $.05 per
Right at any time prior to the tenth day following a public announcement that a
person or group has acquired beneficial ownership of 20% or more of the voting
power of the Company. The Rights expire by their terms on March 21, 2006,
unless earlier redeemed.
The terms of the Rights are set forth in the Rights Agreement which has
been filed with the SEC as an Exhibit to a Registration Statement on Form 8-A/A
filed on March 15, 1996, and is incorporated herein by reference.
Dividends. Subject to the rights and preferences of the holders of any
other series of Class A Preferred Stock, the holders of Series One Preferred
Stock are entitled to receive cumulative, quarterly dividends, without interest,
when and as declared by the Board of Directors
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of the Company, out of funds legally available therefor, in preference to the
holders of Common Stock and in an amount per share equal to the greater of
$36.00 or 100 times, as adjusted, the aggregate per share amount of all cash and
non-cash dividends or other distributions, other than a dividend or distribution
payable in shares of Common Stock, paid on the Common Stock in the immediately
preceding quarter.
Conversion Rights. In the event the Company enters into any consolidation,
merger, combination or other transaction in which the Common Stock is exchanged
for or changed into other stock or securities, cash and/or any other property,
then the Series One Preferred Stock will be at the same time, similarly
exchanged for or converted into an amount per share equal to 100 times, as
adjusted, the aggregate amount for or into which the Common Stock is exchanged
or converted.
Voting Rights. Holders of Series One Preferred Stock have no voting rights
except as may be provided by law.
Redemption. The Series One Preferred Stock may be redeemed at the option
of the Board of Directors of the Company, as a whole, but not in part, at any
time, at a cash price per share equal to 100 times, as adjusted, the average
market value, as defined, of the Common Stock, plus all accrued but unpaid
dividends. The Company is not entitled, however, to purchase or otherwise
acquire shares of the Series One Preferred Stock if the quarterly dividend in
respect thereof is accrued and has not been paid or declared and a sum
sufficient for the payment thereof set apart unless all shares of such stock at
the time outstanding are purchased or otherwise acquired.
Liquidation. Subject to the rights and preferences of the holders of any
other series of Class A Preferred Stock, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of Series One
Preferred Stock are entitled to $100 per share, plus all accrued and unpaid
dividends, plus an amount equal to the holder's pro rata share of assets that
would be available for distribution after payment of all liabilities,
liquidation preferences and distributions on the Common Stock, if any, as
determined according to a formula and subject to adjustment in certain events.
The amount payable to the holders of Series One Preferred Stock as so determined
is prior to any payment or distribution to the holders of Common Stock.
Other Information. The Series One Preferred Stock does not carry any
preemptive rights, will not be subject, upon issuance, to any sinking fund
provisions and will not be subject, upon issuance, to any further calls. Upon
issuance, the shares of the Series One Preferred Stock will be freely alienable,
fully paid and nonassessable. Except in certain circumstances as discussed below
under "Certain Provisions Affecting Control of the Company," the Series One
Preferred Stock will be, upon issuance, freely alienable and not subject to
discriminatory provisions based on ownership thresholds.
ESOP Preferred Stock
In 1989, the Board of Directors of the Company established a series of
Class A Preferred Stock, without par value, designated as Series A ESOP
Convertible Preferred Stock (the "ESOP
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Preferred Stock"), in connection with the adoption of the Company's Employee
Stock Ownership Plan (the "Plan"). The ESOP Preferred Stock has been called for
redemption on August 1, 1996, and it is expected that the ESOP trustee, who is
the sole holder of the ESOP Preferred Stock, will convert all the ESOP Preferred
Stock outstanding into Common Stock on or prior to the date of redemption, all
in accordance with the terms of the ESOP Preferred Stock as described below.
Dividends. Subject to the rights and preferences of the holders of any
other series of Class A Preferred Stock, the holders of ESOP Preferred Stock are
entitled to receive cumulative (without interest), semi-annual (in arrears),
cash dividends, if, when and as declared by the Board of Directors of the
Company, out of funds legally available therefor, in an amount equal to $3.462
per share ("ESOP Preferred Dividends"). ESOP Preferred Dividends on outstanding
shares of ESOP Preferred Stock will accrue on a daily basis whether or not the
Company may legally declare and pay a dividend at the time. Such dividend
rights rank prior to the dividend rights of the holders of the Series One
Preferred Stock.
Conversion. A holder of shares of ESOP Preferred Stock is entitled, at any
time, to cause any or all shares of ESOP Preferred Stock to be converted into
shares of Common Stock at a conversion ratio of one share of Common Stock for
each one share of ESOP Preferred Stock, as adjusted. Whenever the Company issues
shares of Common Stock upon conversion of shares of the ESOP Preferred Stock,
the Company will also issue Rights to purchase Series One Preferred Stock in
accordance with the terms of the Rights Agreement (see "Description Of Capital
Stock--Series One Preferred Stock and Preferred Stock Purchase Rights") or any
rights issued to holders of the Common Stock in addition to or in replacement
therefore, but only if such rights are issued and outstanding and held by other
holders of Common Stock and such rights have not expired or been redeemed or
exchanged. In the event any shares of the ESOP Preferred Stock are transferred
to any party other than the trustee of the Plan, such shares are similarly and
automatically converted into shares of Common Stock. The Company is required at
all times to reserve and keep available out of its authorized and unissued
Common Stock the number of shares issuable upon conversion of all shares of ESOP
Preferred Stock then outstanding. See also "ESOP Preferred Stock--Fundamental
Transactions."
Redemption. The ESOP Preferred Stock may be redeemed at the option of the
Board of Directors of the Company, in whole or in part (either pro rata to each
holder or chosen by lot as may be determined by the Board of Directors of the
Company), by giving to the holder thereof not less than 20 days' nor more than
60 days' prior written notice of such redemption (setting forth certain
specified information) at the following redemption prices per share:
12-Month Period
Beginning June 15 Redemption Price
----------------- ----------------
1995 $49.13
1996 $48.79
1997 $48.44
1998 $48.10
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and thereafter at $47.75 per share plus, in each case, accrued but unpaid
dividends.
The Company may redeem any or all of the ESOP Preferred Stock at a
redemption price of $47.75 per share, plus accrued but unpaid dividends if, at
any time (i) dividends on the ESOP Preferred Stock are no longer tax deductible,
(ii) the Internal Revenue Service (the "IRS") determines that the Plan is not a
qualified plan, (iii) the interest income exclusion for Plan lenders is reduced
below 50%, (iv) the Company determines in good faith that the ESOP Preferred
Stock does not comply with the one-share one-vote rule of Rule 19(c)-4 of the
SEC, or (v) the Company terminates the Plan or future contributions to the Plan.
There is no restriction on the repurchase or redemption of ESOP Preferred
Stock while there is any arrearage in the payment of dividends. The ESOP
Preferred Stock is redeemable at the option of the Trustee, who is the holder
thereof, when and to the extent necessary to provide for (i) any distribution
required to be made under the Plan, or (ii) payment on the indebtedness of the
Plan, but only to remedy or prevent a default thereunder, at a redemption price
of $47.75 per share, plus accrued but unpaid dividends. See also "ESOP Preferred
Stock--Fundamental Transactions."
Voting Rights. The holders of ESOP Preferred Stock are entitled to vote on
all matters submitted to a vote of the holders of Common Stock, voting together
with the Common Stock on an as-if-converted basis. See "Common Stock--Voting
Rights" for a description of voting rights with respect to Common Stock and this
ESOP Preferred Stock on an as-if-converted basis.
The affirmative vote of holders of a majority of the ESOP Preferred Stock,
voting as a series, is required for (i) any amendment to the Articles that would
(a) change adversely the preferences, qualifications, limitations or special or
relative rights of the ESOP Preferred Stock, (b) authorize a new class or series
of shares senior to the ESOP Preferred Stock as to dividends or assets, or (c)
increase the number of authorized shares of any class or series senior to the
ESOP Preferred Stock as to dividends or assets, and (ii) any merger,
consolidation, division or share exchange, or sale, lease or exchange of all or
substantially all of the assets of the Company, which would effectively result
in a change in the Articles in any of the foregoing manners.
Liquidation. Subject to the rights and preferences of the holders of any
other series of Class A Preferred Stock, upon any voluntary or involuntary
liquidation, dissolution, or winding up of the Company, the holders of ESOP
Preferred Stock are entitled to $47.75 per share, plus all accrued and unpaid
dividends thereon. The amount payable to the holders of ESOP Preferred Stock as
so determined is prior to any payment or distribution to the holders of Series
One Preferred Stock and the Common Stock.
Fundamental Transactions. In the event the Company consummates a
consolidation, merger or similar transaction, however named, in which the Common
Stock of the Company is exchanged, changed, reclassified or converted by
operation of law into stock or securities of any successor or resulting company
that constitutes qualifying employer securities for purposes of the Internal
Revenue Code, as amended, and the Employee Retirement Income Security Act of
1974, as amended, or their successors ("qualifying employer securities"), the
shares of ESOP Preferred
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Stock will be assumed by and shall become preferred stock of such successor or
resulting company with the same preferences. voting rights, qualifications,
privileges, limitations, options, conversion or other special rights which the
ESOP Preferred Stock had immediately prior to the transaction.
In the event the Company consummates a consolidation, merger or similar
transaction, however named, in which the Common Stock of the Company is
exchanged, changed, reclassified or converted by operation of law into cash,
property or stock or securities of any successor or resulting company that does
not constitute qualifying employer securities, holders of ESOP Preferred Stock
have the right to elect to have their ESOP Preferred Stock converted into the
stock, securities, cash or property in the transaction or to have the Company
redeem their ESOP Preferred Stock at a redemption price of $47.75 per share,
plus all accrued and unpaid dividends.
Other Information. The ESOP Preferred Stock does not carry any preemptive
rights, is not subject, or upon issuance, will not be subject, to further calls
and is not subject, or upon issuance, will not be subject to any sinking fund
provisions. The issued and outstanding shares of the ESOP Preferred Stock are,
and the authorized but unissued shares of the ESOP Preferred Stock upon issuance
will be, fully paid and nonassessable. Except in certain circumstances as
discussed above in this section and below under "Certain Provisions Acting
Control of the Company," the ESOP Preferred Stock is not subject to
discriminatory provisions based on ownership thresholds.
Certain Provisions Affecting Control of the Company
General. Certain provisions of the Company's Articles, Bylaws and the
Pennsylvania Business Corporation Law of 1988, as amended (the "PBCL") operate
with respect to extraordinary corporate transactions, such as mergers,
reorganizations, tender offers, sales or transfers of substantially all of the
Company's assets or the liquidation of the Company, and could have the effect of
delaying or making more difficult a change in control of the Company in certain
circumstances.
Certain Provisions of the Articles. The Articles provide that a Business
Combination (as defined below) with an Interested Shareholder (as defined below)
requires the affirmative vote of shareholders entitled to cast at least a
majority of the votes which all shareholders, other than the Interested
Shareholder, would be entitled to cast at an annual election of directors,
voting together as a single class, unless the transaction is approved by a
majority of the Disinterested Directors (as defined below) or the transaction
meets certain fair price and procedural requirements. An "Interested
Shareholder" is, with certain exceptions, any person, or his assignee or
successor (not including Armstrong or an affiliate of Armstrong), who is (or was
within the previous two years) the beneficial owner of more than ten percent of
the voting power of the outstanding voting stock, together with such person's
affiliates and associates. A "Business Combination" includes, among other
transactions, the following: (i) the merger or consolidation of the Company with
the Interested Shareholder, (ii) the sale of all or substantially all of the
assets of the Company to the Interested Shareholder or its affiliates or
associates; (iii) the issuance of securities of the Company to an Interested
Shareholder having a value equal to greater than ten percent of the assets of
the Company; (iv) the adoption of any plan for the
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liquidation or dissolution of the Company proposed by or on behalf of the
Interested Shareholder, or (v) any reclassification or recapitalization of
securities which effectively increases the proportional equity share of the
Interested Shareholder. The term "Disinterested Director" means a director who
is neither affiliated with nor a representative of an Interested Shareholder and
(i) was a director prior to the time an Interested Shareholder became such, (ii)
was recommended or elected to fill a vacancy created by an increase in the size
of the Board of Directors by a majority of the Disinterested Directors then in
office, or (iii) was a successor of a Disinterested Director and was recommended
or elected to succeed a Disinterested Director by a majority of the
Disinterested Directors then in office. Certain other provisions of the Articles
and Bylaws which could have the effect of delaying or preventing a Change in
Control of the Company are described above under the captions "Common Stock" and
"Description of Capital Stock--Class A Preferred Stock."
Certain Provisions of the PBCL. The Company is governed by the PBCL which
includes the following: (i) provisions which prohibit certain business
combinations (as defined in the PBCL) involving a corporation that has voting
shares registered under the Securities Exchange Act of 1934, as amended, and an
"interested shareholder" (generally defined to include a person who beneficially
owns shares representing at least twenty percent of the votes that all
shareholders would be entitled to cast in an election of directors of the
corporation) unless certain conditions are satisfied or an exemption is
applicable; (ii) provisions concerning a "control-share acquisition" in which
the voting rights of certain shareholders of the corporation (specifically, a
shareholder who acquires 20%, 33-1/3 or 50% or more of the voting power of the
corporation ) are conditioned upon the consent of a majority vote at a meeting
of the independent shareholders of the corporation after disclosure by such
shareholder of certain information; (iii) provisions pursuant to which any
profit realized by a "controlling person or group," generally defined as a 20%
beneficial owner, from the disposition of any equity securities within twenty-
four months prior to, and eighteen months succeeding, the acquisition of such
control is recoverable by the corporation; (iv) provisions pursuant to which
severance payments are to be made by the corporation to any eligible employee of
a covered corporation whose employment is terminated, other than for willful
misconduct, with ninety days before, or twenty-four months after, a control-
share acquisition; (v) provisions pursuant to which any holder of voting shares
of a registered corporation who objects to a "control transaction" (generally
defined as the acquisition of voting shares by a person or group (the
"controlling person or group") that would entitle the holders thereof to cast at
least 20% of the votes that all shareholders would be entitled to cast in an
election of the directors of the corporation) is entitled to make a written
demand on the controlling person or group for payment of the fair value of the
voting shares of the corporation held by the shareholder; (vi) a set of
interrelated provisions which are designed to support the validity of actions
taken by the Board of Directors in response to takeover bids, including
specifically the Board's authority to "accept, reject or take no action" with
respect to a takeover bid, and permitting the unfavorable disparate treatment of
a takeover bidder, and (viii) provisions which allow the directors broad
discretion in considering the best interests of the corporation, including a
provision which permits the Board to consider various corporate interests
including the short-term and long-term interests of the corporation and the
resources, intent and conduct of any person seeking to acquire the corporation.
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