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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 19, 1996
REGISTRATION NO. 333-14913
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
ASTOR CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
DELAWARE 2999 13-3550228
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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--------------------------
CO-REGISTRANT
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<CAPTION>
(EXACT NAME OF
CO-REGISTRANT (STATE OR OTHER JURISDICTION
AS SPECIFIED IN ITS OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CHARTER) INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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<S> <C> <C> <C>
ASTOR HOLDINGS II, INC. Delaware 2999 25-1766332
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8521 SIX FORKS ROAD
RALEIGH, NORTH CAROLINA 27615
(919) 846-8011
(Address, including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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<S> <C>
BOYD D. WAINSCOTT WITH A COPY TO:
Chief Executive Officer BRUCE D. MEYER, ESQ.
ASTOR CORPORATION CLAY A. HALVORSEN, ESQ.
8521 Six Forks Road Gibson, Dunn & Crutcher
Raleigh, North Carolina 27615 333 S. Grand Avenue
(919) 846-8011 Los Angeles, California 90071
(Name, Address, Including Zip Code, (213) 229-7000
and Telephone Number,
Including Area Code, of Agent for
Service)
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
THE REGISTRANT AND THE CO-REGISTRANT HEREBY AMEND THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL THE REGISTRANT AND THE CO-REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE
AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 19, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
ASTOR CORPORATION
OFFER FOR ALL OUTSTANDING
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
10 1/2% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
Astor Corporation, a Delaware corporation, hereby offers (the "Offer"), upon
the terms and subject to the conditions set forth herein and in the related
Letter of Transmittal, to exchange up to $110.0 million aggregate principal
amount of 10 1/2% Series B Senior Subordinated Notes Due 2006 (the "Notes") of
Astor Corporation for a like amount of the privately placed 10 1/2% Senior
Subordinated Notes Due 2006 (the "Old Notes") of Astor Corporation issued on
October 8, 1996, from the holders thereof (together with the holders of Notes,
"Holders").
The Notes are being offered hereunder in order to satisfy the obligations of
Astor Corporation under an Exchange and Registration Rights Agreement dated
October 8, 1996 (the "Registration Rights Agreement") by and among Astor
Corporation and Donaldson, Lufkin & Jenrette Securities Corporation and Chase
Securities Inc. (the "Initial Purchasers"). The Offer is designed to provide to
Holders an opportunity to acquire Notes which, unlike the Old Notes, are
expected to be freely transferable at all times, subject to state "blue sky" law
restrictions, PROVIDED that the Holder is not an "affiliate" of Astor
Corporation within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and represents that the Notes are being acquired in the
ordinary course of such Holder's business and the Holder is not engaged in, and
does not intend to engage in, a distribution of the Notes. With the exception of
the freely transferable nature of the Notes, the Notes are substantially
identical to the Old Notes. See "The Offer -- Purpose of the Offer."
Astor Corporation will accept for exchange any and all validly tendered Old
Notes on or prior to 5:00 P.M., New York time, on , 1997, unless
extended (the "Expiration Date"). Tenders of Old Notes made pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date. In the event
Astor Corporation terminates the Offer and does not accept any Notes with
respect to the Offer, Astor Corporation will promptly return such Old Notes to
the Holders thereof. Astor Corporation will not receive any proceeds from the
Offer.
Interest on the Notes will be payable semi-annually on October 15 and April
15 of each year, commencing on April 15, 1997. The Notes will mature on October
15, 2006. Except as described below, the Notes will not be redeemable prior to
October 15, 2001. On or after October 15, 2001, the Notes may be redeemed at the
option of Astor Corporation, in whole or in part, at the redemption prices set
forth herein, together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to October 15, 1999, Astor
Corporation may, subject to certain requirements, redeem up to $35.0 million of
the aggregate principal amount of the Notes with the net cash proceeds of one or
more Public Equity Offerings (as defined herein), at a price equal to 109.5% of
the principal amount to be redeemed, together with accrued and unpaid interest,
if any, to the date of redemption. The Notes will not be subject to any sinking
fund requirement. Upon the occurrence of a Change of Control (as defined
herein), Astor Corporation will be required to make an offer to repurchase the
Notes at a price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of repurchase. See "Description
of Notes."
(CONTINUED ON FOLLOWING PAGE)
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 HEREIN FOR A DISCUSSION OF CERTAIN
RISKS THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN
CONNECTION WITH THE OFFER.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS DECEMBER , 1996.
<PAGE>
The Notes will be general unsecured obligations of Astor Corporation,
subordinated in right of payment to all Senior Debt (as defined herein) of Astor
Corporation. The Notes will be fully and unconditionally guaranteed on a senior
subordinated basis (the "Guarantee") by Astor Corporation's parent, Astor
Holdings II, Inc. ("Astor Holdings II"). The Guarantee will be a general
obligation of Astor Holding II subordinated in right of payment to all Senior
Debt of Astor Holding II. The Notes will not be guaranteed by Astor
Corporation's existing subsidiaries, but will be fully and unconditionally
guaranteed on a senior subordinated basis by any future U.S. subsidiaries of
Astor Corporation. Consequently, indebtedness of Astor Corporation's existing
subsidiaries and any future foreign subsidiaries would be structurally senior to
the Notes. The Indenture (as defined herein) permits Astor Corporation, Astor
Corporation's subsidiaries and Astor Holdings II to incur additional
indebtedness, including $50 million of Senior Debt under Astor Corporation's
Senior Bank Facility (as defined herein), subject to certain limitations. See
"Description of Notes." As of September 30, 1996, on a pro forma basis after
giving effect to the Transactions (as defined herein), the aggregate amount of
outstanding Senior Debt of Astor Corporation and its subsidiaries would have
been $22.3 million.
The Old Notes were sold by Astor Corporation on October 8, 1996 to the
Initial Purchasers in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act. The Initial Purchasers
subsequently placed the Old Notes with qualified institutional buyers in
reliance upon Rule 144A under the Securities Act and with a limited number of
institutional accredited investors that agreed to comply with certain transfer
restrictions and other conditions. Accordingly, the Old Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available.
Based on certain interpretive letters issued by the staff of the Securities
and Exchange Commission to third parties, the Company believes that a Holder of
Notes (other than (i) a broker-dealer who purchases such Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person who is an affiliate of the Company within
the meaning of Rule 405 under the Securities Act) who exchanges Old Notes for
Notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the Notes, will be allowed to resell the
Notes to the public without further registration under the Securities Act and
without delivering to the purchasers of the Notes a prospectus that satisfies
the requirements of the Securities Act. See "The Offer--Purpose of the Offer"
and "-- Resales of Notes." However, a broker-dealer who holds Old Notes that
were acquired for its own account as a result of market-making or other trading
activities may be deemed to be an "underwriter" within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act. If any other Holder is deemed to be an
"underwriter" within the meaning of the Securities Act or acquires Notes in the
Offer for the purpose of distributing or participating in a distribution of the
Notes, such holder must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction, unless an exemption from registration is otherwise available. For a
period of 180 days from the Expiration Date, the Company will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
There has been no public market for the Old Notes and no active public
market for the Notes is currently anticipated. Astor Corporation currently does
not intend to apply for the listing of the Notes on any securities exchange or
to seek approval for quotation through any automated quotation system. The
Initial Purchasers have advised Astor Corporation that each of the Initial
Purchasers currently intends to make a market in the Notes; however, neither is
obligated to do so and any market making may be discontinued by either Initial
Purchaser at any time without notice. Accordingly, no assurance can be given as
to the liquidity or the trading market for the Notes.
The Offer is not conditioned upon any minimum principal amount of Old Notes
being tendered for exchange. However, the Offer is subject to certain customary
conditions. See "The Offer." Old Notes may be tendered only in integral
multiples of $1,000.
2
<PAGE>
AVAILABLE INFORMATION
Astor Corporation has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Notes offered hereby
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this Prospectus as to the contents of
any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an Exhibit to the Registration Statement, reference is made to such exhibit
for a more complete description thereof, and each such statement shall be deemed
qualifed in its entirety by such reference. The Registration Statement and the
exhibits and schedules thereto may be inspected without charge and copied at
prescribed rates at the Public Reference Section of the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission maintains a website that contains reports, proxy
and information statements and other information filed electronically with the
Commission at http:\\www.sec.gov.
Astor Holdings II is required under the terms of the indenture governing the
Notes and the Old Notes (the "Indenture") to file with the Commission and
furnish, without cost, to the Holders of the Notes and Old Notes the annual,
quarterly and current reports that Astor Holdings II would be required to file
with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), if Astor Holdings II had
equity securities registered under the Exchange Act. Such information includes
annual reports containing consolidated financial statements and notes thereto,
together with an opinion thereon expressed by an independent public accounting
firm, management's discussion and analysis of financial condition and results of
operations, as well as quarterly reports containing unaudited consolidated
financial statements for the first three quarters of each calendar year. The
Company is also required to make such reports available to prospective
purchasers of the Notes and the Old Notes and to securities analysts upon their
request. In addition, the Company and Astor Holdings II have agreed to furnish
to Holders of the Notes and Old Notes and prospective purchasers and securities
analysts, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company and Astor Holding II incorporate herein by reference, the
following documents filed with the Commission under the Exchange Act:
(a) Astor Holdings II's Quarterly Report on Form 10-Q for the Quarter ended
September 30, 1996; and
(b) All documents and reports subsequently filed by the Company or Astor
Holdings II with the Commission pursuant to Sections 13(a), 13(c) or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of the transactions to which this Prospectus relates, shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents or reports.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded, except as so modified or superseded, shall
not be deemed to constitute a part of this Prospectus.
The Company and Astor Holdings II will provide without charge to each person
to whom a copy of this Prospectus has been delivered, on the written or oral
request or such person, a copy of any or all of the documents incorporated
herein by reference, other than exhibits to such documents unless they are
specifically incorporated by reference into such documents. Requests for such
copies should be directed to: John F. Gottshall, Vice President and Chief
Financial Officer, Astor Corporation, 8521 Six Forks Road, Raleigh, North
Carolina 27615, (919) 846-8011.
3
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TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION........................................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................................. 3
SUMMARY......................................................................................... 5
RISK FACTORS.................................................................................... 15
THE OFFER....................................................................................... 20
PRO FORMA CAPITALIZATION........................................................................ 27
PRO FORMA FINANCIAL INFORMATION................................................................. 28
SELECTED CONSOLIDATED FINANCIAL DATA............................................................ 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........... 41
BUSINESS........................................................................................ 48
ACQUISITION OF ADCO............................................................................. 64
MANAGEMENT...................................................................................... 66
OWNERSHIP OF VOTING SECURITIES.................................................................. 75
CERTAIN TRANSACTIONS............................................................................ 80
PRIOR REORGANIZATION............................................................................ 81
SENIOR BANK FACILITY............................................................................ 84
DESCRIPTION OF NOTES............................................................................ 86
PLAN OF DISTRIBUTION............................................................................ 116
LEGAL MATTERS................................................................................... 116
INDEPENDENT AUDITORS............................................................................ 116
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS...................................................... F-1
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4
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SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS MEMORANDUM. THE ISSUANCE AND SALE OF THE
OLD NOTES (THE "OFFERING"), THE CONSUMMATION OF THE ADCO ACQUISITION (AS DEFINED
HEREIN), THE FUNDING OF THE SENIOR BANK FACILITY AND THE REPAYMENT OF THE UBS
CREDIT FACILITY (AS DEFINED HEREIN) ARE COLLECTIVELY REFERRED TO IN THIS
MEMORANDUM AS THE "TRANSACTIONS." THROUGHOUT THIS MEMORANDUM, EXCEPT WHERE THE
CONTEXT OTHERWISE REQUIRES, "ASTOR" REFERS TO ASTOR CORPORATION AND ITS
SUBSIDIARIES, "ADCO" REFERS TO ADCO TECHNOLOGIES, INC. AND ITS SUBSIDIARY PRIOR
TO THE ADCO ACQUISITION, THE "PARENT" REFERS TO ASTOR HOLDINGS, INC., THE SOLE
STOCKHOLDER OF ASTOR HOLDINGS II, AND THE "COMPANY" REFERS COLLECTIVELY TO ASTOR
AND ADCO ON A COMBINED BASIS AFTER GIVING EFFECT TO THE TRANSACTIONS. REFERENCES
HEREIN TO A PARTICULAR FISCAL YEAR ARE TO THE TWELVE MONTH PERIOD ENDING MARCH
31 OF SUCH YEAR.
THE COMPANY
The Company is a leading global developer, producer and marketer of a wide
variety of value-added specialty chemical products. Its principal products are
(i) a broad range of specialty waxes, which represented approximately 70% of pro
forma sales for the 1996 fiscal year, and (ii) an extensive line of
technologically advanced adhesives and sealants, which represented approximately
30% of pro forma sales for the 1996 fiscal year. These products are sold to a
diverse base of over 4,000 customers in more than 50 countries worldwide, with
35.4% of 1996 pro forma sales made to customers outside of the U.S., and are
used in numerous industrial and commercial applications. In the 1996 fiscal
year, no single customer of the Company accounted for more than 5% of the
Company's pro forma sales, and the top ten customers accounted for approximately
21% of the Company's pro forma sales. During the twelve months ended September
30, 1996, the Company had pro forma revenues, EBITDA (as defined herein) and net
income before extraordinary items of $219.9 million, $30.4 million and $11.1
million, respectively. The Company's sales of specialty waxes and adhesives and
sealants grew on a pro forma basis from $159.4 million in fiscal year 1994 to
$206.2 million in fiscal year 1996, or at a compound annual rate of 13.7%.
The Company focuses on developing value-added products to satisfy customers'
unique product demands and exacting specifications by conducting extensive
applied research and product development, often in conjunction with its
customers. The Company's product development has led to a variety of new
products and patented technologies for the Company. The Company's position is
further strengthened by its numerous technical customer approvals and the
value-added nature of its products, which generally represent a relatively small
percentage of an end-use product's total cost. These factors contributed to the
high contribution margins (defined as sales less raw material costs) which have
been achieved by the Company in recent periods. In fiscal 1996, pro forma
contribution margins for specialty waxes and for adhesives and sealants were
approximately 38.8% and 48.6%, respectively.
In 1994, Mr. Boyd Wainscott, an experienced multinational chemical company
manager, joined Astor to lead it in developing and implementing a strategic
business plan. This plan included improving marketing functions and product
distribution, developing more higher-margin, value-added products, improving
manufacturing operations and increasing manufacturing capacity, and pursuing
acquisition opportunities in the consolidating specialty chemicals industry. As
part of this strategic plan, in June 1995, the current business and structure of
Astor were created through the combination of Astor Corporation and Associated
British Industries Limited ("ABI"), a manufacturer of specialty waxes and
adhesives and sealants based in the U.K. (the "ABI Acquisition"). The ABI
Acquisition improved Astor's in-house marketing and packaging capabilities,
resulting in improved product distribution, and improved Astor's product
development capabilities, allowing for the development of higher-valued
products. Concurrent with the consummation of the Offering, Astor acquired ADCO,
a leading U.S. manufacturer and marketer of adhesives and sealants. Through the
acquisition of ADCO, Astor added significant depth to its product lines, global
marketing and manufacturing networks and product development capabilities.
SPECIALTY WAXES. Management of the Company believes that the Company is the
largest developer, producer and marketer of specialty waxes in North America,
and one of the largest producers of specialty waxes in the world, based on
sales. During 1993, the most recent year for which statistics are available,
approximately two billion pounds of specialty and other waxes were consumed in
the U.S., representing over $500 million in revenues, and over seven billion
pounds of specialty and other waxes were consumed worldwide, according to Wax
Data, an industry publication, and a study by Kline & Company, a leading
5
<PAGE>
industry consultant. During the last ten years, wax demand has grown at
approximately 3.3% per annum in the U.S., according to Wax Data. However,
certain end-use products have experienced significantly higher growth rates,
such as the PVC pipe market which grew at a rate of 10.0% from 1993 to 1994,
according to Modern Plastics, an industry publication. Due to the lack of
cost-effective wax substitutes, management believes that wax demand will be
driven by the growth of its end-use products. Specialty waxes, like the
Company's products, are distinguished by their melt point, hardness, color and
other performance characteristics, as well as their consistent qualities and
custom specifications, and are used as an essential, value-added component in
hundreds of products and applications. The primary applications of the Company's
products include use as a protective component in packaging and tires, as a fuel
in candles and synthetic firelogs, and as a lubricant in PVC extrusion. The
Company produces one of the most extensive lines of customized waxes in the
industry and currently has over 3,000 different wax formulations in its
proprietary database.
The Company had $143.7 million of pro forma sales of specialty waxes in
fiscal 1996. Over the past three fiscal years, the Company's sales of specialty
waxes have grown on a pro forma basis at a compound annual rate of 10.9%, well
in excess of the wax industry's growth rate, primarily due to the Company's
focus on high-growth niche markets. The Company's specialty wax products are
manufactured in the U.S., the U.K. and Belgium, and are sold both directly and
through independent agents to customers worldwide. During the 1996 fiscal year,
40.0%, or $57.5 million, of the Company's pro forma specialty wax sales were in
non-U.S. markets.
ADHESIVES AND SEALANTS. The Company is a leading developer, producer and
marketer of an extensive line of adhesives and sealants for a variety of
specialized niche applications. According to Chemical Week, an industry
publication, in 1995, sales of adhesives and sealants reached approximately
$15.4 billion worldwide and $9.4 billion in North America. Adhesives are used to
bond various materials under numerous temperature and moisture conditions, and
sealants are used to prevent the passage of air, water and noise between two
surfaces. The primary markets for the Company's adhesives and sealants are new
and replacement commercial roofing, transportation aftermarket, transportation
OEM, insulated window manufacturing for new and replacement construction,
concrete pipe and vaults, and new and rehab building construction. The Company
currently offers more than 1,650 proprietary adhesives and sealants to its
customers.
The Company had $62.5 million of pro forma sales of adhesives and sealants
in fiscal 1996. Over the past three fiscal years, the Company's sales of
adhesives and sealants have grown on a pro forma basis at a compound annual rate
of 21.3%, well in excess of the adhesives and sealants industry's growth rate of
5.0%-6.0% as reported by Chemical Week, primarily due to the Company's
aggressive development of and the commercial acceptance of its new products. The
Company's adhesives and sealants are manufactured in both the U.S. and the U.K.,
and are sold both directly and through independent agents to customers
worldwide. During the 1996 fiscal year, 24.6%, or $15.4 million, of the
Company's pro forma adhesives and sealants sales were in non-U.S. markets.
The principal executive offices of the Company are located at 8521 Six Forks
Road, Raleigh, North Carolina 27615, and the Company's telephone number is (919)
846-8011. Astor and PurFlex are registered trademarks of the Company.
THE TRANSACTIONS
ACQUISITION OF ADCO. Concurrent with the consummation of the Offering on
October 8, 1996, Astor acquired all of the outstanding capital stock and all of
the issued but unexercised options of ADCO, a publicly traded Nasdaq National
Market manufacturer and marketer of adhesives and sealants, for an aggregate
consideration of $54.4 million (the "ADCO Acquisition"). Through the acquisition
of ADCO, Astor added significant depth to its product lines, global marketing
and manufacturing networks and product development capabilities. Management
believes that these strengths will enable Astor to improve significantly the
penetration of its existing adhesives and sealants in the U.S. and provide Astor
the opportunity to market ADCO's products outside of the U.S. Management
believes that the ADCO Acquisition will also serve as an excellent platform from
which to pursue complementary acquisitions in the highly fragmented adhesives
and sealants industry.
6
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Pursuant to the terms of a definitive merger agreement between the parties,
Astor paid $10.25 per share for the 5.15 million ADCO shares outstanding, plus
an aggregate of $1.6 million representing the aggregate net spread on ADCO's
outstanding stock options. In addition, ADCO caused its subsidiary to redeem
approximately $3.9 million of outstanding preferred stock of such subsidiary and
pay the dividends accrued thereon as of the date of redemption. See "Acquisition
of ADCO."
Concurrent with the consummation of the Offering and the acquisition of
ADCO, ADCO Products, Inc., a subsidiary of ADCO, was merged with and into ADCO,
and ADCO was merged with and into Astor Corporation. Astor Corporation is the
surviving entity of these mergers.
SENIOR BANK FACILITY. Astor Corporation has entered into a Senior Secured
Credit Agreement (the "Senior Bank Facility") with The Chase Manhattan Bank (the
"Bank") providing for a six-year term loan (the "Bank Term Loan") denominated in
eurosterling in an amount not exceeding the U.S. dollar equivalent of $20.0
million and a six-year revolving credit facility (the "Revolving Credit
Facility") in an amount not exceeding the U.S. dollar equivalent of $30.0
million (subject to borrowing base limitations), which will be available in U.S.
dollars or eurosterling on a revolving basis.
The Bank Term Loan was made in a single drawing concurrent with the closing
of the Transactions and all of the proceeds were lent by Astor Corporation to
Astor Stag Ltd. and used to repay to Union Bank of Switzerland ("UBS") existing
indebtedness of Astor Stag Ltd. and ABI Acquisition 2 plc, both of which are
foreign subsidiaries of Astor Corporation based in the U.K. The note evidencing
the intercompany loan (the "Intercompany Term Loan") by Astor Corporation to
Astor Stag Ltd. is secured by substantially all the assets of Astor Stag Ltd.
and pledged in favor of the Lenders (as defined herein). The Bank Term Loan is
repayable in 21 quarterly installments of varying amounts, beginning in October
31, 1997, with the final maturity being October 31, 2002. The Intercompany Term
Loan is repayable on demand.
Subject to the satisfaction of customary conditions and meeting certain
borrowing base requirements, advances under the Revolving Credit Facility may be
made at any time prior to October 31, 2002 (the "Termination Date"), to be used
(i) to finance permitted acquisitions, (ii) to refinance existing indebtedness
of Astor Corporation, ABI Acquisition 2 plc and Astor Stag Ltd. and (iii) to
finance the working capital needs of Astor Corporation and its subsidiaries. Up
to $10.0 million of the Revolving Credit Facility will be available for letters
of credit. Proceeds from revolver advances to be used by subsidiaries in Europe
will be lent by Astor Corporation to Astor Stag Ltd. and the note evidencing
such intercompany advances (the "Intercompany Advances") will be secured and
pledged on the same basis as the note evidencing the Intercompany Term Loan. The
Intercompany Advances will be repayable on demand.
The Senior Bank Facility is secured by a first priority security interest in
all assets of Astor Corporation, all of the capital stock of Astor Corporation's
direct and indirect U.S. subsidiaries, 65% of the voting capital stock and 100%
of the non-voting capital stock of ABI Acquisition 2 plc and all of the capital
stock of Astor Corporation. The obligations of Astor Corporation under the
Senior Bank Facility are guaranteed on a senior secured basis by each of Astor
Corporation's existing and future U.S. subsidiaries. See "Senior Bank Facility."
The indebtedness under the Senior Bank Facility is subject to prepayment with
designated percentages of proceeds of asset sales, issuances of equity and debt
and excess cash flow. See "Senior Bank Facility."
7
<PAGE>
CORPORATE STRUCTURE. The following chart depicts the equity ownership of
the Company after giving effect to the Transactions, including the ADCO
Acquisition.
[FLOWCHART]
- ------------------------
(1) The outstanding voting preferred stock of ABI Acquisition 1 plc entitles the
holder thereof to (i) elect three of the four directors of ABI Acquisition 1
plc, (ii) exercise 75% of the voting power of the outstanding capital stock
of ABI Acquisition 1 plc and (iii) an aggregate liquidation preference of
$1.7 million.
(2) The outstanding voting preferred stock of Astor Corporation entitles the
holder thereof to an aggregate liquidation preference of $28.5 million and
has a cumulative dividend rate of 12.5% per annum. The holder of such shares
is also entitled to exercise 13.2% of the voting power of the currently
outstanding capital stock of Astor Corporation.
8
<PAGE>
THE OFFER
<TABLE>
<S> <C>
Securities Offered........... Up to $110,000,000 principal amount of 10 1/2% Series B
Senior Subordinated Notes Due October 15, 2006 (the
"Notes").
The Offer.................... The Notes are being offered in exchange for a like principal
amount of the Company's Old Notes. Old Notes may be
exchanged only in integral multiples of $1,000. The issuance
of the Notes is intended to satisfy the obligataions of the
Company under the terms of the Registration Rights
Agreement.
Tenders; Expiration Date;
Withdrawal.................. The Offer will expire at 5:00 P.M. New York City time on
, 1997, or such later date and time to which it
is extended by the Company (the "Expiration Date"). Tenders
of Old Notes pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date. In the event the Company
terminates the Offer and does not accept for exchange any
Old Notes pursuant to the Offer, the Company will promptly
return such Old Notes to the Holders thereof.
Accrued Interest on the
Notes....................... The Notes will bear interest from and including the date of
issuance of the Old Notes. Accordingly, Holders who receive
Notes in exchange for Old Notes will forego accrued but
unpaid interest on their exchanged Old Notes for the period
from and including the date of issuance of the Old Notes to
the date of exchange, but will be entitled to such interest
under the Notes.
Conditions of the Offer...... The Offer is subject to certain customary conditions, any or
all of which may be waived by the Company. The Company
currently expects that each of the conditions will be
satisfied and that no waivers will be necessary. See "The
Offer -- Conditions to the Offer."
Procedures for Tendering Old
Notes....................... Each Holder wishing to accept the Offer must complete and
sign the Letter of Transmittal, in accordance with the
instructions contained therein, and submit the Letter of
Transmittal to the Exchange Agent identified below. See "The
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures.................. Holders of Old Notes who wish to tender their Old Notes and
whose Old Notes are not immediately available or who cannot
deliver their Old Notes and Letter of Transmittal and any
other documents required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date, must tender
their Old Notes according to the guaranteed delivery
procedures set forth in "The Offer -- Guaranteed Delivery
Procedures."
Acceptance of Old Notes and
Delivery of Notes........... The Company will accept for exchange any and all Old Notes
which are properly tendered in the Offer prior to 5:00 P.M.
New York City time on the Expiration Date. See "The Offer --
Acceptance of Old Notes for Exchange; Delivery of Notes."
Federal Income Tax
Considerations.............. The exchange of Old Notes for Notes pursuant to the Offer
will not be a taxable event for federal income tax purposes.
See "The Offer -- Federal Income Tax Consequences."
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Rights of Dissenting
Holding..................... Holders of Old Notes do not have any appraisal or
dissenters' rights under the Delaware General Corporation
Law in connection with the Offer.
Exchange Agent............... State Street Bank and Trust Company; telephone (617)
664-5344. See "The Offer -- Exchange Agent."
Use of Proceeds.............. There will be no cash proceeds to the Company from exchanges
made pursuant to the Offer.
</TABLE>
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, Holders of Old Notes (other than any
holder who is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) who exchanged their Old Notes for Notes pursuant to the
Offer generally may offer such Notes for resale, resell such Notes and otherwise
transfer such Notes without compliance with the registration and prospectus
delivery provisions of the Securities Act provided such Notes are acquired in
the ordinary course of the holder's business and such holder has no arrangement
with any person to participate in a distribution of such Notes. Each
broker-dealer that receives Notes for its own account in exchange for Old Notes
must acknowledge that it will deliver a prospectus in connection with any resale
of such Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the Notes may not be
offered or sold unless they have been registered or qualifed for sale in such
jurisdiction or an exemption from registration or qualification is available and
the conditions thereto have been met. The Company has agreed, pursuant to the
Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the Notes for offer or sale under the securities
or blue sky laws of such jurisdictions as any Holder of the Notes or the Old
Notes reasonably requests in writing. If a holder of Old Notes does not exchange
such Old Notes for Notes pursuant to the Offer, such Old Notes will continue to
be subject to the restrictions on transfer contained in the legend thereon. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. See "The
Offer -- Purposes of the Offer" and "-- Resales of Notes."
TERMS OF THE NOTES
The Terms of the Notes are substantially identical in all material respects
to the terms of the Old Notes, except that the Notes are expected to be freely
transferable as described under "The Offer -- Resales of Notes."
<TABLE>
<S> <C>
Maturity..................... October 15, 2006.
Interest Payment Dates....... October 15 and April 15 of each year, commencing on April
15, 1997.
Optional Redemption.......... Except as described below, the Notes will not be redeemable
by Astor Corporation prior to October 15, 2001. On or after
that date, the Notes may, subject to certain requirements,
be redeemed at the option of Astor Corporation, in whole or
in part, at the redemption prices set forth herein, together
with accrued and unpaid interest and Liquidated Damages (as
defined herein) thereon, if any, to the date of redemption.
In addition, at any time on or prior to October 15, 1999,
Astor Corporation may, subject to certain requirements,
redeem up to $35.0 million of the aggregate principal amount
of the Notes with the net cash proceeds of one or more
Public Equity Offerings (as defined herein) at a price equal
to 109.5% of the principal amount to be redeemed, together
with accrued and unpaid interest, if any, to the redemption
date; PROVIDED, that immediately following such redemption
not less than $75.0 million aggregate principal amount of
the Notes remains outstanding.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Mandatory Redemption......... None, except as set forth under "Description of Notes --
Change of Control" and "Description of Notes -- Certain
Covenants -- Asset Sales and Sales of Subsidiary Stock."
Guarantee.................... The Notes will be fully and unconditionally guaranteed on a
senior subordinated basis by Astor Holdings II and future
U.S. subsidiaries, if any, of Astor Corporation.
Ranking...................... The Notes will be senior subordinated obligations of Astor
Corporation, subordinated in right of payment to all
existing and future Senior Debt of Astor Corporation,
including indebtedness pursuant to the Senior Bank Facility.
The Notes will be structurally subordinated
to all indebtedness and liabilities of Astor Corporation's
existing subsidiaries and any future non-U.S. subsidiary.
The Guarantee of Astor Holdings II and any future U.S.
subsidiary of Astor Corporation which guarantees the Notes
will be subordinated to the prior payment in full of all
Senior Debt of Astor Holdings II and such subsidiaries. As
of September 30, 1996, on a pro forma basis after giving
effect to the Transactions, Astor Corporation and its
subsidiaries would have had Senior Debt outstanding of $20.0
million plus $2.3 million of letters of credit, and Astor
Holdings II would have had no Senior Debt outstanding.
Change of Control............ Upon the occurrence of a Change of Control, Astor
Corporation will be required to make an offer to repurchase
the Notes at a price equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon to the date of purchase.
Astor Corporation may be prohibited in certain circumstances
from making such repurchase. See "Risk Factors -- Control by
Indirect Stockholder; Consequences of Change of Control."
Certain Covenants............ The indenture governing the Notes (the "Indenture") contains
certain covenants that impose limitations on, among other
things, (i) the incurrence of additional indebtedness by
Astor Corporation, any Restricted Subsidiary (as defined
herein) and Astor Holdings II, (ii) the issuance of
Disqualified Stock (as defined herein), (iii) the making of
certain Restricted Payments (as defined herein), (iv) the
imposition of restrictions on the payment of dividends and
other payment restrictions affecting subsidiaries, (v)
anti-layering, (vi) the incurrence of liens, (vii)
transactions with affiliates and (viii) the consummation of
certain mergers, consolidations or sales of assets.
Absence of a Public Market
for the Notes............... There has been no public market for the Old Notes and no
active public market for the Notes is currently anticipated.
The Company currently does not intend to apply for the
listing of the Notes on any securities exchange or to seek
approval for quotation through any automated quotation
system. The Initial Purchasers have advised the Company that
each of the Initial Purchasers currently intends to make a
market in the Notes; however, neither is obligated to do so
and any market making may be discontinued by either Initial
Purchaser at any time without notice. Accordingly, no
assurance can be given as to the liquidity or the trading
market for the Notes.
</TABLE>
RISK FACTORS
For a discussion of certain matters that should be considered by prospective
investors in connection with the Offering, see "Risk Factors" beginning on page
15.
11
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table presents summary pro forma consolidated financial
information of Astor Holdings II derived from the Consolidated Financial
Statements of each of Astor Holdings II, ABI and ADCO, and other data as of the
dates and for the periods indicated. In the opinion of management of the
Company, all unaudited financial data used herein include all adjustments,
consisting only of normal adjustments, necessary for a fair presentation of the
results for the periods presented. Astor Holdings II is the parent corporation
of Astor Corporation, has guaranteed the obligations of Astor under the Notes
and has no material operating assets, liabilities or operations other than its
ownership of the outstanding common stock of Astor Corporation, the outstanding
$1.7 million (liquidation preference) of preferred voting ordinary stock of ABI
Acquisition 1 plc, a subsidiary of Astor Corporation, a subordinated
intercompany note payable to the Parent in the amount of $5.7 million and a
corresponding subordinated intercompany note receivable from ABI Acquisition 1
plc in the amount of $5.7 million. See "Risk Factors -- Absence of Guarantees
from Subsidiaries; Structural Subordination; Limitations on Payments to the
Company."
The summary pro forma consolidated financial data for the fiscal year ended
March 31, 1996 have been derived from the consolidated audited financial
statements of Astor Holdings II for the fiscal year ended on such date, the
consolidated audited financial statements of ADCO for the fiscal year ended
December 31, 1995 and the consolidated unaudited financial statements of ABI for
the period from April 1, 1995 to June 28, 1995.
The summary pro forma consolidated financial data for the six months ended
September 30, 1996 have been derived from the unaudited consolidated financial
statements of each of Astor Holdings II and ADCO for the six months ended
September 30, 1996. The results for the six months ended September 30, 1996 are
not necessarily indicative of the results to be expected for the full year.
The summary pro forma consolidated financial data for the twelve months
ended September 30, 1996 have been derived from the consolidated audited
financial statements of Astor Holdings II for the fiscal year ended March 31,
1996, the consolidated audited financial statements of ADCO for the fiscal year
ended December 31, 1995, the unaudited consolidated financial statements of
Astor Holdings II for the six months ended September 30, 1996 and the unaudited
consolidated financial statements of ADCO for the nine months ended September
30, 1996.
The summary pro forma consolidated financial data are provided for
informational purposes only and do not purport to represent the financial
position or the results of operations of Astor Holdings II had the Transactions
or the Prior Transactions (as defined herein) occurred on or as of the dates
indicated nor do such data purport to project the results of Astor Holdings II
for any future period.
The summary pro forma consolidated financial data should be read in
conjunction with "Selected Consolidated Financial Data," "Pro Forma Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements and the related
notes thereto for each of Astor Holdings II, ABI and ADCO included elsewhere in
this Memorandum.
12
<PAGE>
ASTOR HOLDINGS II
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
FISCAL YEAR TWELVE MONTHS SIX MONTHS
ENDED ENDED ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1996 (1) 1996 (2) 1996 (3)
----------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales:
Specialty waxes.................... $143,661 $153,212 $79,415
Adhesives and sealants............. 62,539 66,655 37,790
----------- -------------- -------
Total sales...................... 206,200 219,867 117,205
Gross profit before depreciation..... 48,546 53,076 28,992
Selling, general and administrative
expenses............................ 21,624 23,499 12,509
Depreciation and amortization........ 8,198 8,386 4,285
Non-recurring items.................. 1,184 1,223 --
Operating income..................... 17,540 19,968 12,198
Reorganization expense............... 856 -- --
Interest expense..................... 13,785 13,785 6,893
Provision for (benefit from) income
taxes............................... (2,546) (4,029) 141
Net income, before extraordinary
items............................... $ 5,828 $ 11,067 5,797
Ratio of earnings to fixed charges
(4)................................. 1.2x 1.5x 1.8x
OTHER DATA:
EBITDA (5)........................... $ 27,305 $ 30,432 $17,116
EBITDA margin (6).................... 13.2% 13.8% 14.6%
Capital expenditures................. $ 6,551 $ 6,588 $ 2,539
EBITDA to interest expenses, net..... 2.0x 2.2x 2.5x
Total debt to EBITDA (7)............. 5.1x 4.5x 4.0x
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
AS OF
SEPTEMBER 30,
1996 (2)
--------------
<S> <C>
BALANCE SHEET DATA:
Current assets.................................................. $ 66,583
Total assets.................................................... 213,672
Total debt...................................................... 137,996
Stockholder's equity............................................ 38,056
</TABLE>
(See footnotes on following page)
13
<PAGE>
ASTOR HOLDINGS II
NOTES TO SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
(1) The pro forma consolidated financial data for the year ended March 31, 1996
reflects the Transactions and the Prior Transactions as if each had occurred
on April 1, 1995. For purposes of this pro forma financial information, the
ABI Acquisition and the ADCO Acquisition are treated as purchases. See "Pro
Forma Financial Information," "Acquisition of ADCO," "Senior Bank Facility"
and "Prior Reorganization."
(2) The pro forma consolidated financial data for the twelve months ended
September 30, 1996 reflects the Transactions as if each had occurred on
April 1, 1995. The pro forma balance sheet at September 30, 1996 is prepared
assuming the Transactions had occurred at that date. For purposes of this
pro forma financial information, the ABI Acquisition and the ADCO
Acquisition are treated as purchases. See "Pro Forma Financial Information,"
"Acquisition of ADCO," "Senior Bank Facility" and "Prior Reorganization."
(3) The pro forma consolidated financial data for the six months ended September
30, 1996 reflects the Transactions as if each had occurred on April 1, 1995.
For purposes of this pro forma financial information, the ABI Acquisition
and the ADCO Acquisition are treated as purchases. See "Pro Forma Financial
Information," "Acquisition of ADCO," "Senior Bank Facility" and "Prior
Reorganization."
(4) For the purposes of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes, extraordinary items and
fixed charges. Fixed charges consist of interest expense, amortization
expense of deferred debt financing costs and the interest component of rent
expense.
(5) EBITDA represents earnings before interest expense, income tax expense,
depreciation and amortization expense, extraordinary items and non-recurring
items. EBITDA as used herein may not be comparable to similarly titled
measures reported by other companies. Information concerning EBITDA is
included as it is used by certain investors as a measure of a company's
ability to service its debt. EBITDA may also be considered an important
measure to the Company because certain of the financial ratio covenants in
the Senior Credit Facility are based in part upon EBITDA. EBITDA is not a
GAAP (as defined herein) measure of financial performance and should not be
used as an alternative to, or be construed as more meaningful than,
operating income or cash flows or as an indicator of the operating
performance or liquidity of Astor Holdings II. EBITDA differs from cash
flows from operating activities primarily because, unlike cash flow from
operations, EBITDA excludes interest expense, taxes and net change in
working capital.
(6) EBITDA margin is the ratio of EBITDA to sales, expressed as a percentage.
(7) For the purposes of calculating total debt to EBITDA, (i) total debt for all
periods shown is pro forma total debt at September 30, 1996, (ii) EBITDA for
the period ended March 31, 1996 and September 30, 1996 reflects the twelve
months ended on such date and (iii) EBITDA for the six months ended
September 30, 1996 has been annualized.
14
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS MEMORANDUM,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS PRIOR
TO PURCHASING THE NOTES OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THE
FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS MEMORANDUM.
SIGNIFICANT LEVERAGE
The Company is highly leveraged and has indebtedness that is substantial in
relation to its stockholder's equity. As of September 30, 1996, on a pro forma
basis after giving effect to the Transactions, the Company would have had an
aggregate of $138.0 million of outstanding indebtedness for borrowed money, $1.7
million (liquidation preference) of outstanding preferred stock of a subsidiary
of Astor Corporation held by Astor Holdings II and $33.0 million of
stockholder's equity. Astor Corporation is a subsidiary of Astor Holdings II.
Astor Holdings II has guaranteed the obligations of Astor Corporation under the
Indenture and the Notes. As of September 30, 1996, on a pro forma basis after
giving effect to the Transactions, Astor Holdings II (on a consolidated basis
including the Company and its subsidiaries) would have had an aggregate of
$138.0 million of outstanding indebtedness for borrowed money and $38.1 million
of stockholder's equity. The Indenture permits Astor Corporation, its
subsidiaries and Astor Holdings II to incur additional indebtedness, including
Senior Debt (as defined herein) subject to certain limitations. See
"Capitalization," "Pro Forma Financial Information," "Description of Notes" and
the Consolidated Financial Statements of Astor Holdings II and the related notes
thereto included elsewhere in this Memorandum.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of interest on the Notes and interest and principal on its other
existing indebtedness, thereby reducing the funds available to the Company for
other purposes; (iii) indebtedness under the Senior Bank Facility will be at
variable rates of interest, which will cause the Company to be vulnerable to
increases in interest rates; (iv) the Company may be hindered in its ability to
adjust rapidly to changing market conditions; and (v) the Company's substantial
degree of leverage could make it more vulnerable in the event of a downturn in
general economic conditions or in its business.
The Senior Bank Facility matures prior to the maturity of the Notes. In the
event that the Company is unable to refinance the Senior Bank Facility or raise
funds to repay the facility through asset sales, sales of equity or otherwise,
its ability to pay the principal of and interest on the Notes would be adversely
affected.
SUBORDINATION OF THE NOTES AND THE GUARANTEE
The Notes and the Guarantee will be general obligations of Astor Corporation
and Astor Holdings II, respectively, and will be subordinate in right of payment
to all Senior Debt of the Company and Astor Holdings II (or any future U.S.
subsidiary which guarantees the Notes), including all amounts owing under the
Senior Bank Facility. In addition, the borrowings under the Senior Bank Facility
(including the guarantees thereof) are secured by a first priority security
interest in all assets of Astor Corporation, all of the capital stock of Astor
Corporation's direct and indirect U.S. subsidiaries, 65% of the voting capital
stock and 100% of the non-voting capital stock of ABI Acquisition 2 plc and all
of the capital stock of Astor Corporation. See "Senior Bank Facility." In the
event of a bankruptcy, liquidation or reorganization of Astor Corporation or
Astor Holdings II, the assets of Astor Corporation or Astor Holdings II, as the
case may be, would be available to pay obligations on the Notes or the
Guarantee, as the case may be, only after all Senior Debt has been paid in full,
and there may not be sufficient assets remaining to pay amounts due on any or
all of the Notes then outstanding. As of September 30, 1996, on a pro forma
basis after giving effect to the Transactions, Astor Corporation would have had
Senior Debt of approximately $22.3 million and approximately $27.7 million of
unused commitment under the Senior Bank Facility. Additional Senior Debt,
including secured indebtedness, may be incurred by Astor Corporation and Astor
Holdings II from time to
15
<PAGE>
time subject to certain restrictions contained in the Senior Bank Facility and
the Indenture. See "Description of Notes -- Subordination," "-- Certain
Covenants -- Incurrence of Indebtedness or Issuance of Preferred Stock" and
"Senior Bank Facility."
ABSENCE OF GUARANTEES FROM EXISTING SUBSIDIARIES; STRUCTURAL SUBORDINATION;
LIMITATIONS ON PAYMENTS TO THE COMPANY
Under the Indenture, Astor Corporation's existing subsidiaries are not
required to guarantee Astor Corporation's obligations under the Notes, although
the Indenture requires all future direct and indirect U.S. subsidiaries of Astor
Corporation to guarantee the Notes. As of and for the year ended September 30,
1996, on a pro forma basis after giving effect to the Transactions, the existing
subsidiaries of the Company would have had an aggregate of $45.9 million of
tangible assets (representing 30.9% of the total tangible assets of the Company
and Astor Holdings II on a consolidated basis), $659,000 of net income
(constituting 6.0% of the total consolidated pro forma net income of the Company
and the Guarantor). The rights of Astor Corporation and its creditors, including
the holders of the Notes, to realize upon the assets of Astor Corporation's
existing subsidiaries and any future non-U.S. subsidiary in the event of
bankruptcy, liquidation or reorganization of any such subsidiary will be subject
to the prior claims of such subsidiary's creditors, except to the extent that
Astor Corporation or Astor Holdings II may itself be a creditor with recognized
claims against such subsidiary. Astor Corporation is a creditor of Astor Stag
Ltd., an indirect U.K. subsidiary of Astor Corporation, for a total of $28.5
million which was loaned by the Company to Astor Stag Ltd. to repay existing
indebtedness of Astor Stag Ltd. and another indirect non-U.S. subsidiary of
Astor Corporation outstanding under the UBS Credit Facility. This claim, which
is secured by substantially all of the assets of Astor Stag, Ltd., has been
pledged to secure the Senior Bank Facility and is repayable upon demand by Astor
Corporation. There can be no assurance that such claim will remain outstanding
at any time. In addition, this claim (to the extent unsecured), and any other
such unsecured or junior secured claim of Astor Corporation or Astor Holdings II
with respect to a subsidiary of Astor Corporation, will still be subordinate to
any indebtedness secured (to the extent senior) by the assets of the subsidiary.
Astor Corporation may rely, in part, upon dividends and other payments from its
subsidiaries (including interest payments and the repayment of principal under
intercompany indebtedness) or funds contributed or otherwise transferred to
Astor Corporation by Astor Holdings II (which must rely upon equity or debt
financing in the absence of dividend payments from Astor Corporation) to meet
Astor Corporation's obligations, including the payment of principal and interest
on the Notes. The ability of Astor Corporation's subsidiaries and Astor Holdings
II to make such payments and transfers may be restricted or limited by, among
other things, applicable state and foreign corporate laws, tax laws and other
laws and regulations or by terms of agreements to which they may become party.
RESTRICTIVE LOAN COVENANTS; CONSEQUENCE OF FAILURE TO COMPLY
The Notes and the Senior Bank Facility impose upon the Company certain
financial and operating covenants including, among other things, requirements
that the Company maintain certain financial ratios and satisfy certain financial
tests, limitations on capital expenditures, and restrictions on the ability of
the Company to incur indebtedness, pay dividends or take certain other corporate
actions, all of which may restrict the Company's ability to expand or to pursue
its business strategies. In addition, instruments evidencing future borrowings
by the Company will likely contain similar restrictions. Changes in economic or
business conditions, results of operations or other factors could in the future
cause a violation of one or more covenants in the Company's debt instruments,
entitling the holders of such indebtedness to declare the indebtedness
immediately due and payable. An event of default under a debt instrument of the
Company is likely to result in an event of default under one or more other debt
instruments of the Company. The Notes, and the Senior Bank Facility both contain
such cross-default provisions. There can be no assurance that the assets of the
Company will be sufficient to repay any such accelerated indebtedness, and any
indebtedness containing cross-default provisions to such indebtedness, including
the Notes. See "Description of Notes" and "Senior Bank Facility."
CONTROL BY INDIRECT STOCKHOLDER; CONSEQUENCES OF CHANGE OF CONTROL
Astor Corporation is a subsidiary of Astor Holdings II, which in turn is a
subsidiary of the Parent. Entities controlled by Gerald L. Parsky, a director of
the Parent, Astor Holdings II and Astor Corporation,
16
<PAGE>
collectively own all of the outstanding common stock of the Parent. Therefore,
Mr. Parsky is able to elect directly or indirectly a majority of the directors
of the Parent, Astor Holdings II and the Company, and to approve or disapprove
substantially all matters submitted to a vote of stockholders of the Parent,
Astor Holdings II and the Company. See "Ownership of Voting Securities."
Upon the occurrence of a Change of Control (as defined herein), Astor
Corporation will be required to make an offer to repurchase the Notes at a price
equal to 101% of the principal amount thereof, together with accrued and unpaid
interest thereon. In addition, a change of control of Astor Corporation under
the Senior Bank Facility and, in all likelihood, other Senior Debt to which
Astor Corporation becomes a party will give rise to a default and rights of
acceleration under such other indebtedness. Such acceleration would prevent
repurchase of the Notes as a result of the subordination provisions applicable
to the Notes until the Senior Debt has been paid in full, decreasing the
likelihood that Astor Corporation would have the financial resources to
repurchase all or any part of the Notes. At September 30, 1996, on a pro forma
basis after giving effect to the Transactions, the Company would have had $138.0
million of indebtedness, consisting of the Notes, borrowings outstanding under
the Senior Bank Facility and an intercompany note to the Parent, carrying
optional redemption rights at the election of the holder in the event of a
change of control or provisions that would trigger an event of default upon the
occurrence of a change of control. If, as a result of the occurrence of a change
of control, all such indebtedness were required to be redeemed or became
immediately due and payable, Astor Corporation would not currently have
sufficient resources available to redeem and repay all such indebtedness and
there can be no assurance that sufficient resources would be available for such
purpose in the future. Even if such acceleration does not occur, the existence
of such a default under the Senior Bank Facility and, in all likelihood, other
Senior Debt will also contain prohibitions on payment of the Notes under such
circumstances for a specified period. See "Description of Notes --
Subordination."
REORGANIZATION; LIMITED REORGANIZED OPERATING HISTORY
Astor Corporation was incorporated as a new venture in 1989 in the State of
Delaware under the name Petrowax PA Inc. ("Petrowax") for the purpose of
developing a wax production business. As part of its start-up plan of
operations, Petrowax acquired two lube oil and wax production facilities from
Quaker State Oil Co. ("Quaker State"). Shortly after the completion of the
acquisition in 1990 and prior to the acquisition of ABI and ADCO, Petrowax
encountered a number of operational and financial difficulties, resulting in
Petrowax filing a voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code on February 25, 1992 (the "Filing"). Petrowax's Chapter 11
plan of reorganization (the "Reorganization Plan") was confirmed by an order of
the bankruptcy court dated May 19, 1995 and became effective as of June 28, 1995
(the "Effective Date"). On the Effective Date, Petrowax received an equity
infusion of $10.0 million from Astor Holdings II in consideration of the sale of
its common stock. As part of the Reorganization Plan, Petrowax entered into the
UBS Credit Facility pursuant to which UBS provided term loans in the principal
amount of $57.5 million and agreed to provide a revolving facility in the
principal amount of $20.0 million. Additionally, as part of the Reorganization
Plan, Petrowax consummated the ABI Acquisition and changed its name from
Petrowax to Astor Corporation, a tradename of ABI. As a result of the
reorganization and certain related actions, Astor Corporation is under new
operational management, its assets and liabilities have been substantially
restructured and its strategic plan has been significantly changed from its
strategic focus prior to the reorganization.
Because the Reorganization Plan became effective as of June 28, 1995,
purchasers of the Notes have only limited historical financial and other
information upon which to assess the effectiveness of the new strategic plan and
the results of Astor's restructured operations, including its combination with
ABI. Effective March 31, 1996, having attained consistent earnings for the
nine-month period since its emergence from bankruptcy, Astor Holdings II
effected a quasi-reorganization to restate, in conformity with generally
accepted accounting principles, its equity and financial position to better
reflect its true equity and financial position as a reorganized entity. Pursuant
to the quasi-reorganization, Astor Holding II's accumulated deficit at that date
of $23.9 million was offset against its additional paid-in capital, its retained
earnings were
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reduced to zero and its additional paid-in capital was proportionately reduced.
See "Prior Reorganization" and Note 3 to the Consolidated Financial Statements
of Astor Holdings II included elsewhere in this Memorandum.
POSSIBLE ENVIRONMENTAL LIABILITIES
The Company is subject to stringent federal, state, local and foreign laws
and regulations relating to the protection of the environment, including,
without limitation, those relating to the storage, handling, emission and
discharge of materials into the environment. The Company has expended, and may
be required to expend in the future, substantial funds for compliance with and
remediation under such laws and regulations. Some risk of environmental
liability is inherent in the nature of the Company's business, and there can be
no assurance that additional material environmental costs will not arise as a
result of future legislation or the discovery of non-compliance with existing
laws and regulations. Additionally, environmental statutes and regulations are
becoming increasingly more stringent. To the extent that the cost of compliance
increases and the Company cannot pass on future increases to its customers, such
increases may have a material adverse effect on the Company's profitability.
Except for certain of the matters discussed herein, the Company believes that it
is currently in material compliance with all applicable environmental laws and
regulations.
The Company is aware of certain conditions which may lead to environmental
liability being imposed on the Company with respect to the operation of its
facilities and business. Contamination exists at the Company's facility in
Titusville, Pennsylvania, which management believes resulted from disposal of
waste at the facility by an oil refinery that formerly operated in the area. In
addition, an EPA investigation, the conclusions of which management believes to
be inaccurate, indicated that a former subsidiary of ABI (which has since been
merged into the Company) was the former owner and a contributor of waste to a
waste disposal area which has been investigated by the EPA for potential
inclusion on the Superfund list. Soil and ground water contamination, which is
being addressed in large measure by Quaker State pursuant to an indemnity, also
exists at the Company's Emlenton and McKean, Pennsylvania facilities. Finally
contamination exists at ADCO's manufacturing facility in Michigan Center,
Michigan for which Astor is seeking protection from liability under a new state
statute which shields new owners from responsibility for contamination existing
prior to acquisition of a facility. The Company has certain indemnification
rights with respect to certain of these environmental matters. Assuming that the
indemnitors continue to meet their obligations, the Company does not believe
that the above or any other environmental matters will have a material adverse
effect on the business or financial condition of the Company. There can be no
assurance, however, that the indemnitors will continue to meet their obligations
or that the Company will not incur additional significant liabilities in
connection with the above or other environmental matters, either of which could
have a material adverse effect on the Company's business or financial condition.
See "Business -- Environmental Matters."
WAX FEEDSTOCK PRICE RISKS
The Company's raw material costs, particularly the costs of its wax
production feedstocks, are subject to commodity pricing risks. The markets and
prices for the Company's wax production feedstocks and other raw materials
depend on many factors beyond the control of the Company. The Company purchases
wax feedstocks primarily based on formulas tied to oil and gasoline price
indices which permit substantial volatility in feedstock costs. The Company is
able to hedge a portion of these costs by hedging crude oil in the public market
and, when possible, seeks to raise the prices of its specialty wax products in
response to increases in feedstock costs. However, the Company has not always in
the past been, and may not in the future always be, able to raise prices high
enough or quickly enough to offset the effects of such increased feedstock
costs. A substantial or prolonged increase in feedstock prices without a
corresponding increase in the Company's specialty wax product prices could have
a material adverse effect on the Company's business and financial condition. See
"Business -- Supply."
RELIANCE ON PRIMARY SUPPLIER FOR CERTAIN RAW MATERIALS
Approximately 26% of the Company's wax related raw material costs result
from the purchase of wax feedstocks derived from Altamont/Bluebell Yellow Wax
crude oil ("A/B Crude"). These wax feedstocks are purchased pursuant to a
long-term feedstock supply contract with Lube & Wax Ventures, L.L.C. ("L&W")
which expires on October 1, 2006, subject to certain early termination rights.
While the Company believes
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that, if needed, there are alternative sources of A/B Crude and other wax
feedstocks, the unanticipated termination of or nonperformance by the supplier
under this supply contract could have a material adverse effect on the Company's
business and financial condition.
RISKS RELATING TO ADCO ACQUISITION AND INTEGRATION OF OPERATIONS
Astor acquired ADCO concurrent with the closing of the Offering. Under the
acquisition agreement pursuant to which ADCO was acquired, the representations
and warranties of ADCO did not survive the effectiveness of the acquisition.
There can be no assurance that the Company will not encounter unanticipated
problems or liabilities with respect to the operations of ADCO or with the
integration of ADCO's operations with those of the Company. See "Acquisition of
ADCO."
COMPETITION
The Company competes with a wide variety of companies in a diverse number of
markets. In certain wax market segments, the Company competes with large
multinational oil refineries. The Company also competes with specialized wax
producers and formulators around the world which, like the Company, create
value-added products through formulating and packaging. Both the specialty wax
product and adhesives and sealants industries are highly fragmented, and the
Company competes with a large number of manufacturers in these industries.
Certain of the Company's competitors have greater financial, technical,
marketing and other resources than the Company. There can be no assurance that
the Company will be able to compete successfully in any of the markets in which
it operates. See "Business -- Competition."
PROTECTION OF CONFIDENTIAL AND PROPRIETARY INFORMATION
The success of the Company depends, in part, on its ability to maintain the
confidentiality of its trade secrets and proprietary formulations and processes.
There can be no assurance that the Company will be able to protect its
confidential information and, to the extent such confidential information may be
disclosed, the Company's business could be adversely affected. The Company also
holds 19 patents in the United States and 26 patents in other countries on
adhesives and sealants compositions, methods of using such adhesives and
sealants and other technologies related to such products. There can be no
assurance that these patents will provide adequate protection for the Company's
products or do not conflict with the patents rights of others. See "Business --
Patents and Proprietary Information."
DEPENDENCE ON KEY PERSONNEL
The success of the Company will depend upon the efforts and abilities of
certain key officers and employees. See "Business -- Competitive Strengths." The
Company could be adversely affected if for any reason these officers and
employees should no longer be active in the Company's operations. In addition, a
primary element in the Company's strategic plan is the specialized expertise of
its technical personnel and the abilities of its sales and customer service
personnel to build and maintain relationships with its customers. The Company
does not believe that the departure of any particular individual would have a
material adverse effect on the Company. However, if a significant number of such
personnel should no longer be active in the Company's business, and if the
Company were unable to find equally qualified personnel to replace them, there
can be no assurance that the Company would not be materially adversely affected.
Certain of the Company's executive officers, including Boyd D. Wainscott, the
Chairman of the Board and the Chief Executive Officer, and C. Richard Spalton, a
Director and the President, have entered into employment agreements with the
Company. See "Management -- Executive Compensation -- Management Compensation
and Employment Agreements." The Company does not maintain key person insurance
for any key officers or employees.
LACK OF PUBLIC MARKET FOR NOTES; LIMITED LIQUIDITY
There is currently no established market for the Notes and there can be no
assurance as to the liquidity of markets that may develop for the Notes, the
ability of Holders of the Notes to sell their Notes or the price at which such
Holders would be able to sell their Notes. If such markets were to exist, the
Notes could trade at prices that may be higher or lower than the initial market
values thereof depending on many factors, including prevailing interest rates
and the markets for similar securities. The Old Notes are eligible for trading
in the Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") market. The Company does not intend to apply for listing of the Notes
on any securities exchange or for quotation through any automated quotation
system. The Initial Purchasers have advised the Company that they currently
intend to make a market in the Old Notes, and, if issued, the Notes. However,
neither is obligated
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to do so, and any market-making with respect to the Old Notes or the Notes may
be discontinued at any time without notice. In addition, such market-making
activity may be limited during the pendency of the Offer. The Offer will not be
conditioned upon any minimum or maximum aggregate principal amount of Old Notes
being tendered for exchange. No assurance can be given as to the liquidity of
the trading market for the Notes, or, in the case of non-tendering Holders of
Old Notes, the trading market for the Old Notes following the Offer. See "Plan
of Distribution."
THE OFFER
PURPOSE OF THE OFFER
The Offer is designed to provide Holders of Old Notes with an opportunity to
acquire Notes which, unlike the Old Notes, will be freely tradable at all times,
subject to any restrictions on transfer imposed by state "blue sky" laws and
provided that the Holder is not an affiliate of the Company within the meaning
of the Securities Act and represents that the Notes are being acquired in the
ordinary course of such Holder's business and the Holder is not engaged in, and
does not intend to engage in a distribution of the Notes. The outstanding Old
Notes in the aggregate principal amount of $110.0 million were originally issued
and sold on October 8, 1996 (the "Original Issue Date") in order to provide
financing for the ADCO Acquisition and the repayment of the Company's
outstanding indebtedness under the UBS credit facility. The original sale to the
Initial Purchasers was not registered under the Securities Act in reliance upon
the exemption provided by Section 4(2) of the Securities Act and the concurrent
resale of the Old Notes to investors was not registered under the Securities Act
in reliance upon the exemption provided by Rule 144A promulgated under the
Securities Act. The Old Notes may not be reoffered, resold or transferred other
than pursuant to a registration statement filed pursuant to the Securities Act
or unless an exemption from the registration requirements of the Securities Act
is available. Pursuant to Rule 144, Old Notes may generally be resold (a)
commencing two years after the Original Issue Date, in an amount up to, for any
three-month period, the greater of 1% of the Old Notes then outstanding or the
average weekly trading volume of the Old Notes during the four calendar weeks
immediately preceding the filing of the required notice of sale with the
Commission and (b) commencing three years after the Original Issue Date, in any
amount and otherwise without restriction by a Holder who is not, and has not
been for the preceding 90 days, an affiliate of the Company. The Old Notes are
eligible for trading in the PORTAL Market, and may be resold to certain
Qualified Institutional Buyers pursuant to Rule 144A. Certain other exemptions
may also be available under other provisions of the federal securities laws for
the resale of the Old Notes.
In connection with the original issue and sale of the Old Notes, the Company
entered into a Registration Rights Agreement, pursuant to which it agreed to
file with the Commission a registration statement covering the exchange by the
Company of the Notes for the Old Notes (the "Exchange Offer Registration
Statement"). The Registration Rights Agreement provides that (i) the Company
will file the Exchange Offer Registration Statement with the Commission on or
prior to 30 days after the Original Issue Date, (ii) the Company will use its
best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 105 days after the Original Issue
Date, (iii) unless the Offer would not be permitted by applicable law or
Commission policy, the Company will commence the Offer and use its best efforts
to issue on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement is declared effective by the Commission, Notes in
exchange for all Old Notes tendered prior thereto in the Offer and (iv) if
obligated to file a shelf registration statement covering the Old Notes (a
"Shelf Registration Statement"), the Company will file the Shelf Registration
Statement with the Commission on or prior to 30 days after such filing
obligation arises and use its best efforts to cause the Shelf Registration
Statement to be declared effective by the Commission on or prior to 105 days
after such obligation arises and cause such Shelf Registration Statement to
remain effective and usable for a period of two years following the initial
effectiveness thereof. If (a) the Company fails to file any of the registration
statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such registration statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness, (c) the Company fails to consummate the Offer within 30 business
days after the date on which the Exchange Offer Registration Statement is
declared effective, or (d) the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
(as defined
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below) during the periods specified in the Registration Rights Agreement (each
such event referred to in clauses (a) through (d) above a "Registration
Default"), then the Company will pay liquidated damages ("Liquidated Damages")
to each Holder of Transfer Restricted Securities, with respect to the first
90-day period immediately following the occurrence of such Registration Default
in an amount equal to $.10 per week per $1,000 principal amount of Transfer
Restrictive Securities held by such person. The amount of the Liquidated Damages
will increase by an additional $.05 per week per $1,000 principal amount of
Transfer Restricted Securities with respect to each subsequent 60-day period
until all Registration Defaults have been cured up to a maximum amount of
Liquidated Damages of $.30 per week per $1,000 principal amount of Transfer
Restricted Securities (regardless of whether one or more than one Registration
Default is outstanding). Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease. For purposes of the foregoing,
"Transfer Restricted Securities" means each Old Note until (i) the date on which
such Old Note has been exchanged by a person other than a broker-dealer for a
Note in the Offer, (ii) the date on which such Old Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement, (iii) the date on which such Old Note is distributed to
the public pursuant to Rule 144 under the Securities Act or, (iv) the date on
which such Old Note is salable pursuant to Rule 144(k) under the Securities Act.
The staff of the Commission has issued certain interpretive letters that
concluded, in circumstances similar to those contemplated by the Offer, that new
debt securities issued in a registered exchange for outstanding debt securities,
which new securities are intended to be substantially identical to the
securities for which they are exchanged, may be offered for resale, resold and
otherwise transferred by a holder thereof (other than (i) a broker-dealer who
purchases such securities from the issuer to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) a person who is an
affiliate of the issuer within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provision of
the Securities Act, PROVIDED that the new securities are acquired in the
ordinary course of such holder's business and such holder has no arrangement
with any person to participate in the distribution of the new securities.
However, a broker-dealer who holds outstanding debt securities that were
acquired for its own account as a result of market-making or other trading
activities may be deemed to be an "underwriter" within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the new
securities received by the broker-dealer in any such exchange. See "-- Resales
of Notes." The Company has not requested or obtained an interpretive letter form
the Commission staff with respect to this Offer, and the Company and the Holders
are not entitled to rely on interpretive advice provided by the staff to other
persons, which advice was based on the facts and conditions represented in such
letters. However, the Offer is being conducted in a manner intended to be
consistent with the facts and conditions represented in such letters. If any
Holder has any arrangement or understanding with respect to the distribution of
the Notes to be acquired pursuant to the Offer, such Holder (i) could not rely
on the applicable interpretations of the staff of the Commission and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. In addition, each
broker-dealer that receives Notes for its own accounts in exchange for the Old
Notes, where such Old Notes were acquired by such broker-dealers as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Notes. See "Plan
of Distribution" By delivering the Letter of Transmittal, a Holder tendering Old
Notes for exchange will represent and warrant to the Company that the Holder is
acquiring the Notes in the ordinary course of its business and that the Holder
is not engaged in, and does not intend to engage in, a distribution of the
Notes. Any Holder using the Offer to participate in a distribution of the Notes
to be acquired in the Offer must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Holders who do not exchange their Old Notes pursuant to this
Offer will continue to hold Old Notes that are subject to restrictions on
transfer.
It is expected that the Notes will be freely transferable by the Holders
thereof, subject to the limitations described in the immediately preceding
paragraph and in "-- Resales of Notes." Sales of Notes acquired in the Offer by
Holders who are "affiliates" of the Company within the meaning of their
Securities Act will be subject to certain limitation on resale under Rule 144 of
the Securities Act. Such persons will only be entitled to sell Notes in
compliance with the volume limitations set forth in Rule 144, and sales of Notes
by affiliates
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will be subject to certain Rule 144 requirements as to the manner of sale,
notice and the availability of current public information regarding the Company.
The foregoing is a summary only of Rule 144 as it may apply to affiliates of the
Company. Any such persons must consult their own legal counsel for advice as to
any restrictions that might apply to the resale of their Notes.
The Notes otherwise will be substantially identical in all material respects
(including interest rate, maturity, security and restrictive covenants) to the
Old Notes for which they may be exchanged pursuant to this Offer.
TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth herein and in the
accompanying Letter of Transmittal, the Company will exchange $1,000 principal
amount of Notes for each $1,000 principal amount of its outstanding Old Notes.
Notes will be issued only in integral multiplies of $1,000 to each tendering
Holder of Old Notes whose Old Notes are accepted in the Offer.
The Notes will bear interest from and including the Original Issue Date.
Accordingly, Holders who receive Notes in exchange for Old Notes will forego
accrued but unpaid interest on their exchanged Old Notes for the period from and
including the Original Issue Date to the date of exchange, but will be entitled
to such interest under the Notes.
As of December , 1996, $110.0 million aggregate principal amount of Old
Notes were outstanding. This Prospectus and the Letter of Transmittal are being
sent to all registered Holders of Old Notes as of that date. Tendering Holders
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Old Notes pursuant to the Offer. The Company will pay all charges
and expenses, other than certain transfer taxes which may be imposed, in
connection with the Offer. See "-- Payment of Expenses."
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law in connection with the Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION
The Offer will expire at 5:00 P.M., New York City time, on
, 1997 subject to extension by the Company by notice to the
Exchange Agent as herein provided. The Company reserves the right to extend the
Offer at its discretion, in which event the term "Expiration Date" shall mean
the time and date on which the Offer as so extended shall expire. The Company
shall notify the Exchange Agent of any extension by oral or written notice and
shall mail to the registered holders of Old Notes an announcement thereof, each
prior to 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date.
The Company reserves the right to extend or terminate the Offer and not
accept for exchange any Old Notes if any of the events set forth below under "--
Conditions to the Offer" occur and are not waived by the Company, by giving oral
or written notice of such delay or termination to the Exchange Agent. See "--
Conditions to the Offer." The rights reserved by the Company in this paragraph
are in addition to the Company's rights set forth below under the caption "--
Conditions to the Offer."
PROCEDURES FOR TENDERING
The tender to the Company of Old Notes by a Holder thereof pursuant to one
of the procedures set forth below and the acceptance thereof by the Company will
constitute an agreement between such Holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
Except as set forth below, a holder who wishes to tender Old Notes for
exchange pursuant to the Offer must transmit a properly completed and duly
executed Letter of Transmittal, including all other documents required by such
Letter of Transmittal, to the Exchange Agent at the address set forth below
under "Exchange Agent" on or prior to the Expiration Date. In addition, either
(i) certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
pursuant to the procedure of book-entry
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transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. LETTERS OF TRANSMITTAL AND OLD NOTES SHOULD NOT BE
SENT TO THE COMPANY. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
Signatures on a Letter of Transmittal must be guaranteed unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered Holder of Old
Notes who has not completed the box entitled "Special Issuance and Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of any firm
that is a member of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. (the "NASD") or a commercial
bank or trust company having an office in the United States (an "Eligible
Institution"). In the event that signatures on a Letter of Transmittal are
required to be guaranteed, such guarantee must be by an Eligible Institution.
The method of delivery of Old Notes and other documents to the Exchange
Agents is at the election and risk of the Holder, but if delivery is by mail it
is suggested that the mailing be made sufficiently in advance of the Expiration
Date to permit delivery to the Exchange Agent before the Expiration Date.
If the Letter of Transmittal is signed by a person other than a registered
Holder of any Old Note tendered therewith, such Old Note must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name or names of the registered Holder or Holders appear on the Old Note(s).
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes will be resolved by the Company,
whose determination will be final and binding. The Company reserves the absolute
right to reject any or all tenders that are not in proper form or the acceptance
of which would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the right to waive any irregularities or conditions of
tender as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Offer (including the instructions in the Letter of
Transmittal) will be final and binding. Unless waived, any irregularities in
connection with tenders must be cured within such time as the Company shall
determine. Neither the Company nor the Exchange Agent shall be under any duty to
give notification of defects in such tenders or shall incur liabilities for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering Holder, unless otherwise provided in the Letter
of Transmittal, as soon as practicable following the Expiration Date.
The Company's acceptance for exchange of Old Notes tendered pursuant to the
Offer will constitute a binding agreement between the tendering person and the
Company upon the terms and subject to the conditions of the Offer.
BOOK ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Depository Trust Company for purposes of the Exchange
offer within two business days after the date of this Prospectus, and any
financial institution that is a participant in the Depository Trust Company's
systems may make book-entry delivery of Old Notes by causing the Depository
Trust Company to transfer such Old Notes into the Exchange Agent's account at
the Depository Trust Company in accordance with such Depository Trust Company's
procedures for transfer. However, although delivery of Old Notes may be effected
through book-entry transfer at the Depository Trust Company, the Letter of
Transmittal or facsimile thereof with any required signature guarantees and any
other required documents must, in any case, be transmitted to and received by
the Exchange Agent at one of the addresses set forth below under "Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within five New York Stock Exchange
trading days after the Expiration Date.
Upon request of the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
CONDITIONS TO THE OFFER
Notwithstanding any other provisions of the Offer, or any extension of the
Offer, the Company will not be required to issue Notes in respect of any
properly tendered Old Notes not previously accepted, and may terminate the Offer
by oral or written notice to the Exchange Agent and the Holders, or at its
option, modify or otherwise amend the Offer, if any material change occurs that
is likely to affect the Offer, including, but not limited to, the following:
(a) there shall be instituted or threatened any action or proceeding
before any court or governmental agency challenging the Offer or otherwise
directly or indirectly relating to the Offer or otherwise affecting the
Company;
(b) there shall occur any development in any pending action or
proceeding that, in the sole judgement of the Company, would or might (i)
have an adverse effect on the business of the Company, (ii) prohibit,
restrict or delay consummation of the Offer, or (iii) impair the
contemplated benefits of the Offer;
(c) any statute, rule or regulation shall have been proposed or enacted,
or any action shall have been taken by any governmental authority which, in
the sole judgment of the Company, would or might (i) have an adverse effect
on the business of the Company, (ii) prohibit, restrict or delay
consummation of the Offer, or (iii) impair the contemplated benefits of the
Offer; or
(d) there exists, in the sole judgment of the Company, any actual or
threatened legal impediment (including a default or prospective default
under an agreement, indenture or other instrument or obligation to which the
Company is a party or by which it is bound) to the consummation of the
transactions contemplated by the Offer.
The Company expressly reserves the right to terminate the Offer and not
accept for exchange any Old Notes upon the occurrence of any of the foregoing
conditions. In addition, the Company may amend the Offer at any time prior to
5:00 P.M., New York City time, on the Expiration Date if any of the conditions
set forth above occur. Moreover, regardless of whether any of such conditions
has occurred, the Company may amend the Offer in any manner which, in its good
faith judgement, is advantageous to the Holders.
24
<PAGE>
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in its sole discretion. Any
determination made by the Company concerning an event, development or
circumstance described or referred to above will be final and binding on all
parties.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NOTES
Upon the terms and subject to the conditions of the Offer, the Company will
accept all Old Notes validly tendered prior to 5:00 P.M., New York City time, on
the Expiration Date. The Company will deliver Notes in exchange for Old Notes
promptly following the Expiration Date.
For purposes of the Offer, the Company shall be deemed to have accepted
validly tendered Old Notes when, as and if the Company has given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering Holders for the purpose of receiving the Notes. Under no
circumstances will interest be paid by the Company or the Exchange Agent by
reason of any delay in making such payment or delivery.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, at the Company's
expense, to the tendering Holder thereof as promptly as practicable after the
expiration or termination of the Offer.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under "Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes), and (where certificates for
Old Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing Holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange Agent,
then, prior to the release of such certificates the withdrawing Holder must also
submit the serial numbers of the particular certificates to be withdrawn and a
signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such Holder is an Eligible Institution. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
Depository Trust Company to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Depository Trust Company pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
the Depository Trust Company for the Old Notes) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "-- Procedures for Tendering" above at any time on or prior to
the Expiration Date.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizing federal income tax consequences of the
Offer reflects the opinion of Gibson, Dunn, & Crutcher, counsel to the Company,
as to material federal income tax consequences expected to result from the
Offer. An opinion of counsel is not binding on the Internal Revenue Service
("IRS") or the courts, and there can be no assurances that the IRS will not
take, and that a court would not sustain, a position contrary to that described
below. Moreover, the following discussion is for general information only and
does not constitute comprehensive tax advice to any particular Holder of Old
Notes. The summary is based on the current provisions of the Internal Revenue
Code of 1986, as amended, and applicable Treasury regulations, judicial
authority and administrative pronouncements. The tax consequences described
below could be modified by future changes in the relevant law, which could have
25
<PAGE>
retroactive effect. Each Holder of Old Notes should consult its own tax adviser
as to these and any other federal income tax consequences of the Offer as well
as any tax consequences to it under foreign, state, local or other law.
Exchanges of Old Notes for Notes pursuant to the Offer should be treated as
a modification of the Old Notes that does not constitute a material change in
their terms, and the Company intends to treat the exchanges in that manner.
Under that approach, a Note is treated as a continuation of the corresponding
Old Note. An exchanging Holder's holding period for a Note would include such
Holder's holding period for the Old Note. Such Holder would not recognize any
gain or loss, and such Holder's basis in the Note would be the same as such
Holder's basis in the Old Note. The Offer will result in no federal income tax
consequences to a non-exchanging Holder.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent for
the Offer. All correspondence in connection with the Offer and the Letter of
Transmittal should be addressed to the Exchange Agent as follows:
<TABLE>
<CAPTION>
BY HAND DELIVERY, MAIL OR OVERNIGHT EXPRESS
(INSURED OR REGISTERED RECOMMENDED): BY FACSIMILE:
- --------------------------------------------------------------------------- -----------------
<S> <C>
State Street Bank and Trust Company (617) 664-5365
61 Broadway Concourse Level
New York, New York 10006 BY TELEPHONE:
-----------------
Attention: Corporate Trust Department (617) 664-5344
</TABLE>
Requests for additional copies of the Prospectus or the Letter of
Transmittal should be directed to the Exchange Agent or the Company.
PAYMENT OF EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Offer and will not make any payments to brokers, dealers or
others for soliciting acceptances of the Offer. The Company, however, will pay
reasonable and customary fees and reasonable out-of-pocket expenses to the
Exchange Agent in connection therewith. The Company will also pay the cash
expenses to be incurred in connection with the Offer, including accounting,
legal, printing, and related fees and expenses.
ACCOUNTING TREATMENT
The Notes will be recorded at the same carrying value as the Old Notes, as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. The
Company's expenses of the Offer will be capitalized for accounting purposes.
RESALES OF NOTES
With respect to resales of Notes, based on certain interpretive letters
issued by the staff of the Commission to third parties, the Company believes
that a Holder of Notes (other than (i) a broker-dealer who purchases such Notes
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person who is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act) who exchanged
Old Notes for Notes in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the Notes,
will be allowed to resell the Notes to the public without further registration
under the Securities Act and without delivering to the purchasers of the Notes a
prospectus that satisfies the requirements of the Securities Act. However, a
broker-dealer who holds Old Notes that were acquired for its own account as a
result of market making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act. If any
other Holder is deemed to be an "underwriter" within the meaning of the
Securities Act or acquires Notes in the Offer for the purpose of distributing or
participating in a distribution of the Notes, such holder must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless an exemption from
registration is otherwise available. For a period of 180 days from the
Expiration Date, the Company will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale.
26
<PAGE>
PRO FORMA CAPITALIZATION
The following table sets forth the pro forma combined debt and equity
capitalization of Astor Holdings II as of September 30, 1996 and as adjusted to
give effect to the Transactions, including the application of the net proceeds
from the Offering.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1996
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt:
UBS Credit Facility:
Term loans........................................................................... $ 52,969 $ --
Revolving loans...................................................................... 12,539 --
Senior Bank Facility:
Bank Term Loan....................................................................... -- 20,000
Revolving Credit Facility (1)........................................................ -- --
Subsidiary debt (2).................................................................... 2,277 2,277
Senior Subordinated Notes, net of original issue discount.............................. -- 109,450
Subordinated Note due to an affiliate (3).............................................. 5,847 5,847
Other (4).............................................................................. 422 422
---------- -----------
Total debt............................................................................. 74,054 137,996
---------- -----------
Stockholder's Equity:
Common stock, $0.01 par value, 10,000 shares authorized, 1,000 shares issued and
outstanding........................................................................... -- --
Additional paid-in capital............................................................. 36,671 36,671
Foreign currency translation adjustment................................................ 16 16
Retained earnings...................................................................... 5,091 1,369(5)
---------- -----------
Total stockholder's equity............................................................. 41,778 38,056
---------- -----------
Total capitalization................................................................... $ 115,832 $ 176,052
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) After giving effect to the Transactions and the issuance of $1.8 million of
letters of credit under the Senior Bank Facility, the Company will have
$28.2 million available for revolving borrowings under the Senior Bank
Facility, subject to borrowing base limitations.
(2) Subsidiary debt represents borrowings of $600,000 by a U.S. subsidiary and
$1.7 million by a Belgian subsidiary, from a Belgian bank in Belgian francs,
both of which are secured by a letter of credit issued under the UBS Credit
Facility. Upon the consummation of the Offering, this letter of credit was
replaced for the same amount under the Senior Bank Facility.
(3) Represents an unsecured note payable to the Parent maturing on July 5, 2003.
Interest accrues on such note at the rate of 6% and is payable
semi-annually.
(4) Includes current maturities of $110,000.
(5) Represents the cost of early termination of interest rate swap contracts,
net of tax benefit, of $180,000 and the elimination of unamortized debt
issuance costs related to early extinguishment of term loans under the UBS
Credit Facility, net of a tax benefit, of $3.5 million.
27
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated statement of income for the
year ended March 31, 1996 gives effect to (i) the Prior Transactions, consisting
of the reorganization of Petrowax, the establishment of the UBS Credit Facility
and the completion of the ABI Acquisition, and (ii) the Transactions, consisting
of the ADCO Acquisition and the Offering and the application of the net proceeds
therefrom, as if they had occurred on April 1, 1995. The unaudited pro forma
consolidated statement of income for the three months ended June 30, 1996 gives
effect to the Transactions, including the ADCO Acquisition and the Offering and
the application of the net proceeds therefrom, as if they had occurred on April
1, 1995. The unaudited pro forma consolidated statement of income for the twelve
months ended September 30, 1996 gives effect to the Transactions, including the
ADCO Acquisition and the Offering and the application of the net proceeds
therefrom, as if they had occurred on April 1, 1995. The unaudited pro forma
condensed consolidated balance sheet at September 30, 1996 gives effect to the
Transactions, including the ADCO Acquisition and the Offering and the
application of the net proceeds therefrom, as if they had occurred on September
30, 1996. The historical financial statements of Astor Holdings II reflect the
Prior Transactions as of June 28, 1995. For purposes of this pro forma financial
information, both the ABI Acquisition and the ADCO Acquisition are treated as
purchases. The unaudited pro forma consolidated statements of income reflect the
preliminary allocation of the purchase price for ADCO to Astor Holdings II's
tangible and intangible assets and liabilities. Although the final allocation of
the ADCO purchase price and the resulting amortization expense may differ
somewhat from the preliminary estimates, management does not believe that the
final allocation will differ materially from the Company's preliminary
estimates.
The unaudited pro forma financial data are based on the historical financial
statements of each of Astor Holdings II, ABI and ADCO, and the assumptions and
adjustments described in the accompanying notes. The unaudited pro forma
consolidated financial data are provided for informational purposes only and do
not purport to represent what Astor Holdings II's financial position or results
of operations actually would have been if the foregoing transactions occurred as
of the dates indicated or what such results will be for any future periods.
The unaudited pro forma financial data are based on assumptions that the
Company believes are reasonable and should be read in conjunction with the
Consolidated Financial Statements and the related notes thereto for each of
Astor Holdings II, ABI and ADCO included elsewhere in this Memorandum.
28
<PAGE>
ASTOR HOLDINGS II
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996
-----------------------------------------------------------------------------------------------------------
HISTORICAL ASTOR HISTORICAL ABI HISTORICAL
HOLDINGS II FOR FOR THE THREE ADCO FOR THE
THE YEAR ENDED MONTHS ENDED PRO FORMA FOR YEAR ENDED
MARCH 31, 1996 JUNE 28, 1995 ABI ACQUISITION PRIOR DECEMBER 31, TRANSACTION
(1) (2) ADJUSTMENTS TRANSACTIONS 1995 ADJUSTMENTS
---------------- --------------- ---------------- --------------- -------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Sales............... $ 135,418 $ 24,451 $ (1,080)(3) $ 158,789 $ 47,411 $ --
Cost of sales....... 108,176 18,546 (1,080)(3) 125,390 32,264 --
(252)(4)
-------- ------- ------- --------------- ------- -------
Gross profit before
depreciation....... 27,242 5,905 252 33,399 15,147 --
Selling, general and
administrative
expenses........... 12,893 2,644 -- 15,537 6,087 --
Depreciation and
amortization....... 5,416 823 130(5) 6,369 1,169 660(6)
Non-recurring items
(7)................ 874 -- -- 874 310 --
-------- ------- ------- --------------- ------- -------
Operating income.... 8,059 2,438 122 10,619 7,581 (660)
Income from
investment in
Rheochem........... 91 276 -- 367 -- --
Management fee
income (expense)... -- -- -- -- (151) 151(8)
Other income........ -- -- -- -- 16 --
Interest expense.... (5,252) (123) (1,170)(9) (6,545) (17) (7,223)(10)
Dividends on
preferred stock of
subsidiary......... -- -- -- -- (280) 280(11)
Reorganization
expenses........... (856) -- -- (856) -- --
-------- ------- ------- --------------- ------- -------
Income before taxes
and extraordinary
items.............. 2,042 2,591 (1,048) 3,585 7,149 (7,452)
Provision for
(benefit from)
income taxes....... (3,434) 875 (2,559) 2,877 (2,864)(12)
-------- ------- ------- --------------- ------- -------
Income before
extraordinary
items.............. $ 5,476 $ 1,716 $ (1,048) $ 6,144 $ 4,272 $ (4,588)
-------- ------- ------- --------------- ------- -------
-------- ------- ------- --------------- ------- -------
<CAPTION>
ASTOR HOLDINGS
II PRO FORMA
--------------
<S> <C>
Sales............... $ 206,200
Cost of sales....... 157,654
--------------
Gross profit before
depreciation....... 48,546
Selling, general and
administrative
expenses........... 21,624
Depreciation and
amortization....... 8,198
Non-recurring items
(7)................ 1,184
--------------
Operating income.... 17,540
Income from
investment in
Rheochem........... 367
Management fee
income (expense)... --
Other income........ 16
Interest expense.... (13,785)
Dividends on
preferred stock of
subsidiary......... --
Reorganization
expenses........... (856)
--------------
Income before taxes
and extraordinary
items.............. 3,282
Provision for
(benefit from)
income taxes....... (2,546)
--------------
Income before
extraordinary
items.............. $ 5,828
--------------
--------------
</TABLE>
(See footnotes on following page)
29
<PAGE>
ASTOR HOLDINGS II
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(1) Represents Astor Holdings II's consolidated results of operations for the
fiscal year ended March 31, 1996, which include the results of operations
of ABI since its acquisition on June 28, 1995.
(2) Represents ABI's historical operating results for the preacquisition period
from April 1, 1995 to June 28, 1995 in accordance with U.S. GAAP. ABI's
statement of income has been translated into U.S. dollars by using the
weighted average exchange rate for the reported period.
(3) Represents the elimination of Astor Holdings II's sales to ABI and costs of
such sales for the preacquisition period from April 1, 1995 to June 28,
1995.
(4) Represents the elimination of additional cost of sales resulting from the
write-up of the opening finished goods inventory to fair market value for
the ABI Acquisition. This adjustment to the historical financial statements
is being eliminated because it is directly related to the accounting for
the ABI Acquisition.
(5) Represents a reduction in depreciation expense of $496,000 resulting from
adjusting property, plant and equipment to fair market value and assigning
new useful lives to property, plant and equipment for the ABI Acquisition
and the additional amortization of new intangibles, including goodwill over
25 years, for the three months prior to the ABI Acquisition of $626,000.
The depreciation policy is the straight-line method of depreciation with
asset lives of 20 to 31.5 years for buildings and 10 years for machinery
and equipment.
(6) Represents the additional amortization of new intangibles from the ADCO
Acquisition of $1.5 million, including goodwill over 40 years and deferred
financing costs over 6 years to 10 years, and the additional depreciation
expense resulting from the write-up of property, plant and equipment to
fair market value for the ADCO Acquisition of $104,000, less a reduction in
amortization expense of $984,000 due to the write-off of existing deferred
financing costs as a result of the early extinguishment of the UBS Credit
Facility. The depreciation policy is the straight-line method of
depreciation with asset lives of 40 years for buildings and 16 years for
machinery and equipment.
(7) Represents non-recurring flood expense of $500,000 and moving expense of
$374,000 incurred by Astor Holdings II and the new packaging expense of
$310,000 incurred by ADCO.
(8) Represents the capitalization of management fees paid to former
stockholders of ADCO as part of the purchase price of ADCO because Astor
management does not believe that they will utilize this management
contract.
(9) Represents the additional interest expense on the borrowings under the UBS
Credit Facility utilized to purchase ABI for the three months prior to the
ABI Acquisition.
(10) Reflects the pro forma interest expense as follows:
<TABLE>
<CAPTION>
Senior Subordinated Notes, net of original issue discount
(interest rate of 10.5%)...................................... $11,550,000
<S> <C>
Bank Term Loan (assumed interest rate of 8.5%)................. 1,700,000
Subordinated Note due to an affiliate.......................... 342,000
Subsidiary debt................................................ 193,000
Elimination of historical interest charge...................... (6,562,000)
----------
$7,223,000
----------
----------
</TABLE>
An increase of 1/8% in the interest rate on the variable rate pertaining to
the above debt instruments would result in an interest expense increase of
$27,000.
(11) Represents the elimination of cash dividends paid to former holders of
preferred stock of ADCO's subsidiary.
(12) Represents the tax benefit resulting from higher expenses, primarily
interest costs.
30
<PAGE>
ASTOR HOLDINGS II
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------------------------
HISTORICAL ASTOR TRANSACTION
HOLDINGS II HISTORICAL ADCO ADJUSTMENTS PRO FORMA
---------------- ---------------- ------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales........................................ $ 87,827 $ 29,378 $ -- $ 117,205
Cost of sales................................ 67,736 20,477 -- 88,213
------- ------- ------------- --------
Gross profit before depreciation............. 20,091 8,901 -- 28,992
Selling, general and administrative
expenses.................................... 9,010 3,499 -- 12,509
Depreciation and amortization................ 3,345 610 330(1) 4,285
------- ------- ------------- --------
Operating income............................. 7,736 4,792 (330) 12,198
Income from investment in Rheochem........... 441 -- -- 441
Management fee income (expense).............. -- (81) 81(2) --
Other income (expense)....................... -- 192 -- 192
Interest income (expense).................... (3,276) 122 (3,739)(3) (6,893)
Dividends on preferred stock of subsidiary... -- (182) 182(4) --
------- ------- ------------- --------
Income before taxes and extraordinary
items....................................... 4,901 4,843 (3,806) 5,938
Provision for income taxes................... (190) 1,969 (1,638)(5) 141
------- ------- ------------- --------
Income before extraordinary items............ $ 5,091 $ 2,874 $ (2,168) $ 5,797
------- ------- ------------- --------
------- ------- ------------- --------
</TABLE>
(See footnotes on following page)
31
<PAGE>
ASTOR HOLDINGS II
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(1) Represents the additional amortization of new intangibles from the ADCO
Acquisition of $770,000, including goodwill over 40 years and deferred
financing costs over 6 years to 10 years, and the additional depreciation
expense resulting from the write-up of property, plant and equipment to
fair market value for the ADCO Acquisition of $52,000, less a reduction in
amortization expense of $492,000 due to the write-off of existing deferred
financing costs as a result of the early extinguishment of the UBS Credit
Facility. The depreciation policy is the straight line method of
depreciation with asset lives of 40 years for buildings and 16 years for
machinery and equipment.
(2) Reflects the pro forma interest expense as follows:
<TABLE>
<S> <C>
Senior Subordinated Notes, net of original issue discount
(interest rate of 10.5%)........................................ $5,775,000
Bank Term Loan (assumed interest rate of 8.5%).................. 850,000
Subordinated Note due to an affiliate........................... 171,000
Subsidiary debt................................................. 97,000
Elimination of historical interest charge....................... (3,154,000)
----------
$3,739,000
----------
----------
</TABLE>
An increase of 1/8% in the interest rate on the variable rate pertaining to
the above debt instruments would result in an interest expense increase of
$7,000.
(3) Represents the capitalization of management fees paid to former
stockholders of ADCO as part of the purchase price of ADCO because Astor
management does not believe they will utilize this management contract.
(4) Represents the elimination of cash dividends paid to former holders of
preferred stock of ADCO's subsidiary.
(5) Represents tax benefits resulting from higher expenses, primarily interest
costs.
32
<PAGE>
ASTOR HOLDINGS II
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------------------------
HISTORICAL ASTOR TRANSACTION
HOLDINGS II HISTORICAL ADCO ADJUSTMENTS PRO FORMA
---------------- ---------------- ------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales........................................ $ 169,050 $ 50,817 $ -- $ 219,867
Cost of sales................................ 131,723 35,405 (337)(1) 166,791
-------- ------- ------------- --------
Gross profit before depreciation............. 37,327 15,412 337 53,076
Selling, general and administrative
expenses.................................... 17,065 6,434 -- 23,499
Depreciation and amortization................ 6,518 1,208 660(2) 8,386
Non-recurring items (3)...................... 688 535 -- 1,223
-------- ------- ------------- --------
Operating income............................. 13,056 7,235 (323) 19,968
Income from investment in Rheochem........... 597 -- -- 597
Management fee income (expense).............. -- (160) 160(4) --
Other income................................. -- 258 -- 258
Interest income (expense).................... (6,691) 240 (7,334)(5) (13,785)
Dividends on preferred stock of subsidiary... -- (322) 322(6) --
-------- ------- ------------- --------
Income before taxes and extraordinary
items....................................... 6,962 7,251 (7,175) 7,038
Provision for (benefit from) income taxes.... (4,190) 2,963 (2,802)(7) (4,029)
-------- ------- ------------- --------
Income before extraordinary items............ $ 11,152 $ 4,288 $ (4,373) $ 11,067
-------- ------- ------------- --------
-------- ------- ------------- --------
</TABLE>
(See footnotes on following page)
33
<PAGE>
ASTOR HOLDINGS II
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(1) Represents the elimination of the additional cost of sales resulting from
the write-up of the opening finished goods inventory to fair market value
for the ABI Acquisition. This adjustment to the historical financial
statements is being eliminated because it is directly related to the
accounting for the ABI Acquisition.
(2) Represents the additional amortization of new intangibles from the ADCO
Acquisition of $1.5 million, including goodwill over 40 years and deferred
financing costs over 6 years to 10 years, and the additional depreciation
expense resulting from the write-up of property, plant and equipment to
fair market value for the ADCO Acquisition of $104,000, less a reduction in
amortization expense of $984,000 due to the write-off of existing deferred
financing costs as a result of the early extinguishment of the UBS Credit
Facility. The depreciation policy is the straight-line method of
depreciation with asset lives of 40 years for buildings and 16 years for
machinery and equipment.
(3) Represents the non-recurring expenses related to new packaging expense at
ADCO of $535,000 and flood expense of $500,000 and moving expense of
$188,000 at Astor Holdings II.
(4) Represents the capitalization of management fees paid to former
stockholders of ADCO as part of the purchase price of ADCO because Astor
management does not believe they will utilize this management contract.
(5) Reflects the interest expense on the pro forma debt instruments as follows:
<TABLE>
<S> <C>
Senior Subordinated Notes, net of original issue discount
(interest rate of 10.5%)....................................... $11,550,000
Bank Term Loans (assumed interest rate of 8.5%)................ 1,700,000
Subordinated Note due to an affiliate.......................... 342,000
Subsidiary debt................................................ 193,000
Elimination of historical interest charge...................... (6,451,000)
----------
$7,334,000
----------
----------
</TABLE>
An increase of 1/8% in the interest rate on the variable rate pertaining to
the above debt instruments would result in an interest expense increase of
$27,000
(6) Represents the elimination of cash dividends paid to former holders of
preferred stock of ADCO's subsidiary.
(7) Represents tax benefits resulting from higher expenses, primarily interest
costs.
34
<PAGE>
ASTOR HOLDINGS II
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------------------------------
HISTORICAL
---------------------- ASTOR
ASTOR TRANSACTION HOLDINGS II
HOLDINGS II ADCO ADJUSTMENTS PRO FORMA
----------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 1,765 $ 5,810 $ (5,791)(1) $ 1,784
Accounts receivable, net..................................... 23,645 7,295 -- 30,940
Receivables from Rheochem.................................... 635 -- -- 635
Inventory.................................................... 21,835 6,498 518(2) 28,851
Prepaid expenses and other current assets.................... 4,225 148 -- 4,373
----------- --------- ----------- -----------
Total current assets........................................... 52,105 19,751 (5,273) 66,583
Property, plant and equipment, net............................. 50,964 9,411 9,840(3) 70,215
Investment in Rheochem......................................... 4,392 -- -- 4,392
Goodwill....................................................... 29,180 7,371 24,640(4) 61,193
Intangible assets, net......................................... 6,161 451 2,521(5) 9,133
Deferred income taxes, net..................................... 4,692 256 (2,805)(6) 2,143
Other assets................................................... -- 13 -- 13
----------- --------- ----------- -----------
Total assets................................................... $ 147,494 $ 37,255 $ 28,923 $ 213,672
----------- --------- ----------- -----------
----------- --------- ----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................. $ 16,309 $ 2,918 $ -- $ 19,227
Accrued interest payable..................................... 522 -- -- 522
Accrued expenses............................................. 8,086 2,822 (97)(7) 10,811
Current portion of long term debt............................ 5,361 -- (5,251)(8) 110
----------- --------- ----------- -----------
Total current liabilities...................................... 30,278 5,740 (5,348) 30,670
Long term debt................................................. 62,846 -- 69,193 (10 132,039
Subordinated Note due to an affiliate (9)...................... 5,264 -- -- 5,264
Deferred income taxes.......................................... 4,856 1,024 (1,687) 11) 4,193
Other long-term liabilities.................................... 2,472 -- 978 (12 3,450
ADCO redeemable preferred stock of subsidiary.................. -- 3,920 (3,920) 13) --
Stockholder's equity:
ADCO stockholders' equity.................................... -- 26,571 (26,571) 14) --
Common stock................................................. -- -- -- --
Additional paid-in capital................................... 36,671 -- -- 36,671
Retained earnings............................................ 5,091 -- (3,722) 15) 1,369
Foreign currency translation adjustment...................... 16 -- -- 16
----------- --------- ----------- -----------
Total stockholder's equity..................................... 41,778 26,571 (30,293) 38,056
----------- --------- ----------- -----------
Total liabilities and stockholder's equity..................... $ 147,494 $ 37,255 $ 28,923 $ 213,672
----------- --------- ----------- -----------
----------- --------- ----------- -----------
</TABLE>
(See footnotes on following page)
35
<PAGE>
ASTOR HOLDINGS II
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) Represents the use of ADCO cash of $4.0 million to redeem outstanding
preferred stock of ADCO's subsidiary and to pay $1.1 million in transactions
fees and the use of Astor's existing cash of $756,000 to fund the
Transactions less the cash receipt of the receivables from management
stockholders ($50,000). See note 10 below. The use of cash is consistent with
the actual funding of the Transactions.
(2) Represents the estimated write-up of finished goods inventory to fair market
value in connection with the purchase price allocation.
(3) Represents the estimated write-up of property, plant and equipment to fair
market value in connection with the purchase price allocation.
(4) Represents $32.0 million of excess purchase price over the fair market value
of the net assets acquired less the elimination of ADCO's existing goodwill
of $7.4 million. Management's preliminary allocation of the purchase price
for ADCO is as follows:
<TABLE>
<CAPTION>
Purchase price:
<S> <C>
Cash portion................................................... $54,414,000
Estimated fees and expenses.................................... 1,705,000
----------
Total...................................................... $56,119,000
----------
----------
Allocated as follows:
Existing book value of ADCO.................................... $26,621,000
Increase in inventory to estimated fair market value........... 518,000
Estimated increase in property, plant and equipment to fair
market value.................................................. 9,840,000
Elimination of existing ADCO goodwill.......................... (7,373,000)
Transaction related liabilities (a)............................ (2,261,000)
Increase in deferred tax....................................... (3,239,000)
Increase in goodwill........................................... 32,013,000
----------
Total...................................................... $56,119,000
----------
----------
</TABLE>
--------------------------------------
(a) Fees related to the ADCO acquisition of $1.1 million and
future payments under ADCO's existing management agreement of
$1.1 million.
(5) Represents deferred debt issuance costs related to the Offering of $8.2
million less the elimination of unamortized debt issuance costs related to
early extinguishment of term loans under the UBS Credit Facility of $5.7
million.
(6) Represents the federal tax benefits of $1.5 million, on the $5.7 million
extraordinary loss for write-off of debt issuance costs related to the early
extinguishment of term loans under the UBS Credit Facility, less the net
deferred tax liabilities ($3.2 million) resulting from the allocation of
purchase price for the ADCO acquisition and the reclassification of the ADCO
deferred tax liabilities ($1 million) acquired.
(7) Represents the current portion of the future payments under ADCO's existing
agreement of $163,000, and unpaid fees related to the ADCO acquisition of
$67,000 less the tax benefit on the cost of early termination of interest
swap contracts of $94,000, the dividend payment on redeemable preferred
stock of ADCO's subsidiary prior to the ADCO Acquisition of $112,000 and the
interest payment of $121,000.
(8) Represents the repayment of current portion of long-term debt under the UBS
Credit Facility.
(9) Represents an unsecured loan note payable to the Parent maturing on July 5,
2003. Interest accrues on such note at the rate of 8% and is payable
semi-annually.
36
<PAGE>
ASTOR HOLDINGS II
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED)
(10) Represents the proceeds from the Offering of $109.5 million and the Bank
Term Loan under the Senior Bank Facility of $20.0 million, net of repayment
of long-term debt of $65.5 million. The sources and uses of funds of the
Transactions are as follows:
<TABLE>
<CAPTION>
Source of funds:
<S> <C>
Cash on hand.............................................. $ 756,000
Bank Term Loan............................................ 20,000,000
Proceeds from the Offering................................ 109,450,000
-----------
Total sources......................................... $130,206,000
-----------
-----------
Use of funds:
ADCO cash purchase price.................................. $54,414,000
Repayment of borrowings and interest under UBS Credit
Facility................................................. 65,629,000
Fees and expenses......................................... 10,163,000
-----------
Total uses............................................ $130,206,000
-----------
-----------
</TABLE>
No amortization payments are required on the Revolving Credit Facility or
the Notes in the next five years. Amortization payments on the Bank Term Loan
are as follows:
<TABLE>
<CAPTION>
AMORTIZATION
FISCAL YEAR PAYMENT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1997............................................................................ --
1998............................................................................ $1,400,000
1999............................................................................ 1,800,000
2000............................................................................ 3,000,000
2001............................................................................ $4,500,000
</TABLE>
(11) Represents the foreign tax benefits ($660,000) on the extraordinary loss
for write-off of debt issuance costs related to the early extinguishment of
term loans under the UBS Credit Facility and the reclassification of ADCO
deferred tax liabilities acquired to deferred tax assets account.
(12) Represents the long term portion of the future payments under ADCO's
existing management agreement.
(13) Represents ADCO's redemption of preferred stock of its subsidiary of $3.9
million.
(14) Represents the elimination of ADCO's historical stockholders' equity ($26.6
million) resulting from the application of purchase accounting, net of the
collection of receivables from management stockholders ($50,000).
(15) Represents the cost of early termination of interest swap contracts, net of
tax benefit, of $180,000 and the elimination of unamortized debt issuance
costs related to early extinguishment of term loans under the UBS Credit
Facility, net of tax benefit, of $3.5 million.
37
<PAGE>
ASTOR HOLDINGS II
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of March 31 of
each of the years 1992 through 1996 and for the years then ended have been
derived from the Consolidated Financial Statements of Astor Holdings II. The
Consolidated Financial Statements of Astor Holdings II for each of the fiscal
years ended March 31, 1994, 1995 and 1996 were audited by Ernst & Young LLP,
independent auditors, and appear elsewhere in this Memorandum. The selected
financial data as of and for the years ended March 31, 1992 and 1993 and as of
September 30, 1995 and 1996 and for the six months then ended have been derived
from unaudited consolidated financial statements of Astor Holdings II, but
include all adjustments which are, in the opinion of management, necessary for a
fair presentation of Astor Holdings II's financial position at such dates and
results of operations for such periods. Astor Holdings II, the parent
corporation of Astor Corporation, has guaranteed the obligations of Astor
Corporation under the Notes and has no material operating assets or liabilities
or operations other than its ownership of all the outstanding common stock of
Astor Corporation, the outstanding $1.7 million (liquidation preference) of
preferred voting ordinary stock of ABI Acquisition 1 plc, a subsidiary of Astor
Corporation, a subordinated intercompany note payable to the Parent in the
amount of $5.7 million and a corresponding subordinated intercompany note
receivable from ABI Acquisition 1 plc in the amount of $5.7 million. Operating
results for the six months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending March 31,
1997. The selected consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the related notes
thereto for each of Astor Holdings II and ABI included elsewhere in this
Memorandum.
38
<PAGE>
ASTOR HOLDINGS II
SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
MONTHS ENDED
AS OF AND FOR YEARS ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------------- --------------------
1992 1993 1994 1995 1996(1) 1995 1996
---------- --------- ---------- --------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.................................... $ 48,052 $ 47,837 $ 54,665 $ 61,852 $ 135,418 $ 54,195 $ 87,827
Gross profit before depreciation......... (12,606) 789 3,759 7,302 27,242 10,006 20,091
Selling, general and administrative
expenses................................ 5,694 3,505 3,652 4,132 12,893 5,024 9,010
Depreciation and amortization............ 3,274 4,870 4,041 1,993 5,416 2,243 3,345
Non-recurring items...................... 202 (500) 25,883(2) -- 874 -- --
---------- --------- ---------- --------- ---------- --------- ---------
Income (loss) from operations............ (21,574) (7,086) (29,817) 1,177 8,059 2,739 7,736
Income (loss) from Rheochem.............. -- -- -- -- 91 (65) 441
Interest and other income................ 65 7 5 -- -- -- --
Interest expense......................... 4,220 1,015 1,476 1,606 5,251 1,837 3,276
Reorganization expense................... -- 1,815 1,256 1,088 856 856 --
---------- --------- ---------- --------- ---------- --------- ---------
Income (loss) before income taxes and
extraordinary items..................... (25,931) (9,909) (32,544) (1,517) 2,043 (19) 4,901
Provision for (benefit from) income
taxes................................... -- -- -- -- (3,434 (3) 566 (190)
---------- --------- ---------- --------- ---------- --------- ---------
Income (loss) before extraordinary
items................................... (25,931) (9,909) (32,544) (1,517) 5,477 (585) 5,091
Extraordinary items...................... -- -- -- -- 44,933(4) 44,933(4) --
---------- --------- ---------- --------- ---------- --------- ---------
Net income (loss)........................ $ (25,931) $ (9,909) $ (32,544) $ (1,517) $ 50,410 $ 44,348 $ 5,091
---------- --------- ---------- --------- ---------- --------- ---------
---------- --------- ---------- --------- ---------- --------- ---------
Ratio of earnings to fixed charges (5)... N/A N/A N/A N/A 1.3x N/A 2.3x
OTHER DATA:
EBITDA (6)............................... $ (18,300) $ (2,716) $ 107 $ 3,170 $ 14,440 $ 5,773 $ 11,522
Cash flow from operating activities...... (35,377) (2,894) 391 859 1,357 4,733 5,316
EBITDA margin (7)........................ N/A N/A 0.2% 5.1% 10.7% 10.7% 13.1%
EBITDA to interest expense, net.......... N/A N/A 0.1x 2.0x 2.7x 3.1x 3.5x
Total debt to EBITDA (8)................. N/A N/A N/M 20.2x 5.3x 6.5x 3.2x
Capital expenditures..................... $ 680 $ 70 $ 260 $ 274 $ 4,640 $ 1,786 $ 2,094
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF SEPTEMBER 30,
--------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1995 1996
--------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets........................ $ 16,675 $ 12,313 $ 10,192 $ 13,475 $ 47,479 $ 50,773 $ 52,105
Current liabilities................... 1,975 3,743 6,239 13,707 27,604 33,284 30,278
Total assets.......................... 66,819 58,344 28,131 30,166 142,906 143,779 147,495
Total debt............................ 44,916 55,336 56,696 64,075 76,524 74,874 74,054
Stockholder's equity (deficit)........ (147) (10,055) (42,599) (44,115) 36,358(9) 30,248 41,779
</TABLE>
(See footnotes on following page)
39
<PAGE>
ASTOR HOLDINGS II
SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
(1) Represents Astor Holdings II's consolidated results of operations for the
fiscal year ended March 31, 1996, which includes the results of operations
of ABI since its acquisition on June 28, 1995.
(2) In fiscal 1994, Astor Holdings II recorded a provision of $25.9 million,
representing the writedown of property, plant and equipment and other
intangible assets in order to recognize a permanent impairment of value.
(3) During this period Astor Holdings II, Inc. recognized a net deferred tax
asset primarily with respect to net operating loss carryforwards.
(4) Astor Holdings II recorded a gain on the forgiveness of debt of $44.9
million upon the effectiveness of Petrowax's Reorganization Plan as of June
28, 1995.
(5) For the purposes of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes, extraordinary items and
fixed charges. Fixed charges consist of interest expense, amortization of
debt expense and the interest component of rent expense. Earnings for the
years ended March 31, 1992, 1993, 1994 and 1995 and for the six months ended
September 30, 1995 were insufficient to cover fixed charges by $25.9
million, $9.9 million, $32.5 million, $1.5 million and $0.6 million,
respectively.
(6) EBITDA represents earnings before interest expense, income tax expense,
depreciation and amortization expense, extraordinary items and non-recurring
items. EBITDA as used herein may not be comparable to similarly titled
measures reported by other companies. Information concerning EBITDA has been
included as it is used by certain investors as a measure of a company's
ability to service its debt. EBITDA may also be considered an important
measure to the Company because certain of the financial ratio covenants in
the Senior Credit Facility are based in part upon EBITDA. EBITDA is not a
GAAP measure of financial performance and should not be used as an
alternative to, or be construed as more meaningful than, operating income or
cash flows or as an indicator of the operating performance or liquidity of
Astor Holdings II. EBITDA differs from cash flows from operating activities
primarily because, unlike cash flow from operations, EBITDA excludes
interest expense, taxes and net change in working capital.
(7) EBITDA margin is the ratio of EBITDA to sales, expressed as a percentage.
(8) For purposes of calculating total debt to EBITDA, EBITDA for the six months
ended September 30, 1996 and 1995 has been annualized.
(9) In addition to the forgiveness of debt by Petrowax's creditors, the sole
stockholder recapitalized Astor Holdings II on June 28, 1995 by contributing
$30.7 million to its equity.
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
"Selected Consolidated Financial Data" and the Consolidated Financial Statements
and the related notes included elsewhere in this Memorandum. The consolidated
financial data presented below is that of Astor Holdings II. Astor Holdings II
is the parent corporation of Astor Corporation, has guaranteed the obligations
of Astor Corporation under the Notes and has no material assets or liabilities
or operations other than its ownership of all the outstanding common stock of
Astor Corporation, the outstanding $1.7 million (liquidation preference) of
preferred voting ordinary stock of ABI Acquisition 1 plc, a subsidiary of Astor
Corporation, a subordinated intercompany note payable to the Parent in the
amount of $5.7 million and a corresponding subordinated intercompany note
receivable from ABI Acquisition 1 plc in the amount of $5.7 million. As a
result, except for its ownership of the preferred voting ordinary stock of ABI
Acquisition 1 plc, the consolidated financial statements of Astor Holdings II
and Astor Corporation are substantially identical.
GENERAL
The current business and structure of Astor were created through the
combination of Astor Corporation and ABI in June 1995. This combination created
one of the largest producers of specialty waxes in the world, based on sales,
and a recognized U.K. manufacturer and marketer of adhesives and sealants. The
ABI Acquisition improved Astor's in-house marketing and packaging capabilities,
resulting in improved product distribution and improved Astor's product
development capabilities, allowing the development of more higher-margin
value-added products.
Astor Corporation was incorporated as a new venture in 1989 in the State of
Delaware under the name Petrowax for the purpose of developing a wax production
business. As part of its start-up plan of operations, Petrowax acquired two lube
oil and wax production facilities from Quaker State. Shortly after the
completion of the acquisition in 1990 and prior to the acquisition of ABI and
the acquisition of ADCO, Petrowax encountered a number of operational and
financial difficulties, including (i) difficulties in converting the acquired
facilities to the production of specialty waxes, (ii) surplus inventories
resulting from long lead times required to secure customer approvals, an
exclusive reseller's inability to perform its obligations to purchase wax from
Petrowax and the delay in converting one of the facilities, (iii) a lack of
extensive process knowledge and limited product development capabilities
resulting in the production of low-margin products and (iv) insufficient working
capital, forcing Petrowax to liquidate inventory to fund day-to-day operations.
As a result of these and other difficulties and inefficiencies, Petrowax
voluntarily filed for relief pursuant to Chapter 11 of the U.S. Bankruptcy Code
on February 25, 1992.
Following the Filing, Petrowax took a number of steps to improve its
competitive position, including (i) the recruitment of turnaround management,
(ii) the renegotiation of its primary supply contract to provide for improved
pricing and the delivery of higher quality waxy components of A/B Crude, (iii)
the termination of Petrowax's exclusive marketing contract with its reseller,
the establishment of a number of non-exclusive reseller arrangements and the
increase of Petrowax's direct sales of its products, (iv) the arrangement of
debtor-in-possession financing and additional working capital to provide for
short-term working capital needs, (v) the renegotiation of various
transportation and terminaling contracts and (vi) the implementation of a number
of other overhead reduction measures.
After the above described corrective measures were taken, Petrowax focused
on its emergence from bankruptcy and improving its strategic position in the
marketplace. In June 1994, Mr. Boyd Wainscott, an experienced multinational
chemical company manager, joined Petrowax to lead it in developing and
implementing a strategic business plan. This plan included (i) improving
marketing functions and product distribution, (ii) developing more
higher-margin, value-added products, (iii) improving manufacturing operations
and increasing manufacturing capacity, and (iv) pursuing acquisition
opportunities in the consolidating specialty chemicals industry.
In June 1995, Petrowax emerged from bankruptcy, was recapitalized, acquired
ABI and changed its name from Petrowax to Astor Corporation, a tradename of ABI.
The acquisition of ABI has resulted in a significant improvement in the
operating results of Astor.
41
<PAGE>
Of Astor's total sales of $135.4 million for fiscal year 1996, specialty wax
products represented approximately 90%. Astor has facilities in the U.S., the
U.K. and Belgium and sells its products to customers in over 50 countries.
RESULTS OF OPERATIONS
The following table summarizes Astor Holding II's historical results of
operations to a percentage of sales for the last three fiscal years ended March
31, 1994, 1995, and 1996 and the six months periods ended September 30, 1995 and
1996:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED
MARCH 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATE:
Sales......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................. 93.1 88.2 79.9 81.5 77.1
--------- --------- --------- --------- ---------
Gross profit before depreciation.............. 6.9 11.8 20.1 18.5 22.9
Selling, general and administrative
expenses..................................... 6.7 6.7 9.5 9.3 10.3
Depreciation and amortization................. 7.4 3.2 4.0 4.1 3.8
Non-recurring items........................... 49.6 1.8 1.3 1.6 --
--------- --------- --------- --------- ---------
Income (loss) from operations................. (56.8) 0.1 5.3 3.5 8.8
Income (loss) from Rheochem................... -- -- 0.1 (0.1) 0.5
Interest expense, net......................... 2.7 2.6 3.9 3.4 3.7
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary items.......................... (59.5) (2.5) 1.5 0.0 5.6
Provision for (benefit from) income taxes..... -- -- (2.5) 1.0 (0.2)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary items...... (59.5) (2.5) 4.0 (1.0) 5.8
Extraordinary items........................... -- -- 33.2 82.9 --
--------- --------- --------- --------- ---------
Net income (loss)............................. (59.5)% (2.5)% 37.2% 81.9% 5.8%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1995
SALES. Sales increased by $33.6 million from $54.2 million for the six
months ended September 30, 1995 to $87.8 million for the six months ended
September 30, 1996. Of this sales increase, $26.1 million is related to the
acquisition of ABI in June 1995. Excluding the impact of ABI, sales increased
$7.5 million, or 23%, as a result of (i) higher sales volume due to the capacity
improvements achieved from the capital expenditure program completed in January
1996, (ii) higher specialty wax prices realized in the U.S., (iii) a more
focused marketing effort provided by the addition of ABI's sales force resulting
in greater sales volume and (iv) a product mix shift to higher priced products.
Of this 23% increase in sales, excluding the impact of ABI, 4% was due to an
increase in product price and 19% was due to an increase in sales volume.
GROSS PROFIT. Gross profit increased by $10.1 million from $10.0 million
for the six months ended September 30, 1995 to $20.1 million for the six months
ended September 30, 1996, with $8.0 million of the increase attributable to the
acquisition of ABI. Gross profit as a percentage of sales increased from 18.5%
for the six months ended September 30, 1995 to 22.9% for the three months ended
September 30, 1996, primarily as a result of the acquisition. Excluding the
acquisition of ABI, gross profit as a percentage of sales improved from 13.1%
for the six months ended September 30, 1995 to 16.0% for the six months ended
September 30, 1996 principally as a result of the reasons discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $4.0 million from $5.0 million for the six
months ended September 30, 1995 to $9.0 million for the six months ended
September 30, 1996. Selling, general and administrative expenses as a percentage
of sales increased from 9.3% for the six months ended September 30, 1995 to
10.3% for the six months ended September 30, 1996. The increase was primarily
associated with the expansion of the business as a result of the acquisition of
ABI. The $4.0 million increase was comprised of (i) $1.3 million of additional
selling related costs associated with ABI product sales, (ii) $1.8 million of
administrative costs associated with the acquired ABI businesses and (iii) $0.9
million associated with planned staff increases to support the new larger
company and Astor's growth strategy.
42
<PAGE>
INCOME FROM RHEOCHEM. Astor's share of equity earnings from Rheochem (as
defined herein) was $0.4 million for the six months ended September 30, 1996
compared to a $0.1 million loss from Rheochem for the six months ended September
30, 1995. Astor acquired its interest in Rheochem on June 28, 1995 with the
acquisition of ABI. See "Business -- Rheochem Joint Venture."
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by $1.1 million from $2.2 million for the six months ended September
30, 1995 to $3.3 million for the six months ended September 30, 1996 primarily
due to the acquisition of ABI.
INTEREST EXPENSE, NET. Interest expense, net, increased by $1.5 million
from $1.8 million for the six months ended September 30, 1995 to $3.3 million
for the six months ended September 30, 1996. During this period the Company had
an average amount of debt outstanding of $74.6 million, with the average
interest rate during this period equaling 8.8%. The increase was primarily due
to the additional debt incurred in connection with the acquisition of ABI.
NONRECURRING EXPENSES. The $0.9 million of reorganization expenses for the
six months ended September 30, 1995 were primarily attributable to professional
fees associated with Astor's emergence from bankruptcy. No costs related to the
Prior Transactions occurred in the six month period ended September 30, 1996 or
are expected in the future.
EXTRAORDINARY ITEM -- GAIN ON CANCELLATION OF DEBT. An extraordinary item
resulting from the gain on cancellation of $44.9 million of debt was recorded in
the six months ended September 30, 1995 reflecting the discharge of pre-petition
indebtedness of Petrowax.
NET INCOME BEFORE EXTRAORDINARY ITEMS. As a result of the factors discussed
above, particularly the acquisition of ABI and improved performance of Astor's
business, net income before extraordinary items for the six months ended
September 30, 1996 was $5.1 million while the six months ended September 30,
1995 showed a $0.6 million net loss before extraordinary items.
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995
SALES. Sales increased by $73.5 million from $61.9 million in fiscal year
1995 to $135.4 million in fiscal year 1996. Of this sales increase, $68.6
million is related to the acquisition of ABI in June 1995. Excluding the impact
of ABI, sales increased $4.9 million, or 8%, from $61.9 million in fiscal year
1995 to $66.8 million in fiscal year 1996 as a result of (i) increased sales
volume due to capacity improvements achieved from the capital expenditure
program completed in January 1996, (ii) higher specialty wax prices realized in
the U.S., (iii) a more focused marketing effort provided by the acquisition of
ABI's sales force resulting in greater sales volumes and (iv) a product mix
shift to higher priced products. Of this 8% increase, excluding the impact of
ABI, 7% was due to an increase in product prices and 1% was due to an increase
in sales volume.
GROSS PROFIT. Gross profit increased by $19.9 million from $7.3 million in
fiscal year 1995 to $27.2 million in fiscal year 1996, with most of the increase
attributable to the acquisition of ABI in June 1995. Gross profit as a
percentage of sales increased from 11.8% in fiscal year 1995 to 20.1% in fiscal
year 1996, primarily as a result of the acquisition. Excluding the acquisition
of ABI, Astor's gross profit increased by $2.8 million, or 38%, from $7.3
million in fiscal year 1995 to $10.1 million in fiscal year 1996 and, on a
percentage of sales basis, from 11.8% in fiscal 1995 to 15.1% in fiscal 1996
principally as a result of the reasons discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $8.8 million from $4.1 million in fiscal
year 1995 to $12.9 million in fiscal year 1996. The acquisition of ABI accounted
for $7.6 million of the selling, general and administrative expenses increase.
INCOME FROM RHEOCHEM. Astor's share of equity earnings from Rheochem was
$0.1 million in fiscal year 1996 compared to no income from Rheochem for fiscal
year 1995. Astor acquired its interest in Rheochem on June 28, 1995 with the
acquisition of ABI. See "Business -- Rheochem Joint Venture."
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by $3.4 million from $2.0 million in fiscal year 1995 to $5.4 million
in fiscal year 1996 primarily due to the acquisition of ABI.
43
<PAGE>
INTEREST EXPENSE, NET. Interest expense, net, increased by $3.7 million
from $1.6 million in fiscal year 1995 to $5.3 million in fiscal year 1996.
During this period the Company had an average amount of debt outstanding of
$53.8, with the average interest rate during this period equal to 9.9%. The
increase was primarily due to the additional debt incurred in connection with
the acquisition of ABI.
NONRECURRING EXPENSES. Reorganization expenses of $0.9 million were
recognized in fiscal year 1996 compared to $1.1 million in fiscal year 1995.
These expenses were primarily attributable to professional fees and employee
costs associated with Petrowax's operating under bankruptcy. No additional costs
pertaining to this matter are expected in the future. Other non-recurring costs
of $0.8 million in fiscal year 1996 included $0.5 million related to a flood at
the Farmer's Valley facility and $0.3 million related to non-recurring moving
costs.
EXTRAORDINARY ITEM -- GAIN ON CANCELLATION OF DEBT. An extraordinary item
resulting from the gain on cancellation of $44.9 million of debt was recorded in
fiscal year 1996 reflecting the discharge of pre-petition indebtedness of
Petrowax.
INCOME TAXES. A net income tax benefit of $3.4 million was recorded in
fiscal 1996. This benefit is primarily attributed to the reduction in the
valuation allowance related to the net deferred tax asset.
NET INCOME BEFORE EXTRAORDINARY ITEMS. Net income before extraordinary
items increased by $7.0 million from a loss of $1.5 million in fiscal year 1995
to $5.5 million in fiscal year 1996.
FISCAL YEAR ENDED MARCH 31, 1995 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1994
SALES. Sales increased by $7.2 million, or 13%, from $54.7 million in
fiscal year 1994 to $61.9 million in fiscal year 1995. This sales increase was
primarily the result of increased wax volumes resulting from the use of a higher
wax yielding feedstock.
GROSS PROFIT. Gross profit increased by $3.5 million from $3.8 million in
fiscal year 1994 to $7.3 million in fiscal year 1995. Gross profit as a
percentage of sales increased from 6.9% in fiscal year 1994 to 11.8% in fiscal
year 1995 principally as a result of the reasons discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $0.4 million from $3.7 million in fiscal
year 1994 to $4.1 million in fiscal year 1995. The selling, general and
administrative expense increase was primarily the result of higher sales volume.
Selling, general and administrative expenses as a percentage of sales remained
stable at 6.7% in fiscal years 1994 and 1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization charges
decreased by $2.0 million from $4.0 million in fiscal year 1994 to $2.0 million
in fiscal year 1995 primarily due to adjustments in fiscal year 1994 to the book
value of certain assets in recognition of their impairment.
INTEREST EXPENSE, NET. Interest expense, net, increased by $0.1 million
from $1.5 million in fiscal year 1994 to $1.6 million in fiscal year 1995.
During this period the Company had an average amount of debt outstanding of
$12.4 million, with the average interest rate during this period equaling 12.9%.
This increase was primarily due to higher debt levels related to an increase in
working capital requirements.
NONRECURRING EXPENSES. The $27.1 million of nonrecurring expenses
recognized in fiscal year 1994 compared to $1.1 million in fiscal year 1995 was
primarily attributable to a $25.9 million provision reflecting the writedown of
assets in order to recognize permanent impairment of their value. Reorganization
expenses decreased by $0.2 million from $1.3 million in fiscal year 1994
primarily due to lower professional fees associated with Petrowax's bankruptcy.
NET LOSS. The net loss decreased by $5.2 million from a net loss before
extraordinary items and asset impairment writedown of $6.7 million in fiscal
year 1994 to a net loss of $1.5 million in fiscal year 1995 for the reasons
discussed above.
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RECENT ABI DEVELOPMENTS
Astor completed the ABI acquisition in June 1995. See "Prior
Reorganization." Although nine months of ABI's post-acquisition results are
included in Astor's financial statements for the year ended March 31, 1996,
Astor believes that the following unaudited comparative information of the
business formerly conducted as ABI is useful in evaluating the financial
performance of the Company.
SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1995
Sales increased by $7.2 million, or 15%, from $47.9 million for the six
months ended September 30, 1995 to $55.1 million for the six months ended
September 30, 1996. Primarily all of the sales increase was attributable to
strong wax demand in the United States. Sales to Europe and the rest of the
world were flat due to a slow down in the European economy during fiscal 1996.
Gross profit increased by $1.9 million, or 16%, from $11.9 million for the
six months ended September 30, 1995 to $13.8 million for the six months ended
September 30, 1996. The increase in gross profit is due primarily to sales
volume increases in the U.S. specialty wax business. The gross profit margin
increased from 24.8% to 25.0% primarily as a result of product mix.
Selling, general and administrative expenses for ABI increased by $0.3
million from $5.8 million for the six months ended September 30, 1995 to $6.1
million for the six months ended September 30, 1996 primarily due to planned
higher staffing levels in anticipation of the division's growth with Astor
Holdings II. As a percentage of sales, selling, general and administrative
expenses decreased from 12.1% for the six months ended September 30, 1995 to
11.0% for the six months ended September 30, 1996. The contribution of earnings
from the Rheochem joint venture, continuing management fees and equity earnings
increased by $0.1 million, from $1.1 million for the six months ended September
30, 1995 to $1.2 million for the six months ended September 30, 1996. EBITDA
increased by $1.6 million, or 22%, from $7.2 million for the six months ended
September 30, 1995 to $8.9 million for the six months ended September 30, 1996
as a result of the factors discussed above.
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995
Sales increased by $12.3 million, or 14%, from $89.0 million for the year
ended March 31, 1995 to $101.3 million for the year ended March 31, 1996. The
increased sales are the result of both the strong worldwide wax demand and more
aggressive sales efforts in the Far East. Gross profit increased by $1.2
million, or 6%, from $21.8 million for the year ended March 31, 1995 to $23.0
million for the year ended March 31, 1996 as a result of the sales increase. The
gross profit margin percentage for the year ended March 31, 1996 decreased to
22.5% from 24.5% for the year ended March 31, 1995 due to product mix. Selling,
general and administrative expenses increased by $0.1 million, or 1%, from $11.7
million for the year ended March 31, 1995 to $11.8 million for the year ended
March 31, 1996 primarily due to the higher selling cost associated with sales
increases. Selling, general and administrative expenses as a percentage of sales
decreased from 13.1% for the year ended March 31, 1995 to 11.6% for the year
ended March 31, 1996 due to higher sales. The contribution to ABI's earnings
from the Rheochem joint venture, taking into account management fees and equity
earnings increased from $0.4 million, or 31%, from $1.3 million for the year
ended March 31, 1995 to $1.7 million for the year ended March 31, 1996 due to
higher Rheochem operating income. EBITDA increased by $1.5 million, or 13%, from
$11.4 million for the year ended March 31, 1995 to $12.9 million for the year
ended March 31, 1996 as a result of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended September
30, 1996 was $5.3 million compared to $4.7 million for the six months ended
September 30, 1995. The $5.3 million of net cash provided in the six months
ended September 30, 1996 was primarily due to cash flow from operating profits
of $7.3 million, offsetting a $2.0 million use of cash for working capital and
an increase in inventories due to higher sales offsetting an increase in accrued
expenses. The $4.7 million of cash provided by operating activities for the six
months ended September 30, 1995 was primarily due to $1.7 million cash flow from
operating profits and a $3.0 million source of cash from working capital,
resulting from an increase in accrued expenses which offset increased
inventories and accounts receivable due to higher sales.
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Net cash provided by operating activities for the years ended March 31,
1996, 1995 and 1994 was $1.4 million, $0.9 million and $0.4 million,
respectively. The cash provided for the year ended March 31, 1996 was primarily
due to an increase in cash flow from operations as a result of the acquisition
of ABI, increased sales and higher product prices. The cash provided for the
year ended March 31, 1995 was primarily due to $0.5 million of cash flow from
operating profits and a $0.4 million source of cash from working capital,
resulting from an increase in accounts payable which offset increased
inventories and accounts receivable due to higher sales. The cash provided for
the year ended March 31, 1994 resulted from increased accounts payable.
Cash used in investing activities for the six months ended September 30,
1996 and 1995 and the years ended March 31, 1996, 1995 and 1994 was $2.1
million, $12.4 million, $65.2 million, $0.3 million and $0.3 million,
respectively. Cash used in investing for the six months ended September 30, 1995
and for the year ended March 31, 1996 included the ABI acquisition costs of
$60.8 million. Cash used for the year ended March 31, 1996 also included capital
expenditures of $4.6 million. The use of cash for the six months ended September
30, 1996 was primarily due to capital expenditures. The Company expects that
capital expenditure requirements will be approximately $3.4 million for fiscal
year 1997 and approximately $0.6 million for the ADCO operations following the
ADCO acquisition, resulting in total capital expenditures of $4.0 million for
fiscal 1997. The Company expects to fund future capital expenditures primarily
from cash generated from operating activities although there can be no assurance
that cash from future operations will be sufficient for this purpose. Astor
purchased ADCO with proceeds from the Offering and the Senior Bank Facility.
Cash used in financing activities for the six months ended September 30,
1996 was $2.8 million due to debt repayments of the Bank Term Loan of $2.0
million and a $0.6 million reduction in the Revolving Credit Facility
borrowings. Cash provided by financing activities of $59.9 million for the six
months ended September 30, 1995 was due to (i) proceeds from the long-term debt
issuance of $67.8 million, (ii) $30.4 million from the issuance of stock and
warrants, net of fees, (iii) the repayment of $31.4 million of existing debt,
and (iv) the settlement of bankruptcy claims. Cash used in financing activities
for the year ended March 31, 1996, consisting of $63.0 million, included the
aforementioned debt financing and capital infusion, net of repayments of
existing debt and bankruptcy claims. Cash used for financing activities for the
fiscal years ended March 31, 1995 and 1994, consisting of $0.1 million and $0.5
million, respectively, was due to capital lease payments and the reduction of
pre-petition liabilities.
The Company had $140.0 million of total debt outstanding as of November 30,
1996 compared to $138.0 million as of September 30, 1996. As of November 30,
1996, the Notes were senior to $6.4 million of such indebtedness. Based on
current borrowings and the interest rate under the Senior Bank Facility, the
Company's debt service for fiscal 1997 is anticipated to be $10.2 million, with
the Company's monthly debt service anticipated to be $1.2 million. In addition,
the Company will have no principal repayments and capital requirements are
expected to be $4.0 million in fiscal 1997. The Company expects to service its
debt primarily from its cash from operations in fiscal 1997, although there can
be no assurance that cash from future operations will be sufficient for that
purpose.
The Company believes that cash generated from operations, together with the
amounts available under the Senior Bank Facility, will be adequate to meet its
debt service requirements, capital expenditures and working capital needs for at
least the next two years, although no assurances can be given in this regard.
As of March 31, 1996 Astor Corporation had net operating losses ("NOLs")
aggregating approximately $24.0 million available to offset certain taxable
income in future years. The utilization of these NOLs would be limited under
Section 382 of the Internal Revenue Code (the "Code") if Astor Corporation were
to undergo, or is deemed to have previously undergone, an "ownership change."
Although the Prior Transactions involved substantial changes in Astor
Corporation's equity ownership, Astor Corporation believes an "ownership
change," as defined by the Code, did not occur. However, this determination is
subject to uncertainty. In addition, there can be no assurance that future
changes in the equity ownership of Astor Corporation, Astor Holdings II or the
Parent will not occur or that such NOLs may be utilized in the future. The NOLs
are expected to expire in the years 2007 through 2009.
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SEASONALITY. Based on the historical performances of Astor Holdings II and
ADCO, management expects the Company's future performance to display seasonal
fluctuations, with the first fiscal quarter being the strongest quarter and the
third fiscal quarter being the weakest.
ENVIRONMENTAL MATTERS. The Company is aware of certain conditions which may
lead to environmental liability being imposed on the Company. Contamination
exists at the Company's facility in Titusville, Pennsylvania, which management
believes resulted from disposal of waste at the facility by other industries
that formerly operated in the area. In addition, an EPA investigation, the
conclusions of which management believes to be inaccurate, indicated that a
former subsidiary of ABI (which has since merged into the Company) was the
former owner and a contributor of waste to a waste disposal area which has been
investigated by the EPA for potential inclusion on the Superfund list. Soil and
groudwater contamination, which is being addressed in large measure by Quaker
State pursuant to an indemnity, also exists at the Company's Emlenton and
McKean, Pennsylvania facilities. Finally, contamination exists at ADCO's
manufacturing facility in Michigan Center, Michigan for which Astor is seeking
protection from liability under a new state statute which shields new owners
from responsibility for contamination existing prior to acquisition of a
facility. The Company has indemnification rights with respect to certain of
these environmental matters. Assuming that the indemnitors continue to meet
their obligations, the Company does not believe that the above or any other
environmental matters will have a material adverse effect on the business or
financial condition of the Company. See "Business -- Environmental Matters."
FOREIGN EXCHANGE EXPOSURE. The functional currency for the majority of
Astor's foreign operations is the applicable local currency. The bulk of Astor's
foreign sales, raw materials, expenses, assets, and liabilities (including bank
debt) are denominated in the local currency, providing for a natural hedge for
currency exposure. For a small portion of foreign sales transactions, Astor uses
forward foreign exchange contracts to mitigate exposure. The translation from
the applicable foreign currency to U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and
for revenue and expense accounts using a weighted average exchange rate during
the period. Translation adjustments resulting from such translation were $0.3
million at March 31, 1996.
HEDGING ACTIVITIES. The Company is currently not a party to any interest
rate swap contracts relating to any of its outstanding debt. As of November 30,
1996, $116.1 million of the Company's total outstanding debt of $140.0 million
was subject to a fixed rate. In order to mitigate the impact of A/B Crude market
price fluctuations, the Company has hedged a portion of its raw material costs
by hedging crude oil in the futures market, entering into a series of price swap
contracts with The Chase Manhattan Bank which fix the cost of a portion of the
Company's A/B Crude purchases through March 31, 1997 and, in the case of certain
of its feedstocks, purchasing feedstocks which are naturally hedged as a result
of a product swap agreement.
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BUSINESS
RECENT HISTORY
In 1994, Mr. Boyd Wainscott, an experienced multinational chemical company
manager, joined Astor to lead it in developing and implementing a strategic
business plan. This plan included improving marketing functions and product
distribution, developing more higher-margin, value-added products, improving
manufacturing operations and increasing manufacturing capacity, and pursuing
acquisition opportunities in the consolidating specialty chemicals industry.
Since implementation of the plan, Astor has increased production capacity by 12%
and increased sales by its direct sales force from the 1994 to the 1996 fiscal
year by $11.2 million.
As part of this strategic plan, in June 1995, the current business and
structure of Astor were created through the combination of Astor Corporation and
ABI, a manufacturer of specialty waxes and adhesives and sealants based in the
U.K. This combination created one of the largest producers of specialty waxes in
the world, based on sales, and a recognized U.K. manufacturer of adhesives and
sealants. Through the addition of global marketing personnel, global marketing
intelligence and domestic product packaging facilities, the ABI Acquisition
improved Astor's in-house marketing and packaging capabilities, resulting in
improved product distribution and improved Astor's product development
capabilities, allowing for the development of higher-valued products.
Concurrent with the consummation of the Offering on October 8, 1996, Astor
acquired all of the outstanding capital stock and all of the issued but
unexercised options of ADCO, a publicly traded Nasdaq National Market
manufacturer and marketer of adhesives and sealants, for an aggregate
consideration of $54.4 million. Through the acquisition of ADCO, Astor added
significant depth to its product lines, global marketing and manufacturing
networks and product development capabilities. Management believes that these
strengths will enable Astor to improve significantly the penetration of its
existing adhesives and sealants in the U.S. and provide Astor the opportunity to
market ADCO's products outside of the U.S. Management believes that the ADCO
Acquisition will also serve as an excellent platform from which to pursue
complementary acquisitions in the highly fragmented adhesives and sealants
industry. Astor and ADCO are referred to herein on a combined basis, after
giving effect to the ADCO Acquisition, as the Company.
COMPANY OVERVIEW
The Company is a leading global developer, producer and marketer of a wide
variety of value-added specialty chemical products. Its principal products are
(i) a broad range of specialty waxes, which represented approximately 70% of pro
forma sales for the 1996 fiscal year, and (ii) an extensive line of
technologically advanced adhesives and sealants, which represented approximately
30% of pro forma sales for the 1996 fiscal year. These products are sold to a
diverse base of over 4,000 customers in more than 50 countries worldwide, with
35.4% of 1996 pro forma sales made to customers outside the U.S., and are used
in numerous industrial and commercial applications. In the 1996 fiscal year, no
single customer of the Company accounted for more than 5% of the Company's pro
forma sales, and the top ten customers accounted for approximately 21% of the
Company's pro forma sales. During the twelve months ended September 30, 1996,
the Company had pro forma revenues, EBITDA and net income before extraordinary
items of $219.9 million, $30.4 million and $11.1 million, respectively. The
Company's sales of specialty waxes and adhesives and sealants grew on a pro
forma basis from $159.4 million in fiscal year 1994 to $206.2 million in fiscal
year 1996, or at a compound annual rate of 13.7%.
The Company focuses on developing value-added products to satisfy customers'
unique product demands and exacting specifications by conducting extensive
applied research and product development, often in conjunction with its
customers. The Company's product development has led to a variety of new
products and patented technologies for the Company. The Company's position is
further strengthened by its numerous technical customer approvals and the
value-added nature of its products, which generally represent a relatively small
percentage of an end-use product's total cost. These factors contributed to the
high contribution margins (defined as sales less raw material costs) which have
been achieved by the Company in recent periods. In fiscal 1996, pro forma
contribution margins for specialty waxes and for adhesives and sealants were
approximately 38.8% and 48.6%, respectively.
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SPECIALTY WAXES. Management of the Company believes that the Company is the
largest developer, producer and marketer of specialty waxes in North America,
and one of the largest producers of specialty waxes in the world, based on
sales. During 1993, the most recent year for which statistics are available,
approximately two billion pounds of specialty and other waxes were consumed in
the U.S., representing over $500 million in revenues, and over seven billion
pounds of specialty and other waxes were consumed worldwide, according to Wax
Data and a study by Kline & Company. During the last ten years, wax demand has
grown at approximately 3.3% per annum in the U.S., according to Wax Data.
However, certain end-use products have experienced significantly higher growth
rates, such as the PVC pipe market which grew at a rate of 10.0% from 1993 to
1994, according to Modern Plastics. Due to the lack of cost-effective wax
substitutes, management believes that wax demand will be driven by the growth of
its end-use products. Specialty waxes, like the Company's products, are
distinguished by their melt point, hardness, color and other performance
characteristics, as well as their consistent qualities and custom
specifications, and are used as an essential value-added component in hundreds
of products and applications. The primary applications of the Company's products
include use as a protective component in packaging and tires, as a fuel in
candles and synthetic firelogs and as a lubricant in PVC extrusion. The Company
produces one of the most extensive lines of customized waxes in the industry and
currently has over 3,000 different wax formulations in its proprietary database.
The Company had $143.7 million of pro forma sales of specialty waxes in
fiscal 1996. Over the past three fiscal years, the Company's sales of specialty
waxes have grown on a pro forma basis at a compound annual rate of 10.9%, well
in excess of the wax industry's growth rate, primarily due to the Company's
focus on high-growth niche markets. The Company's specialty wax products are
manufactured in the U.S., the U.K. and Belgium, and are sold both directly and
through independent agents to customers worldwide. During the 1996 fiscal year,
40.0%, or $57.5 million, of the Company's pro forma specialty wax sales were in
non-U.S. markets.
ADHESIVES AND SEALANTS. The Company is a leading developer, producer and
marketer of an extensive line of adhesives and sealants for a variety of
specialized niche applications. According to Chemical Week, in 1995 sales of
adhesives and sealants reached approximately $15.4 billion worldwide, and $9.4
billion in North America. Adhesives are used to bond various materials under
numerous temperature and moisture conditions, and sealants are used to prevent
the passage of air, water and noise between two surfaces. The primary markets
for the Company's adhesives and sealants are new and replacement commercial
roofing, transportation aftermarket, transportation OEM, insulated window
manufacturing for new and replacement construction, concrete pipe and vaults,
and new and rehab building construction. The Company currently offers more than
1,650 proprietary adhesives and sealants to its customers.
The Company had $62.5 million of pro forma sales of adhesives and sealants
in fiscal 1996. Over the past three fiscal years, the Company's sales of
adhesives and sealants have grown on a pro forma basis at a compound annual rate
of 21.3%, well in excess of the adhesives and sealants industry's growth rate of
5.0% - 6.0% as reported by Chemical Week, primarily due to the Company's
aggressive development of and the commercial acceptance of its new products. The
Company's adhesives and sealants are manufactured in both the U.S. and the U.K.,
and are sold both directly and through independent agents to customers
worldwide. During the 1996 fiscal year, 24.6%, or $15.4 million, of the
Company's pro forma adhesives and sealants sales were in non-U.S. markets.
COMPETITIVE STRENGTHS. The Company believes that it benefits from the
following competitive strengths:
DIVERSE GLOBAL END-USE MARKETS AND PRODUCTS. The Company serves numerous
end-use markets with over 4,650 products. This wide variety of products is sold
to a diverse global base of over 4,000 customers. In the 1996 fiscal year, no
single customer of the Company accounted for more than 5% of the Company's pro
forma sales, and the top ten customers accounted for approximately 21% of the
Company's pro forma sales. This diversity of products, markets and customers
minimizes the Company's exposure to any particular customer, economic cycle or
geographic market and provides a broad base from which to grow sales through
continued development of core technologies and new applications.
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LEADING MARKET POSITIONS. The Company enjoys substantial market shares in
many niche markets because of its product designs capabilities, reputation,
quality and service. In addition, the names -- Astor Stag, Astor Wax and ADCO --
are established and trusted in their respective industries and provide brand
name recognition for the introduction and development of new products and
markets.
GLOBAL MARKETING AND MANUFACTURING CAPABILITIES. The Company sells its
products in over 50 countries worldwide through a global marketing network and
maintains manufacturing facilities in the U.S., the U.K. and Belgium. In fiscal
1996, the Company's sales of specialty waxes and adhesives and sealants outside
of the U.S., on a pro forma basis, totaled $72.9 million, or 35.4% of total
sales. The Company's international marketing and manufacturing capabilities
provide a platform for the introduction of existing and new products throughout
the world and allow the Company to better serve its customers' needs on a
worldwide basis.
CUSTOMER-DRIVEN PRODUCT DEVELOPMENT. The Company focuses on developing
value-added products with its customers by utilizing its extensive product
development expertise and manufacturing process capabilities. The Company's
sales, technical service and development staff work with customers to identify
specific needs and develop innovative, superior performance solutions. New
developments resulting from this process can often be profitably applied to
other high-margin niche markets. Additionally, many of the Company's products
are sold to customers following an often rigorous technical approval process.
The Company has obtained numerous valuable customer approvals which it believes
provide it with a competitive advantage.
LOW-FIXED COST AND FLEXIBLE MANUFACTURING CAPABILITIES. The Company has
engineered its manufacturing facilities to be capable of producing batches of
specialty products on an as needed basis with a minimum of fixed costs which
were 20% of total pro forma costs in the 1996 fiscal year. This just-in-time
focus and relatively low fixed-cost structure enables the Company to respond
rapidly to changing customer specifications and reduces the impact on
profitability during periods of decreased customer demand.
EXPERIENCED MANAGEMENT TEAM. Since 1994, Astor's management team has
substantially improved operating efficiencies and achieved significant cost
savings. Additional efficiencies and savings were achieved by Astor following
the acquisition of ABI in June 1995. The ADCO Acquisition further enhances
managerial expertise with the addition of several new senior managers. The
resulting management team has extensive wax and specialty chemical industry
experience. The Company currently has employment agreements with each of its
five top executives. See "Management -- Executive Compensation -- Management
Compensation and Employment Agreements."
BUSINESS STRATEGY. The Company's business strategy includes the following
key elements:
FOCUS ON DIVERSE, HIGH-MARGIN NICHE MARKETS. The Company intends to
continue to aggressively expand its diverse line of high-margin products for
niche markets. New product development will be achieved through customer
solution engineering and the extension of existing technologies to new
applications. The Company believes that increasing the breadth and diversity of
its product offerings will further reduce the Company's already limited exposure
to fluctuations in any single market.
CONTINUE CUSTOMER-DRIVEN PRODUCT DEVELOPMENT. The Company intends to
continue its strong commitment to applied research and product development. The
Company's focus on solutions for the customer fosters a collaborative effort
between its experienced technical and sales personnel and its customers. This
product development effort serves to enhance customer loyalty and is the genesis
for many new products.
FURTHER GLOBAL EXPANSION. The Company intends to continue to grow in new
geographic markets by selling existing and new products to its current global
customers as they move manufacturing capacity to new geographic regions. Once
established in a new region, the Company intends to open sales offices and
develop marketing alliances to target new customers. Through the combination of
ADCO's product line and Astor's global distribution network, the Company will
have the ability to further develop global adhesives
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and sealants market opportunities. Additionally, the strong product development,
manufacturing and distribution base of ADCO in the U.S. will enable Astor to
more aggressively introduce and market its adhesives and sealants in the U.S.
PURSUE STRATEGIC ACQUISITIONS. The Company intends to selectively pursue
complementary acquisitions which can be integrated into the Company's existing
businesses. As a result of global consolidation trends and the fragmented nature
of the specialty wax and the adhesives and sealants industries, management
believes many opportunities exist for the Company to make strategic
acquisitions. The Company intends to pursue acquisitions which will diversify
its product lines, enhance its product development capabilities, improve its
global marketing reach and lower its costs.
INDUSTRY OVERVIEW
Through the successful execution of its business strategy, the Company has
become a leader in two distinct segments of the specialty chemical industry --
specialty waxes and adhesives and sealants.
WAXES
The large number of wax applications in industrial and consumer products has
created significant worldwide wax demand. During 1993, the last year for which
statistics are available, approximately two billion pounds of specialty and
other waxes were consumed in the U.S., representing over $500 million in
revenues, and seven billion pounds of specialty and other waxes were consumed
worldwide, according to Wax Data and a study by Kline & Company. During the last
ten years, wax demand has grown at a rate of approximately 3.3% per annum in the
U.S., according to Wax Data. However, certain end-use products have experienced
significantly higher growth rates, such as the PVC pipe market which grew at a
rate of 10.0% from 1993 to 1994, according to Modern Plastics. Due to a lack of
cost-effective substitutes, management believes that wax demand will be driven
by the growth of its end-use products. The Company believes that businesses
which successfully target such high growth niche markets as PVC and that develop
new applications and customers will have the opportunity to experience
significantly higher growth than the industry average.
Wax plays a critical role as both a primary element and as an additive in
many different product applications. Specialty waxes, like the Company's
products, are distinguished by their melt point, hardness, color and other
performance characteristics, as well as their consistent qualities and custom
specifications, and are used as an essential, value-added component in hundreds
of products and applications. In most cases, wax represents a small portion of
the total cost of production, but is a critical component of the end-use
product.
Wax is primarily derived as a by-product of the petroleum refining process
and typically represents less than 1% of the volume of a standard barrel of
petroleum. Wax industry suppliers include large petroleum refiners and wax
specialists.
Petroleum refiners are typically volume-driven bulk suppliers providing
little product specialization or service, in part because they view wax as a
by-product of their refining operations. Typically, wax sales by these refiners
represent less than 1% of their revenues, and thus wax production receives
little strategic or capital commitment. The characteristics of the waxes
resulting from production by large refiners are often inconsistent due to
alterations made in the refining process to emphasize production of other
products. As a result, waxes produced by petroleum refiners are typically
commodity in nature and customers tend to be volume buyers requiring little or
no customization or servicing.
Wax specialists, like the Company, focus on customer service. Such services
include development assistance, product customization, specification and supply
consistency, custom packaging and order-size flexibility. Wax specialists target
niche applications and customers demanding these value-added services. As a
result, wax specialists develop significant customer relationships and numerous
product formulations.
ADHESIVES AND SEALANTS
Adhesives and sealants are utilized in a multitude of applications within
many industrial and consumer products. According to Chemical Week, in 1995,
worldwide sales of adhesives and sealants totaled $15.4 billion, with sales in
North America representing approximately $9.4 billion. In 1994, U.S. industry
sales of adhesives and sealants increased by approximately 5% to 6%, according
to Chemical Week. Certain niche
51
<PAGE>
markets have experienced significantly higher growth rates, such as the
automotive industry, which, according to Adhesive Age, an industry publication,
experienced a compound annual growth rate in the use of adhesives and sealants
sales of 14.9% from 1985 to 1993.
Adhesives and sealants are critical to the performance of an end-use
product, but typically represent a small portion of total product cost.
Adhesives are used to bond various materials under numerous temperature and
moisture conditions, and sealants are used to prevent the passage of air, water
and noise between two surfaces.
The worldwide adhesives and sealants industry is highly fragmented with over
500 suppliers in the U.S. alone. According to Chemical Marketing Reporter, an
industry publication, while the five largest suppliers comprise approximately
33% of total U.S. sales, the ten largest suppliers in the U.S. only comprise
approximately 42% of total sales. The adhesives and sealants industry's broad
range of applications leads to the highly fragmented nature of this industry.
Certain applications require little customer service or specialization; these
adhesives and sealants have commodity characteristics and are sold either
directly to customers or through distributors. However, many suppliers, like the
Company, develop expertise within specialized niches. Due to the unique
technical requirements within these niches, even a small supplier to the
industry can be a leader for certain applications. These suppliers tend to be
service-oriented with significant focus on technical development. As a result,
they target customers requiring customized products, strict quality control and
technical support. This value-added service can generate significant goodwill
and strong customer relationships.
PRODUCTS AND MARKETS
The Company offers a complete line of specialty waxes and an extensive line
of adhesives and sealants. The Company markets its products in over 50 countries
worldwide through its direct sales force and global network of agents. During
the 1996 fiscal year, the Company's pro forma revenue was geographically
diversified; 65% in the U.S., 16% in the U.K., 9% in continental Europe and 10%
in all other regions. During the 1996 fiscal year, specialty waxes represented
approximately 70% of the Company's pro forma sales, and adhesives and sealants
represented approximately 30% of the Company's pro forma sales. The following
table summarizes the Company's 1996 fiscal year pro forma sales by product and
market:
1996 PRO FORMA SALES
<TABLE>
<CAPTION>
U.S. NON-U.S. TOTAL % OF SALES
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
SPECIALTY WAXES:
Consumer/Industrial Products................................... $ 29.6 $ 21.4 $ 51.0 25%
Packaging...................................................... 12.3 11.3 23.6 11
Tire/Rubber.................................................... 11.8 9.0 20.8 10
Candle......................................................... 14.2 1.4 15.6 8
Synthetic Fireplace Logs....................................... 6.0 1.0 7.0 4
Cable Fill..................................................... 0.6 5.8 6.4 3
PVC Lubricants................................................. 5.2 1.1 6.3 3
Anticorrosives................................................. -- 4.0 4.0 2
Road Surfacing................................................. -- 2.5 2.5 1
Byproducts..................................................... 6.5 -- 6.5 3
--------- ----- --------- ---
Specialty Waxes Total........................................ $ 86.2 $ 57.5 $ 143.7 70%
--------- ----- --------- ---
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
U.S. NON-U.S. TOTAL % OF SALES
--------- ----------- --------- -----------
ADHESIVES AND SEALANTS:
<S> <C> <C> <C> <C>
Roofing........................................................ $ 18.5 $ -- $ 18.5 9%
Transportation Aftermarket..................................... 5.7 8.7 14.4 7
Transportation OEM............................................. 9.4 1.7 11.1 5
Window Manufacturing........................................... 6.0 -- 6.0 3
Concrete Pipe & Vault.......................................... 5.4 -- 5.4 3
Building Construction.......................................... -- 5.0 5.0 2
Other Industrial............................................... 2.1 -- 2.1 1
--------- ----- --------- ---
Adhesives and Sealants Total................................. 47.1 15.4 62.5 30
--------- ----- --------- ---
Total........................................................ $ 133.3 $ 72.9 $ 206.2 100%
--------- ----- --------- ---
--------- ----- --------- ---
</TABLE>
SPECIALTY WAXES
The Company's proprietary specialty waxes are generally sold to customers
demanding unique performance characteristics. An infinite number of formulations
are possible depending on the customer's requirements for melting point, color,
hardness, viscosity and many other performance characteristics. The Company's
major markets and products are described below.
CONSUMER/INDUSTRIAL PRODUCTS The Company produces specific wax formulations
for hundreds of applications requiring exacting specifications, such as: cheese
wax coatings, hot-melt wax used for bonding materials, chewing gum base,
petroleum based jellies for pharmaceuticals and cosmetics, thermostat waxes,
dental floss, stains and textile production applications and crayons. These
products generally serve value-added niches which require a high degree of
customer reliance on product quality. Many of these products also meet the
specifications of the U.S. Food and Drug Administration ("FDA"). The Company is
diversified globally in this product category with approximately 42% of its
fiscal 1996 pro forma sales of these products made outside of the U.S.
PACKAGING. The Company's products are used by packaging manufacturers in
the production of flexible packages, folding cartons and various foil, cardboard
and paper related packages. Such products provide barrier characteristics, scuff
protection and flexibility. These packaging applications are often used for food
products, and are therefore produced by the Company to meet FDA, as well as U.K.
and European, food and quality standards. The Company is a significant packaging
wax provider, based on sales, maintaining strong customer relationships based
upon specific product design. In addition, the Company is diversified globally
in this product category with almost 50% of its fiscal 1996 pro forma sales of
these products outside of the U.S.
TIRE/RUBBER. The Company's waxes are used in rubber products to prevent
aging and cracking resulting from exposure to ozone in the atmosphere. The
Company's most significant customers are tire manufacturers who demand highly
specialized wax formulations to meet their rigid and exacting requirements.
Although the cost of wax is typically less than 5% of a tire's cost, its
specific chemical characteristics are integral and critical to the tire's
overall performance. As a result, the Company has maintained long established
relationships and acts as a product development partner with various tire
producers. The Company is a leading global supplier in this market category, and
the Company's sales in this product category are geographically diversified,
with approximately 43% of its fiscal 1996 pro forma sales of these products
outside of the U.S.
CANDLES. The Company is a significant supplier of wax to the candle
industry in the U.S. Waxes are the primary fuel source in candles and are used
to influence a candle's color, drip rate, smoke characteristics, burn time and
other performance characteristics. The Company is a high-end leader in specialty
formulations to specialty, value-added candle manufacturers. U.S. wax
consumption for candles accounts for approximately 12% of the total U.S. wax
market, and the Company has aggressively increased its position in the U.S.
market over the last three years.
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<PAGE>
SYNTHETIC FIREPLACE LOGS. The Company's waxes are used as a major component
in the production of synthetic fireplace logs and are used both as a binder for
the log and as a fuel source. Wax formulations specifically affect the burning
characteristics such as color, height and duration of the firelog flame. The
Company is a leading supplier in North America to synthetic fireplace log
manufacturers.
CABLE FILL. The Company's waxes are used as a critical component in the
production of telephone cables and other fiber optic cables to provide barrier
and integrity protection for cable filament over a wide temperature range. The
Company has been active in the evolution from traditional petroleum jelly-based
fills for copper cables to more sophisticated gels used with fiber optics. The
Company's cable fill wax business has been cultivated through attention to
customer service and technical precision.
PVC LUBRICANTS. The production of rigid PVC pipe and siding requires
lubrication during the extrusion process, which is provided by specialty wax
formulations. The Company sells the majority of its PVC wax lubricants through
its joint venture partner, Rheochem, which in addition to manufacturing its own
range of products, acts as a distributor of the Company's PVC wax lubricants in
North America. The Company combined with Rheochem has a leading supply position
in the U.S. See "-- Rheochem Joint Venture."
ANTICORROSIVES. The Company's anticorrosives are used in automotive,
aerospace and engineering applications as corrosion inhibitors, sealers and
water barrier protectives due to their excellent film forming properties.
Significant anticorrosive approvals have been obtained from several automotive
producers in Europe and emerging countries. The Company has 100% of the
anticorrosive business of one major automobile producer in the U.K. to which one
Company employee is fully dedicated and on-site at the customer's facility.
ROAD SURFACING. The Company's road surfacing products are used as both a
surface dressing and as a binder for the aggregate used and are sold primarily
to municipalities for road surfacing in the U.K. and in selected parts of
Europe. These products are produced in the Company's facility in the U.K. and
are sold to roadway contractors. The Company's position has been stable in the
U.K. marketplace and opportunities are available to license road surfacing
technology to global partners.
BYPRODUCTS. Byproducts, which include lube base oil and catalytic cracker
feedstocks, represent a small percentage of the Company's sales and are derived
from its wax manufacturing process. The Company will continue to participate in
these segments while continuing to seek upgrades to more higher-margin products.
ADHESIVES AND SEALANTS.
The Company manufactures a growing line of adhesives and sealants which are
manufactured in various forms, including: hot-melts, pumpables and extruded tape
products. The Company concentrates its efforts on specialized applications in
which performance criteria are more demanding and in which greater added value
can be offered. The Company's primary products and markets are described below.
ROOFING. The Company supplies a number of products, including laminates,
butyl adhesives and sealants and primers to improve the installation and
retrofit of single-ply roofing systems in the new and rehab commercial building
industry. The Company has pioneered more efficient, faster curing seam tapes
and, by moving away from solvent-based traditional adhesives, the Company has
achieved a favored market position. The Company is a market leader in the U.S.
and its customers include all of the largest single-ply roofing system
suppliers. In addition, the Company has licensed certain of its technology
related to selected roofing products to Firestone. The market for the Company's
line of high-margin roofing products has grown steadily in recent years
particularly with the introduction of specialty laminates designed to fit over
difficult to cover areas.
TRANSPORTATION AFTERMARKET. The Company manufactures urethane sealants and
butyl tapes which are used to install and replace windshield glass in
automobiles in the U.S. and used for vehicle crash repair outside the U.S. These
products provide fast cure bonding in the installation of replacement
windshields in vehicles with airbags, which is required to ensure structural
integrity of the windshield in the event of an accident. The Company believes it
is well positioned to take advantage of this market shift to urethane, which is
stronger and cures faster than traditional bonding materials. Other
polyurethanes have been introduced for the adhesion of body parts.
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<PAGE>
TRANSPORTATION OEM. The Company's products include: hot melt sealants,
acrylics, extrudable compounds, butyl tapes and polyurethanes. These products
are used by automobile, recreational vehicle and trailer manufacturers to reduce
the passage of unwanted air, moisture and noise between two surfaces and to
attach product components. Specialty adhesives are increasingly being used as a
substitute for mechanical fasteners to improve performance and reduce costs. The
Company's products are highly regarded by major automobile manufacturers and
often are the product of choice.
WINDOW MANUFACTURING. The Company produces hot melt adhesives and sealants,
pressure sensitive tapes and liquid butyl pumpables for the manufacture of
insulated glass windows. These products provide both adhesion and sealing
properties between the window glass and the window frame, and act as a moisture
barrier between two panes of glass. The Company is well positioned as the window
manufacturing market trends toward achieving greater energy efficiency for both
the new and retrofit market.
CONCRETE PIPE AND VAULT. The Company offers a line of construction-related
products serving various industrial markets, including the concrete pipe and the
concrete burial vault markets. The Company's products in these markets include
large cross-sectional flexible tape sealants designed to form a gasket-type seal
when compressed between two concrete surfaces. The Company maintains a leading
market position for sales of adhesives and sealants to the concrete vault
industry in the U.S.
BUILDING CONSTRUCTION. The Company produces a variety of adhesives and
sealants used for both new and rehab building construction. The Company's
products in this area are used to seal joints in structures, and are used to
provide waterproofing and corrosion resistance to floors, doors, windows, car
decks, bridges and commercial buildings. The Company's line of products are sold
exclusively in the U.K. and Europe at this time.
OTHER INDUSTRIAL. The Company performs toll processing of intermediate raw
materials for third parties, particularly the processing of butyl solutions. The
Company intends to continue to take advantage of these opportunities when
practical.
APPLIED RESEARCH AND PRODUCT DEVELOPMENT
The Company maintains a strong commitment to applied research and product
development, focusing its efforts on enhancing existing product lines as well as
developing new products based on the Company's existing technologies and
production capabilities. The Company's applied research and product development
staff works together with the Company's sales staff and customers to identify
specific needs and develop innovative, superior performance solutions which
satisfy those needs. This method of product development allows the customer to
become a member of the development team, develops close ongoing working
relationships between the Company and its customers and, in many instances,
permits the Company to gain an in-depth understanding of its customers'
businesses, enabling it to better anticipate and serve its customers' needs.
Advancements resulting from this process can often be profitably applied to
other high-margin niche markets.
The Company employs a research and development staff of 40 experienced
chemists and laboratory technicians. The Company expended $2.0 million, $2.3
million and $2.5 million on a pro forma basis in the 1994, 1995 and 1996 fiscal
years, respectively, in these efforts.
SALES AND MARKETING
The Company maintains an extensive global marketing network that includes a
direct sales force and relationships with independent sales representatives,
distributors and resellers. The Company has 90 technical sales and marketing
personnel who work in coordination with the Company's product development and
technical personnel to service the Company's customers. Members of the Company's
sales force typically have a chemistry background and extensive industry
experience and work directly with customers' technical personnel. The Company
extends its global marketing reach through a geographical network of over 40
local agents who specialize in a particular market.
The Company has over 3,000 wax product customers, of which the ten largest
customers in the 1996 fiscal year accounted for approximately 15% of total pro
forma sales. The Company has over 1,000 adhesives
55
<PAGE>
and sealants product customers, of which the ten largest customers accounted for
approximately 14% of total pro forma sales in the 1996 fiscal year. No single
customer of the Company accounted for more than 5% of the Company's total pro
forma sales in the 1996 fiscal year. The Company anticipates that over time
sales to its larger adhesives and sealants customers will become a smaller
percentage of its total sales.
The Company sells many of its products to customers pursuant to a technical
approval process, and over the past several years the Company has developed
numerous valuable customer approvals. The approval process ranges from a
relatively simple process of sample evaluation and product quality review
procedures to a more complicated process of matching a specific molecular
structure to a customer's applications. Oftentimes, approvals require long lead
times to obtain and require the Company to work closely with customer technical
personnel to develop product specifications. The Company believes that the
nature of these approvals gives it a significant competitive advantage and
positions the Company to develop new formulations for its customers' next
generation of products.
SUPPLY
SPECIALTY WAXES
The Company purchases a wide variety of raw materials for the production of
its specialty wax products. The primary feedstocks used for these products are
partially refined crude oil, other waxy feedstocks and fully processed waxes.
Approximately 26% of the Company's wax-related raw material costs are
attributable to wax feedstocks derived from A/B Crude extracted from Utah
production fields. The Company uses wax feedstocks derived from A/B Crude due to
its very high wax content. Wax represents approximately 27% of each barrel of
naturally occurring A/B Crude compared to a typical barrel of crude oil which
may have a wax content of as low as 1%. There are over 400 million barrels of
proven reserves of A/B Crude in the Utah production fields, or more than 70
years of supply based on current demand and extraction methods. The remaining
74% of the Company's raw materials used for production of specialty wax products
are other partially refined crude oils, fully processed waxes and additives that
are acquired from many sources worldwide and are readily available in the
marketplace.
The Company has a long-term contract with L&W for the purchase of its wax
feedstocks derived from A/B Crude. This contract expires on October 1, 2006,
subject to certain early termination rights. Although the Company believes that,
if needed, there are alternative sources of A/B Crude and other waxy feedstocks,
the unanticipated termination of or nonperformance by the supplier under this
supply contract could have a material adverse effect on the Company's business
and financial condition. Raw materials purchased under this contract and the
Company's other supply relationships are generally priced based on market price
formulas, many of which track crude oil or gasoline fuel prices. In order to
mitigate the impact of A/B Crude market price fluctuations, the Company has
hedged a portion of its raw material costs by hedging crude oil in the futures
market, entering into a series of price swap contracts with The Chase Manhattan
Bank which fix the cost of a portion of the Company's A/B Crude purchases
through March 31, 1997 and, in the case of certain of its feedstocks, purchasing
feedstocks which are naturally hedged as a result of a product swap agreement.
The Company generally seeks to raise the prices of its specialty wax products in
response to increases in feedstock costs, although it has not always been able
to raise prices high enough or quickly enough to offset fully increases in
feedstock costs. In addition, the prices of certain byproducts from the
Company's production processes also track crude oil prices, acting to hedge
volatility in the Company's raw material costs. See "Risk Factors -- Wax
Feedstock Price Risks."
The Company continually monitors and evaluates alternative raw material
sources, and actively pursues alternative suppliers which can economically
provide waxes having the quality and consistency that the Company requires.
ADHESIVES AND SEALANTS
The primary raw materials used by the Company in the production of its
adhesives and sealants are butyl rubber, ethylene propylene diene monomer
rubber, polyisobutylenes, carbon black, isocyanates, polyols, petroleum oils and
release films. The Company purchases these materials from a wide variety of
56
<PAGE>
suppliers. In general, these materials are available from multiple suppliers,
and the Company makes an effort to establish secondary suppliers as well as seek
cost-effective alternatives for raw materials having limited availability.
Long-term purchase agreements are pursued when practical.
MANUFACTURING
The Company has engineered its manufacturing facilities to be capable of
producing batches of specialty products on an as needed basis with a minimum of
fixed costs which were 20% of total pro forma costs in the 1996 fiscal year.
This just-in-time focus and relatively low fixed-cost structure enables the
Company to respond rapidly to changing customer specifications and reduces the
impact on profitability during periods of decreased customer demand.
PRODUCTION OF SPECIALTY WAXES
The Company's wax production and formulation facilities are located in
Western Pennsylvania -- the McKean plant located near Farmers Valley,
Pennsylvania and the Emlenton plant located in Emlenton, Pennsylvania. In
addition, the Company's formulation and packaging operations are conducted at
four global locations: Marshall, Texas; Titusville, Pennsylvania; West Drayton,
U.K. and Eupen, Belgium. The Company has joint ownership of Rheochem's PVC wax
lubricant facility in Columbia, Missouri.
At the Company's wax production and formulation facilities, waxy feedstocks
undergo multiple separation processes whereby oil is removed from wax and wax is
separated by melting point into various wax streams. Many of the waxes are
filtered to FDA standards. The resulting wax products are either sold as is,
formulated and then sold, or shipped to one of the Company's formulation and
packaging operations. During each step of wax production, from the raw materials
to the ultimate finished product, quality control personnel sample and monitor
each stream of each process to ensure its quality, specification and
consistency.
At the Company's formulation and packaging facilities, specialty blends of
waxes are produced by mixing together various types and melt point grades of
waxes, as well as by adding non-wax additives such as ethylene-vinyl acetate,
polyethylene and other polymers and resins which can modify overall viscosity
and other specific characteristics dictated by customers. All formulations
designed for specific customers and market applications are proprietary in
nature and produced under strict quality controls. The Company offers a complete
line of packaging capabilities including pelletizing, prilling, slabbing and
flaking of all its wax products and ships them in all forms of containers.
The Company's specialty formulation and packaging facilities are
strategically located to serve world markets and to take advantage of feedstock
sources. The production capabilities of each facility are similar. In general,
bulk materials and ingredients are purchased and then processed using formulas
designed by the Company's and customers' chemists.
All of the Company's formulation and packaging facilities are ISO (the
International Standards Organization) 9002 certified, a widely recognized
industry standard of quality assurance, and operate under its strict guidelines.
The Company is currently seeking to have its wax production and formulation
facilities ISO certified.
The Company's McKean plant and Emlenton plant are currently operating at
nearly full capacity. The Company estimates that up to $5.0 million of capital
expenditures would be required to increase the production capacity of these
facilities by approximately 25% over their current levels of production. Less
than 25% of the waxes produced at these two facilities is utilized as wax raw
materials for the Company's remaining four facilities, with the balance of the
wax feedstocks for these operations being supplied by third parties. The Company
believes that there are adequate third party sources of wax raw materials
available to meet the foreseeable needs of its formulation and packaging
operations. The Company believes that its formulation and packaging operations
will be able to meet customer demand for the Company's specialty waxes for the
foreseeable future without significant capital expenditures and at this time,
management does not anticipate expanding the Company's existing plants or
acquiring new ones.
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ADHESIVES AND SEALANTS PRODUCTION
All production of adhesives and sealants is conducted at two locations: West
Drayton, U.K. and Michigan Center, Michigan. These facilities are well located
to serve the Company's major customers. The production of adhesives and sealants
is a multi-stage process which involves extensive formulation and mixing. Due to
the diversity in the Company's products, the Company utilizes versatile,
proprietary machinery and equipment to fulfill production requirements. The
product is then packaged in drums, pails, cartridges or other forms based on the
customer's requirements. The Company's manufacturing personnel maintain and
improve operating processes as well as assist in the development of new
processes for new products. The expertise of these employees in the
construction, installation and modification of existing and new manufacturing
systems is critical to the development of new products. The Company believes
that it has the equipment, processes and knowledge to accommodate the production
of new adhesives and sealants without significant capital additions.
In connection with the recently completed ADCO Acquisition, the Company
intends to take steps designed to increase sales of Astor's U.K.-manufactured
adhesives and sealants in the U.S. and sales of ADCO's U.S.-manufactured
products globally. The Company believes that it will benefit by manufacturing
products in the country or geographic region in which the products will be sold.
Limited capital expenditures may be necessary to accommodate the production of
Astor's adhesives and sealants at ADCO's Michigan Center plant.
RHEOCHEM JOINT VENTURE
The Company holds a 50% joint venture interest in Rheochem Technologies,
Inc. ("Rheochem"), a manufacturer of a range of PVC lubricant products based in
Columbia, Missouri. The other 50% joint venture partner is Rheochem, Inc.
("RCI"), whose principal founded Rheochem and has wide experience in PVC
compounding technology. Rheochem has developed advanced wax-based lubricants
which improve processing of PVC siding and pipes and has allowed Rheochem to
capture a large share of what the Company believes to be an expanding PVC
lubricant market. Under the terms of the joint venture agreement, RCI is
primarily responsible for the management of the joint venture whereas the
Company provides the joint venture with accounting services and technical
support. In addition, there is an agreement between the Company and Rheochem
whereby Rheochem markets PVC lubricants developed by Astor in North America,
while the Company processes certain of Rheochem's PVC lubricants at its
processing plants in Titusville, Pennsylvania and Marshall, Texas. These
products are sold to the joint venture at mutually agreed upon prices, which
have historically been market prices. The Company and RCI share equally in the
profits and losses of the joint venture and each of them receives management
fees for the respective management and technical services they provide.
Under the joint venture agreement, neither the Company nor RCI may sell its
interests in Rheochem without first complying with right of first offer and
right of first refusal procedures in favor of the other party. After December
31, 1997, either the Company or RCI may compel the other party to purchase all
its Rheochem interests or to sell to it all the other party's Rheochem
interests. In addition, if the principal of RCI ceases to render services to
Rheochem as a result of death, disability or other reasons, then the Company
will have a six-month call option to require RCI to sell its Rheochem interests
and RCI will concurrently have a seven month put option to require the Company
to purchase RCI's Rheochem interests, in either case at aggregate current value
determined under procedures set forth in the agreement.
Rheochem recorded net sales of $25.9 million and net income of $0.4 million
for the year ended December 31, 1995. Rheochem recorded net sales of $26.1
million and net income of $1.0 million for the nine months ending September 30,
1996. The combined contribution of management fees and equity earnings to
Astor's fiscal year 1996 earnings was $1.2 million.
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FACILITIES
The Company operates ten locations and participates in a joint venture which
operates one additional facility with an aggregate total space of approximately
824,000 square feet. The following table sets forth certain information
regarding these locations. Each of the locations is owned by the Company unless
otherwise indicated.
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQ. FT. (1) TYPE OF OPERATIONS
- -------------------------------------- ------------ -------------------------------------------------
<S> <C> <C>
Raleigh, North Carolina (2) 6,600 Global corporate offices
Farmers Valley, Pennsylvania 185,000 Wax production and formulation
Emlenton, Pennsylvania 95,000 Wax production and formulation
Titusville, Pennsylvania 50,000 Wax formulation and packaging
Atlanta, Georgia (2) 22,500 U.S. sales and marketing and administration
Marshall, Texas 74,000 Wax formulation and packaging
Michigan Center, Michigan 170,000 Adhesives and sealants production and research
and development
Columbia, Missouri (3) 22,500 Wax formulation and packaging
West Drayton, Middlesex, England 130,000 European offices, research and development, wax
formulation and packaging, and adhesives and
sealants production
Eupen, Belgium 67,000 Wax formulation and packaging
Kuala Lumpur, Malaysia (2) 1,200 Asian sales and marketing
</TABLE>
- ------------------------
(1) Does not include acreage used for tank farms, other equipment not under roof
or stand-alone warehouses.
(2) These facilities are leased. The Raleigh, North Carolina lease expires on
May 31, 2001, the Atlanta, Georgia lease expires on March 1, 2001 and the
Kuala Lumpur, Malaysia lease expires on April 1, 1998.
(3) This facility is owned and operated by Rheochem, a joint venture in which
the Company holds a 50% interest. See "-- Rheochem Joint Venture."
COMPETITION
The Company competes in the production and sale of specialty wax products
with (i) large multinational oil refineries who largely produce commodity wax as
a byproduct of their lube oil refining business, (ii) a wide variety of
specialty wax producers around the world, which, like the Company, create
value-added products through formulation and packaging and (iii) a large number
of specialty chemical manufacturers, which typically compete in one or more
niche markets. Certain of these competitors have greater financial, technical,
marketing and other resources than the Company. The Company competes on a
variety of factors, including the consistency of its products, the breadth of
its product line, its applied research and product development capabilities, its
worldwide marketing capabilities and its value-added customer services.
The adhesives and sealants markets are highly fragmented, and the Company
competes with a large number of other manufacturers, many of which have greater
financial, technical, marketing and other resources than the Company. The
Company competes by pursuing definable niches in less competitive markets in
which the Company can utilize its technological expertise and applied research
and product development capabilities.
In both the specialty wax and adhesives and sealants businesses, the Company
has developed many of its product formulations in conjunction with its
customers, who often work closely with the Company during the product
development process. Additionally, the Company sells many of its products to
customers pursuant to a technical approval process, and over the past several
years the Company has developed numerous such
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customer approvals. The approval process ranges from a relatively simple process
of sample evaluation and product quality review procedures to a more complicated
process of matching a specific molecular structure to a customer's applications.
The Company believes that the nature of its approvals and its close working
relationship with certain of its customers reduces the threat of losing these
customers to its competitors and positions the Company to develop new
formulations for these customers' next generation of products.
PATENTS AND PROPRIETARY INFORMATION
The Company currently has over 3,000 different wax formulations and over
1,650 adhesives and sealants in its proprietary database. The Company relies
primarily upon trade secrets and other unpatented proprietary information in its
operations, particularly in its specialty wax products business. The Company
also holds 19 patents in the U.S. and 26 patents in other countries on adhesives
and sealants compositions, methods of using such adhesives and sealants and
other technologies related to such products.
However, there can be no assurance that the Company will be able to maintain
the confidentiality of its trade secrets and proprietary formulations and
processes, that others will not develop similar or better formulations and
processes, that the Company's patents will provide any protection or benefit to
the Company or that additional patents will be issued.
ENVIRONMENTAL MATTERS
The Company is subject to stringent federal, state, local and foreign
environmental laws and regulations relating to the protection of the
environment, including, without limitation, those relating to the storage,
handling, emission and discharge of materials into the environment
("Environmental Laws"). The Company has expended and may be required to expend
in the future, substantial funds for compliance with and remediation under
Environmental Laws. Costs and expenses may be incurred in connection with the
repair or upgrade of facilities to meet existing or new requirements under
Environmental Laws, the remediation of hazardous substances in the soil and
groundwater from historical or ongoing operations at the Company's facilities,
or for other purposes. Except for certain of the matters discussed herein, the
Company believes that it is in material compliance with all applicable
environmental laws and regulations.
Environmental Laws are constantly evolving and it is impossible to predict
accurately the effect they may have upon the capital expenditures, earnings or
competitive position of the Company in the future, except that such
Environmental Laws are becoming increasingly strict and can be expected to
result in increasing compliance costs. To the extent that the cost of compliance
increases and the Company cannot pass on future increases to its customers, such
increases may have an adverse effect on the Company's profitability.
Environmental Laws also provide for substantial penalties and criminal sanctions
for certain violations. The Company is aware of certain conditions, including
the matters discussed below, which may lead to environmental liability being
imposed on the Company with respect to the operation of its facilities and
business. The Company has certain indemnification rights with respect to certain
of these environmental matters. Assuming that the indemnitors continue to meet
their obligations, the Company does not believe that these matters will have a
material adverse effect on the business or financial condition of the Company.
There can be no assurance, however, that the indemnitors will continue to meet
their obligations or that the Company will not incur additional significant
liabilities in connection with these or other environmental matters or that such
liabilities will not have a material adverse effect on the Company's business or
financial condition.
TITUSVILLE FACILITY
The Company is aware of contamination at a portion of its Titusville,
Pennsylvania facility. Investigations to date indicate that the Company's
operations did not contribute to the contamination and that most of the
contamination results from the disposal of waste by an oil refinery that
formerly operated in the area. Although the Company, as the current owner of the
site, could be held strictly liable under certain Environmental Laws for the
cleanup of the Titusville facility, the Company would have the right to recover
some or all of the costs of cleaning up this site from third parties who have
owned or operated the site or contributed to its contamination. Environmental
consultants engaged by the Company have given a preliminary estimate of $1
million for the cost of cleaning up this site. Under the terms of an agreement
between the Parent and ABI pursuant to which ABI was acquired and became a
subsidiary of the Company, the Parent is
60
<PAGE>
entitled to set-off, against principal and interest otherwise payable on
L1,450,988 of the subordinated debt issued to ABI's former stockholders, any
costs relating to this site over $350,000, so long as the Parent notifies the
former stockholders by June 28, 1999 of the existence of the condition giving
rise to the set-off claim. After October 1, 1996, any such set-off by the Parent
will result in a corresponding reduction in the mirror intercompany note from
ABI Acquisition 2 plc to ABI Acquisition 1 plc, the mirror intercompany note
from ABI Acquisition 1 plc to Astor Holdings II and the mirror intercompany note
from Astor Holdings II to the Parent. The Company has begun the process of
characterizing the contamination of the Titusville facility pursuant to the
Pennsylvania Land Recycling and Environmental Remediation Standards Act, which
provides for the voluntary cleanup of industrial properties through the use of
streamlined procedures and remedial standards tailored to the future use of the
property.
The Titusville facility is located near the Cyclops Site, which has evidence
of soil and groundwater contamination and has been the subject of an Expanded
Site Inspection by an EPA contractor. Costs of remediation of the Cyclops Site
have been estimated to range between $4 million and $15 million in 1995 dollars
for soil remediation. No cost estimate is available for the remediation, if any,
of groundwater at this site. Based upon investigations conducted to date, the
Company believes that other parties are likely responsible for the contamination
at the Cyclops Site. Under certain Environmental Laws, remediation costs for
this site would be borne by parties who have owned or operated the site or are
responsible for its contamination. An EPA investigation, the conclusions of
which management believes to be inaccurate, indicated that a former subsidiary
of ABI (which has since been merged into the Company) formerly owned the Cyclops
Site and disposed of wastes there. However, based on the Company's
investigations to date, the Company believes that ABI's former subsidiary never
owned or operated the Cyclops Site, or arranged for the disposal of or
transported hazardous waste there and that a different company with some common
ownership and a similar name was the prior owner. Because of the proximity of
the Company's property to the Cyclops Site and other unknown factors, there can
be no assurance that the Company will not incur some liability relating to the
Cyclops Site. Under the terms of the ABI acquisition agreement between the
Parent and ABI, the Parent is entitled to set-off, against the principal and
interest otherwise payable on L1,450,988 of subordinated debt issued to ABI's
former stockholders, any costs relating to the Cyclops Site, so long as the
Parent notifies the stockholders by June 28, 1999 of the existence of the
condition giving rise to the set-off claim. After October 1, 1996, any such
set-off by the Parent will result in a corresponding reduction in the mirror
intercompany note from ABI Acquisition 2 plc to ABI Acquisition 1 plc, the
mirror intercompany note from ABI Acquisition 1 plc to Astor Holdings II and the
mirror intercompany note from Astor Holdings II to the Parent.
PENNSYLVANIA REFINERY FACILITIES
Quaker State, which formerly owned the Company's Emlenton and McKean,
Pennsylvania facilities, has installed groundwater recovery systems at these
facilities and is using the Company's wastewater treatment facilities for
treatment of the contaminated groundwater. Quaker State is responsible for all
costs of the recovery systems, a fee for use of the Company's wastewater
treatment facilities and any incremental costs resulting from the Company's
treatment of groundwater in its wastewater treatment facilities. Groundwater
remediation at the McKean and Emlenton facilities is funded entirely by Quaker
State pursuant to an indemnity agreement. In addition, under the indemnity
agreement, certain non-groundwater environmental remediation and compliance
costs are divided equally between Quaker State and the Company (with the Company
paying its share in the form of subordinated notes payable to Quaker State on
December 31, 2008) up to a total of $5.5 million. Costs above $5.5 million are
paid entirely by Quaker State under the indemnity agreement. The cost sharing
arrangement for such non-groundwater remediation costs and compliance costs
expires in 2010. Since 1990, the Company has incurred approximately $150,000 of
indebtedness relating to this cost-sharing arrangement. There is no expiration
date or maximum liability, however, with respect to Quaker State's obligation to
pay for groundwater remediation at the Emlenton and McKean facilities. There are
several additional environmental compliance issues relating to tanks,
separators, drying pits, cleaning areas and other matters at these facilities,
some of which Quaker State is addressing pursuant to the indemnity agreement and
some for which the Company is seeking coverage from Quaker State under the
indemnity agreement. For example, the U.S. Environmental Protection Agency is
currently reviewing an
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<PAGE>
engineering proposal, funded by Quaker State pursuant to the indemnity, to
remedy a potential noncompliance by installing dikeage surrounding several large
naptha storage tanks at the Emlenton facility. Quaker State consistently has
performed its groundwater remediation obligations under the indemnity. However,
any failure by Quaker State to continue funding the costs to be borne by it or
the incurrence of any costs for which Quaker State is not responsible
substantially in excess of those currently expected by the Company could have a
material adverse effect on the Company's financial condition or results of
operations.
PAGE AVENUE FACILITY
ADCO's manufacturing facility located in Michigan Center, Michigan (the
"Page Avenue Facility") has been the subject of cleanup action during which
numerous buried drums and other waste as well as an underground storage tank
("UST") were removed. The Company believes that former owners and operators of
the Page Avenue Facility buried the drums and other waste and operated the UST.
Residual soil and groundwater contamination apparently released from the drum
waste and/or the UST still remains at the Page Avenue Facility. The results of
investigation and cleanup activities at the Page Avenue Facility have been
reported to the Michigan Department of Environmental Quality ("MDEQ"). Under
recent changes to the Michigan environmental cleanup liability statute, the
current owner of a contaminated facility is only liable for cleanup costs if it
is responsible for causing a release of contamination at the facility. In
October 1995, ADCO asserted to MDEQ that it should not be held liable for any
additional remediation under the revised statute because previous owners and
operators were responsible for the contamination at the Page Avenue Facility.
MDEQ has not yet responded to ADCO's correspondence on this issue. The revised
Michigan cleanup statute also shields from liability the new owner of a
previously contaminated facility if that person conducts a baseline
environmental assessment ("BEA") of the facility within 45 days of acquiring it
and discloses the results of the assessment to MDEQ and subsequent purchasers of
the facility. Astor Corporation has initiated the process of conducting a BEA of
the Page Avenue Facility. Pursuant to a 1993 agreement through which the Page
Avenue Facility was acquired from Nalco Chemical Company ("Nalco"), ADCO has an
indemnity, subject to caps and other limitations, from Nalco Chemical Company
for certain losses incurred in connection with the cleanup of the drum waste
area and the former UST (the "Nalco Indemnity"). There can be no assurance,
however, that the Company would be able to make any recovery under the Nalco
Indemnity.
THIRD PARTY WASTE DISPOSAL SITES
ADCO has been named as a potentially responsible party ("PRP") at two
third-party waste disposal sites pursuant to CERCLA -- the Jackson Drop Forge
Site in Jackson, Michigan (the "Jackson Site") and the Frontier Chemical Site in
Niagara Falls, New York (the "Frontier Site"). The Company believes that ADCO
has no involvement with the Jackson Site. In addition, the EPA has informally
indicated that it no longer considers ADCO a PRP at the Jackson Site. The
Company believes that a portion of the liability, if any, in connection with the
Jackson Site is subject to the Nalco Indemnity. In connection with the Frontier
Site, ADCO has paid approximately $9,000 to settle its share of alleged
liability for removal actions at the site. It is unclear whether the EPA will
require additional cleanup at the Frontier Site.
LEGAL PROCEEDINGS
From time to time, the Company has been and is involved in various legal
proceedings. Management believes that all of such litigation is routine in
nature and incidental to the conduct of its business, and that none of such
litigation would have a material adverse effect on the financial condition or
results of operations of the Company.
The Company has been named as a defendant, along with 92 other companies, in
a class action lawsuit in Texas. The suit alleges personal injury, death and
other damages arising out of the plaintiffs' exposure to a variety of building
materials and other products while working at the Corpus Christi Army Depot. The
plaintiffs, who are seeking approximately $500 million in damages, appear to
have named as defendants the manufacturers of every substance known to have been
used over an extended period at the Army Depot. The Company product involved
appears to be a sealant used in the installation and repair of commercial
roofing.
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<PAGE>
The Company's insurance carrier is currently defending this action on behalf of
the Company. While the case is still in the early stages of discovery, according
to the insurer, no evidence has been produced to date linking the Company's
sealants to any of the plaintiffs' claims.
EMPLOYEES
As of July 1, 1996, the Company had 768 employees in its worldwide
operations. Of that total, 525 were primarily engaged in manufacturing and
production, 90 were primarily engaged in sales, marketing and distribution, 40
were primarily engaged in applied research and product development, and 113 were
primarily engaged in management and administration.
At the Company's Emlenton and McKean, Pennsylvania facilities, 188 of the
hourly production employees are members of the Oil, Chemical and Atomic Workers
International Union. In February 1996, the Company entered into a labor
agreement with this union expiring in January 1999. At its Michigan Center,
Michigan facility, 130 of the Company's hourly production employees are members
of the International Association of Machinists and Aerospace Workers. In May
1994, the Company entered into a five-year labor agreement with this union.
The Company has never experienced a labor strike or other labor-related work
stoppage, and the Company believes that its employee and labor relations are
good.
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<PAGE>
ACQUISITION OF ADCO
TERMS OF MERGER
Concurrent with the consummation of the Offering on October 8, 1996, Astor
acquired all of the outstanding capital stock and all of the issued but
unexercised options of ADCO, a publicly traded Nasdaq National Market
manufacturer and marketer of adhesives and sealants, for an aggregate
consideration of $54.4 million. Through the acquisition of ADCO, Astor added
significant depth to its product lines, global marketing and manufacturing
networks and product development capabilities. Management believes that these
strengths will enable Astor to improve significantly the penetration of its
existing adhesives and sealants in the U.S. and provide Astor the opportunity to
market ADCO's products outside of the U.S. Management believes that the ADCO
Acquisition will also serve as an excellent platform from which to pursue
complementary acquisitions in the highly fragmented adhesives and sealants
industry.
Pursuant to the terms of a definitive merger agreement between the parties,
Astor paid $10.25 per share for the 5.15 million ADCO shares outstanding, plus
an aggregate of $1.6 million representing the aggregate net spread on ADCO's
outstanding stock options. In addition, ADCO caused its subsidiary to redeem
approximately $3.9 million of outstanding preferred stock of such subsidiary and
pay the dividends accrued thereon as of the date of redemption.
The merger agreement contains customary representations and warranties from
ADCO to Astor. These representations and warranties, and any related
indemnification rights, terminated upon the effectiveness of the ADCO
Acquisition. Concurrent with the consummation of the Offering and the
acquisition of ADCO, ADCO Products, Inc., a subsidiary of ADCO, was merged with
and into ADCO, and ADCO was merged with and into Astor Corporation. Astor
Corporation is the surviving entity of these mergers.
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<PAGE>
CORPORATE STRUCTURE
The following chart depicts the equity ownership of the Company after giving
effect to the Transactions, including the ADCO Acquisition.
[FLOWCHART]
- ------------------------
(1) The outstanding voting preferred stock of ABI Acquisition 1 plc entitles the
holder thereof to (i) elect three of the four directors of ABI Acquisition 1
plc, (ii) exercise 75% of the voting power of the outstanding capital stock
of ABI Acquisition 1 plc and (iii) an aggregate liquidation preference of
$1.7 million.
(2) The outstanding voting preferred stock of Astor Corporation entitles the
holder thereof to an aggregate liquidation preference of $28.5 million and
has a cumulative dividend rate of 12.5% per annum. The holder of such shares
is also entitled to exercise 13.2% of the voting power of the currently
outstanding capital stock of Astor Corporation.
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<PAGE>
MANAGEMENT
The following table sets forth the name, age and position of each of the
directors and executive officers of Astor Corporation, Astor Holdings II and the
Parent. Unless otherwise noted, each individual serves in the indicated capacity
at each of Astor Corporation, Astor Holdings II and the Parent. Each director
will hold office until the next annual meeting of stockholders or until his
successor has been elected and qualified. Officers are elected by the Board of
Directors and serve at the discretion of the Board.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---------------------- --- --------------------------------------------------------------------------
<S> <C> <C>
Boyd D. Wainscott 52 Chairman of the Board, Chief Executive Officer, Director
C. Richard Spalton 56 Director, President
Jose C. Houssa 50 Vice President, Chief Technical Officer (1)
John F. Gottshall 49 Vice President, Chief Financial Officer, Treasurer, Assistant Secretary
David E. Hawkins 47 Vice President, Chief Administrative Officer, Secretary
Charles E. Sax 64 President of ADCO Division (1)
Philip D. Beery 52 Chief Operating Officer of ADCO Division (1)
Thomas P. Causer 47 Vice President, Wax Manufacturing Operations (1)
Ron B. Hallewell 47 Vice President, Sales and Marketing, America (1)
Adrian Browne 35 Vice President, Controller, Assistant Treasurer, Assistant Secretary (1)
Alan J. Andreini 50 Director
Richard R. Crowell 41 Director
Mark C. Hardy 32 Director
Kurt B. Larsen 32 Director
Justin Maccarone 37 Director
Gerald L. Parsky 54 Director
Richard K. Roeder 48 Director
W. Montague Yort 33 Director, Assistant Secretary
</TABLE>
- ------------------------
(1) Individual holds such positions at Astor Corporation and not at Astor
Holdings II or the Parent.
BOYD D. WAINSCOTT has served as Chairman and Chief Executive Officer of
Astor Corporation since 1994 and as a director of Astor Corporation since June
1995. From 1990 to 1993, Mr. Wainscott served as President and Chief Executive
Officer of Pitman-Moore, a division of the IMCERA Group and a global
manufacturer and marketer of animal health and nutrition products. Prior to
this, Mr. Wainscott held several senior marketing positions within Pitman-Moore
and at Stauffer Chemical Company where he was responsible for sales and
marketing of a division that produces herbicides and industrial products.
C. RICHARD SPALTON has served as President and a director of Astor
Corporation since June 1995. Prior to that, Mr. Spalton was the Managing
Director of Astor Stag Ltd. and ABI since 1974. Mr. Spalton joined ABI in 1971
as a Marketing Manager following nine years with Shell Oil in England.
JOSE C. HOUSSA has been Vice President and Chief Technical Officer of Astor
Corporation since June 1995. From 1989 to June 1995, Mr. Houssa was the Group
Technical Director of ABI's West Drayton facility and a member of the Board of
Directors of Astor Stag Ltd., ABI's English subsidiary. Prior to that he was
Chief Chemist and Product Director of Astor Stag S.A., ABI's Belgian subsidiary,
and responsible for the marketing and sales of ABI products in the European
community (U.K. excluded). Mr. Houssa has been with ABI since 1970.
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<PAGE>
JOHN F. GOTTSHALL joined Astor Corporation in 1995 as its Chief Financial
Officer. From 1991 to 1995, Mr. Gottshall served as Vice President and Chief
Financial Officer at Trident NGL, Inc., a natural gas liquids firm. In addition,
Mr. Gottshall was Senior Vice President and Chief Financial Officer of Freeport-
McMoRan Resource Partners L.P., an agricultural products firm from 1987 to 1990
and Treasurer of Freeport-McMoRan, Inc. from 1985 to 1987.
DAVID E. HAWKINS has been the Chief Administrative Officer of Astor
Corporation since 1994. From 1987 to 1993, Mr. Hawkins served in several senior
management positions, including Vice President of Marketing from 1987 to 1989,
and Senior Vice President of Strategic Planning, Mergers and Acquisitions from
1989 to 1993 at Pitman-Moore, a division of the IMCERA Group and a worldwide
manufacturer of animal health and nutrition products.
CHARLES E. SAX has been the President of the ADCO Division of the Company
since October 1996. From 1985 to October 1996, Mr. Sax served as President of
ADCO and from 1993 to October 1996 he served as a director of ADCO. Mr. Sax
began working for ADCO in 1985, following Nalco's acquisition of ADCO, and spent
a combined 38 years with Nalco and ADCO. It is currently anticipated that Mr.
Sax will retire from his position as an officer of Astor Corporation on December
31, 1996, at which time he will become a director of Astor Corporation.
PHILIP D. BEERY has been the Chief Operating Officer of the ADCO Division of
the Company since October 1996. From 1990 to October 1996, Mr. Beery served as
Vice President of Sales and Marketing of ADCO, during which time he was in
charge of all sales and marketing at ADCO, including market development and new
products. From 1983 to 1985, Mr. Beery served in several senior management
positions at ADCO.
THOMAS P. CAUSER has served as Vice President, Wax Manufacturing Operations
of Astor Corporation since 1992. From 1990 to 1992, Mr. Causer was McKean Plant
Manager and Quality Control Manager. Mr. Causer had previously spent 12 years as
Quality Control Manager at Quaker State.
RON B. HALLEWELL has been Vice President of Sales and Marketing, America at
Astor Corporation since consummation of the ABI Acquisition in June 1995. Mr.
Hallewell joined ABI in 1972 and held various management positions in ABI,
including Vice President of Sales and Marketing of Astor Wax Corp., a U.S.
subsidiary of ABI, from August, 1986 to June 1995.
ADRIAN BROWNE has been a Vice President of Astor Corporation since 1996 and
the Controller of Astor Corporation since June 1995. Mr. Browne joined ABI as
Group Finance Director in July 1994. Previously, he spent twelve years with the
London office of KPMG Peat Marwick and was Senior Manager of the Audit
Department from 1992 to 1994, working on audit and corporate finance
assignments. Mr. Browne is a chartered accountant.
ALAN J. ANDREINI has served as a director of Astor Corporation since 1989.
Since 1978, Mr. Andreini has served as Executive Vice President of Comdisco,
Inc., a technology services firm, where he is responsible for budgets, human
resources, venture leasing and compensation and also serves as a director. In
addition, Mr. Andreini currently serves as a director of Hugoton Energy
Corporation, an oil and gas exploration and production firm.
RICHARD R. CROWELL has served as a director of Astor Corporation since June
1995. Mr. Crowell is a founding partner of Aurora Capital Partners L.P. ("ACP")
and has served as a Managing Director of ACP since 1991. Prior to forming ACP,
Mr. Crowell was a Managing Director of Rosecliff, Inc., the management company
for Acadia Partners L.P.
MARK C. HARDY has served as a director of Astor Corporation since June 1995.
Mr. Hardy joined ACP in June 1993 as an Associate and has been a Vice President
of ACP since December 1995. Prior to joining ACP, Mr. Hardy was an Associate at
Bain & Company, a consulting firm.
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<PAGE>
KURT B. LARSEN has served as a director of Astor Corporation since June
1995. Mr. Larsen joined ACP at its founding in 1991 as an Associate and served
as a Vice President of ACP from December 1993 through December 1995, at which
time he became a Principal of ACP. Prior to joining ACP, Mr. Larsen was an
Associate at Drexel Burnham Lambert, Inc.
JUSTIN MACCARONE was nominated in September 1996 by UBS Partners Inc. ("UBS
Partners") to serve as a director of Astor Corporation pursuant to the terms of
a Stockholders Agreement described below and under "Ownership of Voting
Securities -- Stockholders Agreement." Mr. Maccarone has served as a Managing
Director of UBS Capital LLC ("UBS Capital") since 1993 and as the President and
a Director of UBS Partners since 1995. Mr. Maccarone served as a Senior Vice
President at GE Capital Corporation from 1992 to 1993 and Vice President from
1989 to 1992. Mr. Maccarone also serves as a director of Cinnabon International,
Inc., Peoples Telephone Company, Inc. and American Sports Products Group, Inc.
GERALD L. PARSKY has served as a director of Astor Corporation since 1994.
Mr. Parsky is a founding partner and has been the Chairman and Managing Director
of ACP since its founding in 1991. Mr. Parsky is also the beneficial owner of
Century City 1800 Partners, L.P., a Delaware limited partnership ("CC 1800").
Prior to forming ACP, Mr. Parsky was a Senior Partner and member of the
Executive and Management Committees with the law firm of Gibson, Dunn &
Crutcher.
RICHARD K. ROEDER has served as a director of Astor Corporation since June
1995. Mr. Roeder is a founding partner and has been a Managing Director of ACP
since its founding in 1991. Prior to forming ACP, Mr. Roeder was a partner in
the law firm of Paul, Hastings, Janofsky & Walker, where he served as Chairman
of the firm's Corporate Law Department and a member of its National Management
Committee.
W. MONTAGUE YORT has served as a director of Astor Corporation since June
1995. Mr. Yort joined ACP in April 1993 as an Associate and has been a Vice
President of ACP since December 1995. From June 1992 to April 1993, Mr. Yort was
an Associate at Morgan Stanley & Co. Incorporated.
Under the Stockholders Agreement, dated as of June 27, 1995, among the
Parent and certain of its stockholders, warrant holders and option holders, UBS
Partners, a stockholder of the Parent, became entitled to appoint two members of
the Board of Directors of the Parent and one member of the Boards of Directors
of Astor Corporation and Astor Holdings II after consummation of the
Transactions. Pursuant to the Stockholders Agreement, UBS Partners designated
Justin Maccarone to serve on the Boards of Directors of Astor Corporation, Astor
Holdings II and the Parent. In addition, UBS Partners is entitled to have one
UBS Board nominee serve as a member of each Board committee of Astor
Corporation, Astor Holdings II and the Parent. See "Ownership of Voting
Securities -- Stockholders Agreement."
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<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth the cash compensation paid or awarded by
Astor Corporation to the Chief Executive Officer and the other four most highly
compensated executive officers of Astor Corporation (the "Named Executive
Officers") for the fiscal year ended March 31, 1996.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL --------------
COMPENSATION NUMBER OF
---------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (2) OPTIONS (#)(3) COMPENSATION
- --------------------------- --------- ------------- ------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Boyd D. Wainscott, 1996 $ 270,000 $ 170,482 $ -- 81,818 $ 58,308(4)
Chief Executive Officer
C. Richard Spalton, 1996 178,250 96,487(5) -- 34,091 17,290(6)
President
Jose C. Houssa, 1996 143,800 25,110 -- 10,227 31,168(6)
Chief Technical Officer
John F. Gottshall, 1996 142,500(7) 22,900 -- 10,227 87,168(8)
Chief Financial Officer
David E. Hawkins, 1996 135,000 18,600 -- 6,818 105,947(9)
Chief Administrative
Officer
</TABLE>
- ------------------------
(1) Figures are in U.S. dollars and where appropriate reflect an assumed
exchange rate of L1.00 to $1.55 and 32.00 Belgian francs to $1.00.
(2) Excludes perquisites and other personal benefits which do not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus for any Named
Executive Officer.
(3) Represents options issued by the Parent to purchase securities of the
Parent. All such options were issued pursuant to the 1995 Stock Incentive
Plan of the Parent (the "Stock Incentive Plan"). Pursuant to the Stock
Incentive Plan, the Compensation Committee of the Board of Directors of the
Parent determines the terms and conditions of each option granted.
(4) Reflects the payment of relocation costs in the amount of $55,601 and the
payment of insurance premiums in the amount of $2,707.
(5) Includes a bonus of $46,113 paid by ABI prior to the June 1995 acquisition.
(6) Reflects contributions to pension plan.
(7) Reflects salary from July 1995 (commencement date of employment) to March
1996.
(8) Reflects the payment of relocation costs in the amount of $84,377 and the
payment of insurance premiums in the amount of $2,791.
(9) Reflects the payment of relocation costs in the amount of $102,130 and the
payment of insurance premiums in the amount of $3,817.
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<PAGE>
OPTION GRANTS
Shown below is information concerning grants of options issued by the Parent
to the Named Executive Officers for the fiscal year ended March 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL POTENTIAL REALIZABLE
GRANTS VALUE AT ASSUMED
-------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS GRANTED EMPLOYEES IN PRICE PER EXPIRATION ------------------------
NAME (#)(1) FISCAL YEAR SHARE DATE 5% 10%
- -------------------------------- --------------- --------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Boyd D. Wainscott............... 81,818 42.3% $ 10.00 6/28/05 $ 514,635 $ 1,304,179
C. Richard Spalton.............. 34,091 17.6 10.00 6/28/05 214,432 543,411
Jose C. Houssa.................. 10,227 5.3 10.00 6/28/05 64,328 163,018
John F. Gottshall............... 10,227 5.3 10.00 6/28/05 64,328 163,018
David E. Hawkins................ 6,818 3.5 10.00 6/28/05 42,885 108,679
</TABLE>
- ------------------------
(1) These options were granted under the Stock Incentive Plan.
EXERCISES OF OPTIONS AND AGGREGATE YEAR-END OPTION VALUES
Shown below is information with respect to the year-end values of all
options held by the Named Executive Officers. No named executive officer
exercised any options in the fiscal year ended March 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------- ------------------- -------------------------
<S> <C> <C>
Boyd D. Wainscott..................................................... 16,364/65,454 0/0
C. Richard Spalton.................................................... 6,818/27,273 0/0
Jose C. Houssa........................................................ 2,045/ 8,182 0/0
John F. Gottshall..................................................... 2,045/ 8,182 0/0
David E. Hawkins...................................................... 1,364/ 5,454 0/0
</TABLE>
- ------------------------
(1) The exercise price of each option is $10.00 per share, the same price per
share paid by all purchasers of the Common Stock of the Parent at the time
of the Prior Transactions. There have been no subsequent issuances of any
class of the Common Stock of the Parent or options to purchase shares of
Common Stock of the Parent since such time. In addition, such Common Stock
is not publicly traded. As a result of these factors, the Board of Directors
of the Parent has decided to use $10.00 as the value of the Common Stock
underlying the unexercised options for the purpose of these calculations.
The value of the unexercised options is equal to the net value of such
Common Stock as of March 31, 1996 ($10.00), less the applicable per share
exercise price of the option ($10.00).
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MANAGEMENT COMPENSATION AND EMPLOYMENT AGREEMENTS
Astor Corporation has entered into an employment agreement with Boyd D.
Wainscott effective as of June 28, 1995, which provides that he will serve as
Chairman and Chief Executive Officer of Astor Corporation for an initial term of
three years, which Astor Corporation can extend for successive one year periods.
Pursuant to the agreement, Mr. Wainscott receives an annual salary of $300,000
subject to increase at the discretion of the Board of Directors of the Company.
In addition, Mr. Wainscott is entitled to receive an annual bonus in an amount
up to 100% of his then annual base salary, subject to the satisfaction of
certain performance conditions and at the sole discretion of the Board of
Directors of Astor Corporation if such conditions are not met. On October 30,
1995 Mr. Wainscott also received stock options to purchase 81,818 shares of
Common Stock of the Parent which vest over a five-year period and become
exercisable upon vesting. If Mr. Wainscott's employment is terminated without
cause by Astor Corporation, he will be entitled to receive as severance an
amount equivalent to his then annual base salary for the remaining three year
initial term of his employment and the accrued portion of any bonus through the
date of the termination.
Astor Corporation has entered into an employment agreement with Charles R.
Spalton effective as of July 1, 1995, which provides that he will serve as
President of Astor Corporation. Astor Corporation may terminate Mr. Spalton's
employment on 24 months notice and Mr. Spalton may terminate his employment on
six months notice, provided that such notice, whether given by Astor Corporation
or Mr. Spalton, may not be effective prior to June 30, 1998. The Company may
terminate Mr. Spalton's employment by giving him at least 24 months written
notice. Pursuant to the agreement, Mr. Spalton receives an annual salary of
L125,000 (or $193,750 at an exchange rate of L1.00 to $1.55), subject to
increase at the discretion of the Board of Directors of the Company. In
addition, Mr. Spalton is entitled to receive an annual bonus in an amount up to
75% of his then annual base salary, subject to the satisfaction of certain
performance conditions and at the sole discretion of the Board of Directors of
Astor Corporation if such conditions are not met. On October 30, 1995 Mr.
Spalton also received stock options to purchase 34,091 shares of Common Stock of
the Parent which vest over a five year period and become exercisable upon
vesting.
Astor Corporation has entered into an employment agreement with Jose C.
Houssa effective as of July 1, 1995, which provides that he will serve as Chief
Technical Officer of Astor Corporation. Astor Corporation may terminate Mr.
Houssa's employment on 24 months notice and Mr. Houssa may terminate his
employment on six months notice, provided that such notice, whether given by
Astor Corporation or Mr. Houssa, may not be effective prior to June 30, 1998.
Pursuant to the agreement, Mr. Houssa receives an annual salary of L90,000 (or
$139,500 at an exchange rate of L1.00 to $1.55), subject to increase at the
discretion of the Board of Directors of Astor Corporation. In addition, Mr.
Houssa is entitled to receive an annual bonus in an amount up to 50% of his then
annual base salary, subject to the satisfaction of certain performance
conditions and at the sole discretion of the Board of Directors of if such
conditions are not met. On October 30, 1995 Mr. Houssa also received stock
options to purchase 10,227 shares of Common Stock of the Parent which vest over
a five year period and become exercisable upon vesting.
Astor Corporation has entered into an employment agreement with John F.
Gottshall effective as of July 1, 1995, which provides that he will serve as
Chief Financial Officer of Astor Corporation for an initial term of two years,
which Astor Corporation can extend for successive one year periods. Pursuant to
the agreement, Mr. Gottshall receives an annual salary of $190,000, subject to
increase at the discretion of the Board of Directors of Astor Corporation. In
addition, Mr. Gottshall is entitled to receive an annual bonus in an amount up
to 40% of his then annual base salary, subject to the satisfaction of certain
performance conditions and at the sole discretion of the Board of Directors of
Astor Corporation if such conditions are not met. On October 30, 1995 Mr.
Gottshall also received stock options to purchase 10,227 shares of Common Stock
of the Parent which vest over a five year period and become exercisable upon
vesting. If Mr. Gottshall's employment is terminated without cause by Astor
Corporation, he will be entitled to receive as severance (i) any accrued bonus,
(ii) an amount equal to his annual base salary and any bonus for the initial
term of two years as if he were employed for such period, (iii) 24-months of
annual base salary at the time of termination or expiration, commencing as of
the later of the termination date or the expiration of the
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initial two-year term, with such payments stopping upon Mr. Gottshall's
employment with another employer; provided, however, he receives payment of his
annual base salary for at least 12-months and (iv) an additional 12-months of
bonus credited as if he were employed for the 12-month period following the
later of the date of termination and the initial two-year term.
Astor Corporation has entered into an employment agreement with David E.
Hawkins effective as of July 1, 1995, which provides that he will serve as Chief
Administrative Officer of Astor Corporation for an initial term of one year,
which Astor Corporation can extend for successive one year periods. Astor
Corporation has extended Mr. Hawkins' term of employment through July 1, 1997.
Pursuant to the agreement, Mr. Hawkins receives an annual salary of $140,000,
subject to increase at the discretion of the Board of Directors of Astor
Corporation. In addition, Mr. Hawkins is entitled to receive an annual bonus in
an amount up to 40% of his then annual base salary, subject to the satisfaction
of certain performance conditions and at the sole discretion of the Board of
Directors of Astor Corporation if such conditions are not met. On October 30,
1995 Mr. Hawkins also received stock options to purchase 6,818 shares of Common
Stock of the Parent which vest over a five year period and become exercisable
upon vesting. If Mr. Hawkins' employment is terminated without cause by Astor
Corporation, he will continue to receive his annual salary for six months
following the termination and the accrued portion of any bonus through the date
of termination.
The employment agreement of each of Messrs. Wainscott, Spalton, Houssa,
Gottshall and Hawkins also contains (i) a nondisclosure provision which is
effective for the term of such individual's employment with Astor Corporation
and for an indefinite period thereafter and (ii) noninterference and
non-competition provisions, each of which is effective for the term of such
individual's employment with Astor Corporation and two years thereafter.
1995 STOCK INCENTIVE PLAN OF PARENT
Neither the Company nor Astor Holdings II has a stock incentive plan. The
Parent adopted its 1995 Stock Incentive Plan in June 1995, in order to provide
incentives to employees, directors (including non-employee directors) and
independent contractors of the Parent and its subsidiaries, including the
Company, by granting them awards tied to the Parent's Common Stock. The Stock
Incentive Plan is administered by the Compensation Committee of the Board of
Directors of the Parent, which has broad authority in administering and
interpreting the Stock Incentive Plan. The Board of Directors of the Parent and
the Compensation Committee thereof are identical to those of the Company and are
expected to remain identical for the foreseeable future. Awards are not
restricted to any specified form or structure and may include, without
limitation, sales or bonuses of stock, restricted stock, stock options, reload
stock options, stock purchase warrants, other rights to acquire stock,
securities convertible into or redeemable for stock, stock appreciation rights,
phantom stock, dividend equivalents, performance units or performance shares
(collectively, "Awards"). Options granted to employees under the Stock Incentive
Plan may be options intended to qualify as incentive stock options under Section
422 of the Internal Revenue Code of 1986, as amended, or options not intended to
so qualify. An Award granted under the Stock Incentive Plan to an employee or
independent contractor may include a provision terminating the Award upon
termination of employment under certain circumstances or accelerating the
receipt of benefits upon the occurrence of specified events, including, at the
discretion of the Compensation Committee, any change of control of the Parent or
the Company.
The Parent granted options to purchase an aggregate of up to 204,545 shares
of its Class D Common Stock to officers, employees and consultants of Astor
Corporation following the consummation of the Prior Transactions. The exercise
price of each option is $10.00 per share, the same price per share as paid by
all purchasers of Common Stock of the Parent through the consummation of the
Prior Transactions. Each option is subject to certain vesting provisions. All
options expire on the tenth anniversary of the date of grant. For certain
information regarding these options granted to officers of Astor, see "Ownership
of Voting Securities."
1997 INCENTIVE BONUS PROGRAM
Astor Corporation adopted its 1997 Incentive Bonus Program in April 1996, in
order to provide incentives to all salaried employees, but excluding any
participant in the 1997 Management Bonus Plan who
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is also eligible to participate in the U.K. Pension Plan (as defined herein), by
granting them awards tied to Astor Corporation's performance objectives
calculated in terms of year-end EBITDA. Salaried employees will receive a bonus
based on (i) actual year-end EBITDA as of March 31, 1997, (ii) a percentage of
the individual's annual salary which increases as year-end EBITDA increases and
(iii) the individual's satisfactory performance. Awards are restricted to cash
awards.
1997 MANAGEMENT BONUS PROGRAM
Astor Corporation adopted its 1997 Management Bonus Program in April 1996,
in order to provide incentives to 33 selected members of management, judged to
have the greatest impact on the year's results, by granting these members of
management awards tied to Astor Corporation's performance objectives calculated
in terms of year-end EBITDA. Participants in this program have been assigned a
percentage of their base salary as their bonus target for the 1997 fiscal year.
A participant's specific bonus award, however, is dependent on both Astor's
year-end EBITDA (which will determine the size of the bonus pool) and the
individual's performance contribution. For example, if the year-end actual
EBITDA achieves the planned EBITDA, a manager with a 20% target and superior
performance will receive a bonus equal to 20% of his or her base salary then in
effect. However, because the bonus pool directly correlates with the 1997 fiscal
year-end EBITDA, if year-end EBITDA is less than the target EBITDA, the
participant would receive less than a 20% bonus. The proposed management bonuses
will be presented to the Chief Executive Officer for review, but must be
approved by the Compensation Committee of the Board of Directors of Astor
Corporation. Awards are restricted to cash awards.
RETIREMENT SAVINGS PLANS
Astor Corporation has a profit sharing and savings plan that is qualified
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"401(k) Plan"). Any full-time employee of Astor Corporation who has completed
one year of service with Astor Corporation and is at least 18 years of age is
eligible to participate in the 401(k) Plan. Astor Corporation employees may
contribute to the plan up to a maximum of 15% of pay. Participants become
immediately vested in both their voluntary contributions as well as any profit
sharing or matching contributions made by Astor Corporation. Under the profit
sharing component of the 401(k) Plan, the Board of Directors annually determines
in its sole discretion the amount, if any, of Astor Corporation's aggregate
profit sharing contribution which is then allocated among participants based on
the ratio that each eligible participant's compensation bears to the total
compensation paid to all eligible participants for the plan year. Under the
matching contribution component of the Plan, Astor Corporation will match
employee contributions in an amount equal to 100% of the employee's pretax
contributions, up to 3% of the employee's eligible compensation contributed into
the plan for the plan year. For all union employees, Astor Corporation will
contribute 2% of the employee's eligible compensation into the plan as long as
the employee has deferred at least 1% of his or her eligible compensation into
the plan for the plan year. As of February 1, 1997, Astor Corporation will
contribute 3% of the union employee's eligible compensation into the plan as
long as the employee has deferred at least 1% of his or her eligible
compensation into the plan for the plan year.
On consummation of the Transactions, the Company assumed ADCO's
discretionary profit sharing plan, which includes a cash-or-deferred arrangement
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the "ADCO
401(k) Plan"). Presently, any full-time employee of the Company who was formerly
a non-union employee of ADCO and who has completed one year of service with the
Company (including service with ADCO) is eligible to participate in the ADCO
401(k) Plan. The Company currently matches 25% of any employee's contribution to
the plan up to a maximum of 5% of pay. Participants become immediately vested in
both their voluntary contributions as well as the Company's matching
contributions in the profit sharing component of the ADCO 401(k) Plan. In
addition, under the profit sharing component of the ADCO 401(k) Plan, the
Company contributes 2% of a participant's compensation to the plan. Presently,
participants become fully vested in this part of the profit sharing component of
the ADCO 401(k) Plan upon completion of seven years of service with the Company
(including service with ADCO). The aggregate total contribution on behalf of all
participants to the ADCO 401(k) Plan may not exceed 15% of total participant
compensation.
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Astor has a pension plan for which all full-time salaried directors or
senior employees based in the U.K. between the ages of 20 and 65 are eligible
(the "U.K. Pension Plan"). Under this plan, eligible employees must contribute
at least 5% of their pay to a retirement savings account maintained by the U.K.
Pension Plan. Astor contributes to the U.K. Pension Plan based on actuarial
valuations. Upon reaching retirement, the eligible participants are entitled to
use contributions to increase their own pensions, to increase their spouse's
pension or, if the individual has been contributing to the fund since before
April 8, 1987, to provide additional tax-free cash at retirement. A participant
normally receives pension payments monthly, but may, with the Company's consent,
give up part of his or her pension and receive a tax-free lump sum payment.
Pension payments are equal to the product of the participant's final pensionable
salary as of the immediately preceding August 1 and the number of pensionable
service years divided by 60. Certain death benefits are paid in the event of
death.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive no compensation for
serving on the Board of Directors. Non-employee directors are reimbursed for
their out-of-pocket expenses in attending Board meetings. Messrs. Crowell,
Hardy, Larsen, Parsky, Roeder and Yort receive no fees in their capacities as
directors, but see "Certain Transactions" for a description of certain other
arrangements pursuant to which ACP and CC 1800 receive compensation from the
Company. Each of Messrs. Crowell, Hardy, Larsen, Parsky, Roeder and Yort is an
affiliate of or limited partner of or employed by ACP. Mr. Parsky is the sole
limited partner and the sole beneficial owner of the general partner of CC 1800.
See "Management" and "Ownership of Voting Securities."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Andreini, Crowell and Roeder serve as the Compensation Committee of
Astor Corporation and the Parent and administer the Stock Incentive Plan.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law (the "DGCL") authorizes
a Delaware corporation to include a provision in its certificate of
incorporation limiting or eliminating the personal liability of its directors to
the corporation and its stockholders for monetary damages for breach of the
directors' fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors exercise an informed business judgment
based on all material information reasonably available to them. Absent the
limitations authorized by such provision, directors are accountable to
corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Although
Section 102 of the DGCL does not change a director's duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. The Certificate of Incorporation and Bylaws of each of the
Parent, Astor Holdings II and Astor Corporation include provisions which limit
or eliminate the personal liability of its directors to the fullest extent
permitted by Section 102 of the DGCL. Consequently, a director or officer will
not be personally liable to any of the Parent, Astor Holdings II or Astor
Corporation or their respective stockholders for monetary damages for breach of
fiduciary duty as a director, except for (i) any breach of the director's duty
of loyalty to any such corporation or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) unlawful payments of dividends or unlawful stock repurchases,
redemptions or other distributions, and (iv) any transaction from which the
director derived an improper personal benefit.
The Certificate of Incorporation and Bylaws of each of the Parent, Astor
Holdings II and Astor Corporation also provide, in effect, that, to the fullest
extent and under the circumstances permitted by Section 145 of the DGCL, each
such corporation will 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, by
reason of the fact that he or she is a director or officer of such corporation
or is or was serving at the request of any such corporation as a director or
officer of another
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corporation or enterprise. The inclusion of these indemnification provisions in
these Certificates of Incorporation and Bylaws is intended to enable each such
corporation to attract qualified persons to serve as directors and officers who
might otherwise be reluctant to do so. Each of the Parent, Astor Holdings II and
Astor Corporation may, in its discretion, similarly indemnify its employees and
agents.
Depending upon the character of the proceeding, each such corporation may
indemnify against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
any action, suit or proceeding if the person indemnified acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of such corporation and, with respect to any criminal action or
proceeding, had no cause to believe his or her conduct was unlawful. To the
extent that a director or officer of any such corporation has been successful in
the defense of any action, suit or proceeding referred to above, any such
corporation would have the right to indemnify him or her against expenses
(including attorneys' fees) actually and reasonably incurred in connection
therewith.
OWNERSHIP OF VOTING SECURITIES
All of the issued and outstanding common stock of Astor Corporation is owned
by Astor Holdings II, and all of the issued and outstanding preferred stock of
Astor Corporation is owned by ABI Corporation, an indirect subsidiary of Astor
Corporation. All of the issued and outstanding capital stock of Astor Holdings
II is owned by the Parent. See "Acquisition of ADCO -- Corporate Structure." The
Parent's authorized capital stock consists of 1,000,000 shares of Preferred
Stock ("Preferred Stock"), 1,000,000 shares of Class A Common Stock ("Class A
Common Stock"), 1,000,000 shares of Class B Common Stock ("Class B Common
Stock"), 1,000,000 shares of Class C Common Stock ("Class C Common Stock") and
1,000,000 shares of Class D Common Stock ("Class D Common Stock" and
collectively with the Class A Common Stock, Class B Common Stock and Class C
Common Stock, the "Classed Common Stock"). In addition, the Parent's authorized
capital stock includes 4,000,000 shares of Common Stock ("Conversion Common
Stock" and together with the Classed Common Stock, "Common Stock") into which
the Classed Common Stock will convert on a share for share basis upon the
earlier of the affirmative vote of the holders of a majority of each class of
Classed Common Stock each voting as a separate class, the consummation of an
initial underwritten public offering of Common Stock meeting certain
requirements or June 28, 2005. All authorized shares of Preferred Stock and
Common Stock have a par value of $0.01 per share.
At July 31, 1996 there were outstanding 535,715 shares of Class A Common
Stock, 142,857 shares of Class B Common Stock and 71,427 shares of Class C
Common Stock. No shares of Class D Common Stock or Conversion Common Stock were
outstanding at July 31, 1996. The holders of Class A Common Stock, Class B
Common Stock and Class C Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders, except that the holders of Class A
Common Stock voting as a separate class are entitled to elect five directors of
the Parent, the holders of Class B Common Stock voting as a separate class are
entitled to elect five directors of the Parent and the holders of Class C Common
Stock voting as a separate class are entitled to elect one director of the
Parent. The Class D Common Stock is nonvoting except as may otherwise be
required by applicable law. Upon issuance, the Conversion Common Stock will be
entitled to one vote per share on all matters submitted to a vote of
stockholders.
Subject to the preferences applicable to the outstanding Preferred Stock,
beneficial owners of Common Stock are entitled to receive ratably those
dividends declared by the Board of Directors out of legally available funds. In
the event of a liquidation, dissolution or winding up of the Parent, the holders
of Common Stock are entitled to share ratably in all assets remaining after all
liabilities and the liquidation preference attributable to the outstanding
Preferred Stock has been paid. The holders of Common Stock have no preemptive
rights or cumulative voting rights and no rights to convert their Common Stock
into any other securities, except that the Classed Common Stock is convertible
into Conversion Common Stock as provided above. All outstanding shares of Common
Stock are fully paid and nonassessable.
The Board of Directors of the Parent is authorized to fix the dividend
rights and terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund and any other rights, preferences,
privileges and restrictions applicable to each series of Preferred Stock. As of
July 31, 1996 the
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Board of Directors had designated two series of Preferred Stock comprised of
142,500 shares of Series A Redeemable Cumulative Preferred Stock ("Series A
Preferred Stock") and 82,500 shares of Series B Redeemable Cumulative Preferred
Stock ("Series B Preferred Stock"). As of July 31, 1996 there were 142,500
shares of Series A Preferred Stock outstanding and 82,500 shares of Series B
Preferred Stock outstanding. Each share of Series A Preferred Stock and Series B
Preferred Stock has a stated value of $100.00.
The Series A Preferred Stock is entitled to receive dividends at the rate of
14.5% per annum on the stated value of each share of Series A Preferred Stock
when, as and if declared payable by the Board of Directors. If accrued dividends
are not paid, the unpaid dividends accumulate annually and accrue dividends at
the rate of 14.5% per annum. The Parent has not paid any cash dividends on the
Series A Preferred Stock and, due to restrictions in the Notes and the Senior
Bank Facility, does not expect to pay cash dividends on the Series A Preferred
Stock for the foreseeable future. The Parent may redeem the Series A Preferred
Stock at its election in whole or in part at any time upon payment of the stated
value of the shares of Series A Preferred Stock being redeemed plus all accrued
and unpaid dividends thereon. Upon the occurrence of certain events involving a
merger, a sale of all or substantially all of the assets or a change in control
(as defined) of the Parent, the holders of Series A Preferred Stock are entitled
to require the Parent to redeem all (or such lesser part as may be selected by
the holder) shares of Series A Preferred Stock for a redemption price of $100.00
per share plus accrued and unpaid dividends thereon. In addition, the Parent is
required to redeem any Series A Preferred Stock outstanding on June 15, 2007.
Upon the liquidation of the Parent each share of Series A Preferred Stock is
entitled to a liquidation preference of $100.00 plus all accrued and unpaid
dividends thereon.
The Series B Preferred Stock is pari passu with, and has the same rights,
preferences and privileges as, the Series A Preferred Stock, except that the
Series B Preferred Stock is not subject to mandatory redemption on June 15,
2007. Accordingly, each share of Series B Preferred Stock is entitled to
participate pro rata with the holders of Series A Preferred Stock in the payment
of dividends, as well as amounts paid upon redemption or liquidation.
The table below sets forth the beneficial ownership of each class of issued
and outstanding capital stock of the Parent, as of July 31, 1996, by each
director of Astor Corporation, each of the executive officers of Astor
Corporation listed under "Management," the directors and executive officers of
Astor Corporation as a group and each person who at such time beneficially owned
more than 5% of the outstanding shares of any class of voting securities of the
Parent.
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<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
---------------------------------------- -----------------------------------
NUMBER OF NUMBER OF
NAME AND ADDRESS OF BENEFICIAL SHARES AND PERCENTAGE SHARES AND PERCENTAGE OF
OWNER CLASS (1) OF CLASS (1)(2) SERIES (1) CLASS (3)
- ----------------------------------- ---------------------- ---------------- ------------------- --------------
<S> <C> <C> <C> <C>
Petrowax Equity Partners I, L.P. 535,715 Class A 100.0% 58,928 Series B 71.4%
(4)(5)............................
Petrowax Equity Partners II, L.P. 142,857 Class B 100.0 15,714 Series B 19.0
(4)(5)............................
Petrowax Equity Partners III, L.P. 35,714 Class C 50.0 3,929 Series B 4.8
(4)(5)............................
Petrowax Equity Partners IV, L.P. 35,713 Class C 50.0 3,929 Series B 4.8
(4)(5)............................
UBS Partners Inc................... 409,090 Class C(6) 85.1 142,500 Series A 100.0
299 Park Avenue,
New York, NY 10171-0026
Alan J. Andreini (7)............... -- -- -- --
Adrian Browne (8).................. 1,091 Class D(9) 100.0 -- --
Thomas P. Causer (10).............. 1,364 Class D(9) 100.0 -- --
Richard R. Crowell (4)............. -- -- -- --
John F. Gottshall (10)............. 2,045 Class D(9) 100.0 -- --
Ronald B. Hallewell (10)........... 1,364 Class D(9) 100.0 -- --
Mark C. Hardy (4).................. -- -- -- --
David E. Hawkins (10).............. 1,364 Class D(9) 100.0 -- --
Jose C. Houssa (8)................. 2,045 Class D(9) 100.0 -- --
Kurt B. Larsen (4)................. -- -- -- --
Justin Maccarone (11).............. -- -- -- --
Gerald L. Parsky (4)(5)............ 535,715 Class A 100.0 82,500 Series B 100.0
142,857 Class B 100.0
71,427 Class C 100.0
Richard K. Roeder (4).............. -- -- -- --
C. Richard Spalton (8)............. 6,818 Class D(9) 100.0 -- --
Boyd D. Wainscott (10)............. 16,364 Class D(9) 100.0 -- --
W. Montague Yort (4)............... -- -- -- --
All directors and officers as a 82,500 100.0%
group (16 persons)................ 535,715 Class A 100.0
142,857 Class B 100.0
71,427 Class C 100.0
32,455 Class D(9) 100.0
</TABLE>
- ------------------------
(1) The shares of Common Stock underlying options, warrants, rights or
convertible securities that are exercisable as of July 31, 1996 or that will
become exercisable within 60 days thereafter are deemed to be outstanding
for the purpose of calculating the beneficial ownership of the holder of
such options, warrants, rights or convertible securities, but are not deemed
to be outstanding for the purpose of computing the beneficial ownership of
any other person. As a result, the aggregate percentage ownership of a
particular class of Common Stock may exceed 100.0%.
(2) The percentages shown are with respect to the individual classes of Classed
Common Stock.
(3) Percentages shown are with respect to the Series A Preferred Stock and the
Series B Preferred Stock of the Parent.
(4) The address of such beneficial holder is 1800 Century Park East, Suite 1000,
Los Angeles, California 90067.
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(5) The general partner of each of Petrowax Equity Partners I L.P., Petrowax
Equity Partners II L.P., Petrowax Equity Partners III L.P. and Petrowax
Equity Partners IV L.P. (collectively, the "Investment Partnerships") is CC
1800, the sole limited partner of which is Gerald L. Parsky and the general
partner of which is Century City Management Partners L.P., a Delaware
limited partnership ("CCMP"). The sole limited partner of CCMP is Mr. Parsky
and its general partner is a Delaware corporation which is wholly owned by
Mr. Parsky. Due to Mr. Parsky's dispositive power over shares of Common
Stock and Preferred Stock owned by each of the Investment Partnerships, Mr.
Parsky may be deemed to beneficially own all the shares of Common Stock and
Preferred Stock owned by each of the Investment Partnerships.
(6) Represents shares of Class C Common Stock issuable upon the exercise of
409,090 warrants that are immediately exercisable at $10.64 per share.
(7) Mr. Andreini is a limited partner of Petrowax Equity Partners III, L.P.
(8) The address of such beneficial holder is Tavistock Road, West Drayton
Middlesex, UB7 7 RA England.
(9) Represents shares of Class D Common Stock issuable upon the exercise of
immediately exercisable options granted under the 1995 Stock Option Plan of
the Parent.
(10) The address of such beneficial holder is 8521 Six Forks Road, Suite 105,
Raleigh, North Carolina 27615.
(11) Mr. Maccarone is a Director of UBS Partners, the beneficial owner of
142,500 shares of Series A Preferred Stock of the Parent and warrants to
purchase 409,090 shares of Class C Common Stock.
STOCKHOLDERS AGREEMENT
The following is a summary description of the principal terms of the
Stockholders Agreement dated as of June 27, 1995 among the Parent and certain of
its stockholders, optionholders and warrantholders (the "Stockholders
Agreement"). This summary description does not purport to be complete and is
subject to and qualified in its entirety by reference to the definitive
Stockholders Agreement.
The Stockholders Agreement provides that, with certain limited exceptions,
Petrowax Equity Partners I L.P. ("P-1"), Petrowax Equity Partners II L.P.
("P-2"), Petrowax Equity Partners III L.P. ("P-3") and Petrowax Equity Partners
IV L.P. ("P-4" and, collectively with P-1, P-2 and P-3, the "Investment
Partnerships"), and UBS Partners, each of which holds shares of or warrants to
purchase Common Stock and Preferred Stock of the Parent, and certain transferees
of such entities and any other stockholders, option holders and warrantholders
of the Parent described in the Stockholders Agreement (the "Restricted
Stockholders"), are limited in their ability to transfer any of their respective
shares or any interest therein without, in the case of P-1, P-2, P-3 and P-4,
the prior approval of the Parent and UBS Partners (so long as UBS Partners
maintains a certain level of ownership of the Parent's stock).
The Stockholders Agreement provides, subject to certain exceptions, for
certain rights of first refusal in favor of P-1, P-2 and UBS Partners and
certain related entities in the event that any other Restricted Stockholder
desires to transfer his or her shares of Common Stock, Preferred Stock or
Warrants to any person or entity other than an affiliate or associate of such
person, the Parent or a Permitted Transferee (as defined in the Stockholders
Agreement). To the extent that P-1, P-2 and UBS Partners and certain related
entities elect to purchase fewer than all of the shares proposed to be sold by
such selling Restricted Stockholder as provided in the Stockholders Agreement,
the Parent will have a right of first refusal with respect to any such unsold
shares. The first refusal rights will terminate with respect to all shares held
by each Restricted Stockholder upon the effective date of the registration
statement for a qualified initial public offering by the Parent as provided in
the Stockholders Agreement. All first refusal rights of UBS Partners and related
entities will terminate when UBS Partners no longer maintains a certain level of
ownership of the Parent's stock.
Subject to the provisions of the Stockholders Agreement, in the event that
P-1 and P-2 desire to accept a third party offer from a non-affiliate to
purchase all outstanding shares of Common Stock held by them, to effect a
business combination of the Parent and such offeror or an affiliate thereof or
to purchase all or substantially all of the assets of the Parent, the other
Restricted Stockholders will be required to sell all of their shares of Common
Stock of the Parent and securities exercisable or convertible into Common Stock
of the Parent to such Offeror on the terms set forth in such acquisition
proposal or to vote all of their shares in
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favor of such acquisition proposal, as the case may be, and to take all actions
necessary or appropriate to cause the Parent to consummate the transaction. The
rights and obligations described in this paragraph will terminate with respect
to all shares held by each Restricted Stockholder upon the earlier of (i) the
effective date of the registration statement for a qualified initial public
offering by the Parent as described in the Stockholders Agreement or (ii) if UBS
Partners so elects, the occurrence of a change in control of the Parent as
described in the Stockholders Agreement.
In the event that any of the Investment Partnerships desire to transfer any
shares of Common Stock and/ or Preferred Stock held by them, the other
Restricted Stockholders (other than the Investment Partnerships) will be
entitled to require, as a condition of such sale, that the proposed buyer
purchase shares of Common Stock or Preferred Stock from each such other
Restricted Stockholder on a pro rata basis. The rights and obligations described
in this paragraph will terminate with respect to all shares (other than Prefered
Stock) held by such other Restricted Stockholders upon the effective date of the
registration statement for a qualified initial public offering by the Parent.
All Restricted Stockholders will be entitled to certain "piggy-back"
registration rights with respect to shares of Common Stock in connection with a
qualified initial public offering by the Parent and in connection with certain
secondary public offerings effected by the Parent, as described in the
Stockholders Agreement. The Parent will bear all expenses incident to any such
registration, including but not limited to the reasonable fees and expenses of a
single counsel retained by the holders of a majority of such shares being
registered; however, each selling stockholder will be responsible for the
underwriting discounts and commissions and transfer taxes in connection with
shares sold by such stockholder. Each selling stockholder and the underwriters
through whom shares are sold on behalf of a selling stockholder will be entitled
to indemnification from the Parent against certain liabilities, including
liabilities under the Securities Act. UBS Partners is entitled to certain
"demand" registration rights with respect to certain shares of Common Stock or
shares of Series A Preferred Stock, subject to certain limitations. UBS Partners
may exercise this right two times, but no earlier than the earlier of June 27,
2002 or nine months after a qualified initial public offering by the Parent.
The Stockholders Agreement provides certain preemptive rights to UBS
Partners and certain related entities if the Parent proposes to sell or issue
shares of Common Stock or Preferred Stock or any securities exercisable for or
convertible into such stock or if a subsidiary of the Parent proposes to sell or
issue any equity securities or securities exercisable for or convertible into
equity securities, such that UBS Partners and cetain related entities will be
allowed priority to purchase shares, subject to certain limited exceptions,
necessary to maintain the equity ownership level of UBS Partners and such
related entities immediately prior to such issuance. Such rights will terminate
upon the effective date of the registration statement for a qualified initial
public offering by the Parent.
After UBS Partners, UBS or their respective affiliates are no longer
creditors of the Parent or its subsidiaries with respect to commercial loan or
revolving credit facility indebtedness and provided UBS Partners maintains a
certain level of ownership of the Parent's stock, UBS Partners will be entitled
to nominate two directors to the Board of Directors of the Parent and one member
of each board of directors of Astor Holdings II and Astor Corporation. The
Restricted Stockholders have agreed to vote their shares of Class A Common Stock
in whatever manner is necessary in order to elect one such nominee to the Board
of Directors of the Parent during such period and to vote their shares of Class
B Common Stock in whatever manner is necessary in order to elect a second such
nominee to the Board of Directors of the Parent during such period.
The Stockholders Agreement may be amended only by a written agreement
executed by the Parent, P-1, P-2 and UBS Partners, if then a stockholder. With
the exception of certain provisions thereof which shall survive, the
Stockholders Agreement will terminate on the earlier to occur of June 27, 2005
and the written approval of P-1, P-2 and UBS Partners, if then a stockholder.
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CERTAIN TRANSACTIONS
The Company believes the transactions described below that were entered into
by Astor Holdings II and Astor Corporation and its subsidiaries were beneficial
to the respective companies, and were no less favorable to the respective
companies as could have been obtained from unaffiliated third parties pursuant
to arms-length negotiations.
TRANSACTIONS WITH CC 1800 AND ITS AFFILIATES
In connection with the acquisition of ABI by Astor Coporation, an indirect
subsidiary of Astor Corporation paid ACP a financial advisory fee in the
aggregate amount of $1.2 million. ACP is a limited partnership, the general
partner of which is controlled by and the limited partners of which are Messrs.
Crowell, Parsky and Roeder, each of whom is a director of the Parent, Astor
Holdings II and Astor Corporation. Messrs. Hardy, Larsen and Yort, each of whom
is also a director of the Parent, Astor Holdings II and Astor Corporation, are
also employees of ACP. In connection with the acquisition of Astor Corporation
by the Parent, Astor paid CC 1800, a financial advisory fee of $500,000. Mr.
Parsky, a director of the Parent, Astor Holdings II and Astor Corporation, is
the sole limited partner and the sole beneficial owner of the general partner of
CC 1800. See "Management," "Ownership of Voting Securities" and "Prior
Reorganization."
CC 1800 was a secured and unsecured creditor in the Petrowax bankruptcy and
received certain payments in connection with the Petrowax reorganization
totaling $3.5 million. In addition, WSGP International, Inc., an affiliate of CC
1800, was a creditor in the Petrowax bankruptcy and received payments of
$751,754 on its pre-filing claims totaling $944,048 in connection therewith.
Immediately prior to the Effective Date of Petrowax's Reorganization Plan, CC
1800 was the beneficial owner of 42.5% of Petrowax's outstanding capital stock.
All of the then outstanding equity interests of Petrowax were canceled upon
effectiveness of the Reorganization Plan. On the Effective Date of the
Reorganization Plan, the Investment Partnerships (all of which are controlled by
CC 1800) acquired newly issued Common Stock and Preferred Stock of the Parent
for $15.8 million, and Astor Holdings II acquired all the newly issued capital
stock of Petrowax for $10.0 million upon Petrowax's emergence from bankruptcy
and its change of name to Astor Corporation. In addition, on the Effective Date
of the Reorganization Plan, Astor Holdings II and Astor became wholly-owned
subsidiaries of the Parent. See "Prior Reorganization." For information
regarding the ownership interest of CC 1800 and its affiliates in the Parent see
"Ownership of Voting Securities."
CC 1800 has entered into a Management Services Agreement with the Parent and
UBS Capital pursuant to which CC 1800 earns management fees from the Parent in
the amount of approximately $412,000 annually. These management fees are subject
to annual increases to reflect increases in the Consumer Price Index. Under the
terms of the Management Services Agreement, the Parent will also (i) pay CC 1800
a transaction fee equal to 1.4% of the aggregate acquisition consideration in
connection with merger and acquisition services rendered in connection with
acquisitions made by the Parent or any of the Parent's affiliates in which the
Parent has an ownership interest and (ii) reimburse CC 1800 for all reasonable
out-of-pocket costs and expenses incurred in connection with the performance of
its obligations under the Management Services Agreement. No such payment of
compensation shall be made if prohibited by the Senior Bank Facility. Concurrent
with the consummation of the Offering and the ADCO Acquisition, the Parent will
pay CC 1800 a closing fee of $761,800 for financial advisory services. The
Management Services Agreement also provides that the Parent will provide CC 1800
and its directors, officers, employees, partners and affiliates with customary
indemnification against all actions not involving gross negligence or willful
misconduct, or in criminal proceedings, if there was no reasonable cause to
believe the alleged conduct was unlawful.
Historically, Astor Corporation has paid certain administrative expenses of
P-1, P-2, P-3 and P-4 aggregating less than $28,000 annually and expects to
continue to pay such expenses in the future.
TRANSACTIONS WITH UBS AND ITS AFFILIATES
In connection with the Prior Transactions, UBS provided $77.5 million to
Astor consisting of a term loan facility in the amount of $57.5 million and a
revolving credit facility in the amount of $20.0 million (the "UBS Credit
Facility"). The outstanding indebtedness under the UBS Credit Facility was
repaid upon the
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consummation of the Transactions out of a portion of the proceeds of the
Offering. The term loan had a maturity of seven years, with a stated
amortization schedule and an additional annual paydown based on cash flow. The
outstanding principal balance of the term loan facility bore interest at the per
annum rate of LIBOR plus 2.25%. The revolving facility had a term of seven
years, with all outstanding principal to be paid at maturity. The outstanding
principal balance of the revolving facility bore interest at a per annum rate
equal to LIBOR plus 2.25%. The loans were secured by substantially all of the
assets of Astor. In connection with the Prior Transactions, the Parent paid UBS
Capital financial advisory fees in the amount of $815,000. In connection with
the Prior Transactions, the Parent also sold UBS Partners, an affiliate of UBS
Capital, 142,500 shares of its Series A Preferred at a per share price of
$100.00 (the same price offered to and paid by other investors) and warrants to
purchase 409,090 shares of its Class C Common Stock exercisable at $10.00 per
share (the same price per share offered to and paid by the other investors) for
an aggregate consideration of $700,000.
UBS Capital is a party to the Parent's Management Services Agreement with CC
1800. Under the terms of the Management Services Agreement, the Parent will (i)
pay to UBS Capital a transaction fee equal to 0.6% of the aggregate acquisition
consideration for merger and acquisition services rendered in connection with
acquisitions made by the Parent or any of the Parent's affiliates in which the
Parent has an ownership interest and (ii) reimburse UBS Capital for all
reasonable out-of-pocket costs and expenses incurred in connection with the
performance of its obligations under the Management Services Agreement.
Concurrent with the consummation of the Offering and the ADCO Acquisition, the
Parent paid UBS Capital a closing fee of $326,500 for financial advisory
services. The Management Services Agreement also provides that the Parent shall
provide UBS Capital and its directors, officers, employees, partners and
affiliates with customary indemnification against all actions not involving
gross negligence or willful misconduct, or in criminal proceedings, if there was
no reasonable cause to believe the alleged conduct was unlawful.
TAX SHARING AGREEMENT
The Parent intends to elect to file a consolidated Federal income tax return
which will include Astor Holdings II, Astor Corporation and its direct and
indirect subsidiaries. Under Federal tax law, Astor Holdings II, Astor
Corporation and each of its subsidiaries can be held severally liable for all
the Federal income tax liabilities with respect to each consolidated Federal
income tax return of the Parent in which Astor Holdings II, Astor Corporation or
its subsidiaries, respectively, are included.
In order to allocate the tax liabilities among them, the Parent and its
subsidiaries have entered into a Tax Sharing Agreement (the "Tax Sharing
Agreement"), which provides in general that, so long as the Parent is required
to file consolidated Federal income tax returns which include Astor Corporation
or any of its subsidiaries, Astor will be responsible for paying to the Parent
the Federal tax liability that would be payable by Astor as though it filed a
consolidated Federal income tax return that included only Astor. Similar
provisions will apply with respect to the filing of combined or consolidated
state income or franchise tax returns and the payment of tax on such returns.
Under the Tax Sharing Agreement, the Parent will determine the reporting of
all items on its consolidated federal income tax returns and will be responsible
for all audits and controversies. The tax liability of Astor will be adjusted to
reflect adjustments resulting from resolved audits or other controversies and
appropriate payments or reimbursements will be made.
OTHER
For a discussion of certain indebtedness repaid to Alan J. Andreini, a
director of the Parent, Astor Holdings II and Astor Corporation, pursuant to the
Petrowax Reorganization Plan, see "Prior Reorganization."
PRIOR REORGANIZATION
Astor Corporation was incorporated as a new venture in 1989 in the State of
Delaware under the name Petrowax for the purpose of developing a wax production
business. As part of its start-up plan of operations,
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Petrowax acquired two lube oil and wax production facilities from Quaker State.
Shortly after the completion of the acquisition in 1990 and prior to the
acquisition of ABI and the contemplated acquisition of ADCO, Petrowax
encountered a number of operational and financial difficulties. First,
management of Petrowax had approved the acquisition of the Quaker State
facilities based on its belief that strong demand existed for microcrystalline
waxes, a high melt point specialty wax, and that one of the Quaker State
facilities could be converted and operated, in a cost-efficient manner, to
process the waxy components of A/B Crude, the principal raw material used in the
production of microcrystalline wax. The conversion of one of such Quaker State
facilities, however, proved significantly more costly and time consuming than
anticipated, and management underestimated the learning curve necessary to
produce microcrystalline wax to required specifications. Second, Petrowax had
entered into an exclusive marketing contract with a reseller of microcrystalline
wax. The contract provided that the reseller would buy microcrystalline wax for
resale at prices that assured compelling production economics. However, the long
lead times required to secure customer approvals, the reseller's inability to
perform its obligations to purchase the wax from Petrowax and the delay in
converting one of the facilities resulted in surplus inventory at Petrowax.
Third, Petrowax's management at the time was unable to develop downstream,
high-margin products due to Petrowax's then lack of extensive process knowledge
and limited product development capabilities. Finally, Petrowax had insufficient
working capital to implement its business plan and was forced to liquidate
inventory to fund day-to-day operations. As a result of these and other
difficulties and inefficiencies, Petrowax voluntarily filed for relief pursuant
to Chapter 11 of the U.S. Bankruptcy Code on February 25, 1992. For the year
ended March 31, 1992, Petrowax had an EBITDA loss of $18.3 million, a net loss
of $25.9 million and cash used by operating activities of $35.4 million.
Following the Filing, Petrowax took a number of steps to improve its
competitive position. Perhaps most importantly, Petrowax retained a turnaround
management team, which undertook a number of corrective actions, including the
renegotiation of substantially all of Petrowax's material contracts. These
corrective actions included (i) the renegotiation of Petrowax's primary supply
contract to provide for improved pricing and the delivery of higher quality waxy
components of A/B Crude oil, (ii) the termination of Petrowax's exclusive
marketing contract with its reseller, the establishment of a number of
non-exclusive reseller arrangements and the increase of Petrowax's direct sales
of its products, (iii) the arrangement of debtor-in-possession financing and
additional working capital to provide for short-term working capital needs, (iv)
the renegotiation of various transportation and terminaling contracts and (v)
the implementation of a number of overhead reduction measures. These steps by
the new management team resulted in (i) the tailoring of Petrowax's products to
meet market demands, (ii) the expansion of Petrowax's customer base and the sale
of its products at improved prices, (iii) the securing of raw materials for
longer, more efficient production runs and the elimination of inventory
liquidation, (iv) the reduction of Petrowax's transportation and terminaling
costs and (v) the streamlining of operations and the general reduction of
overhead costs. For the year ended March 31, 1994, Petrowax had EBITDA of $0.1
million, a net loss of $32.5 million and generated cash flow from operating
activities of $391,000. Included in the net loss was a provision of $25.9
million, representing the write-down of property, plant and equipment and other
intangible assets in order to recognize a permanent impairment of value.
After the above described corrective measures were taken, Petrowax focused
on its emergence from bankruptcy and improving its strategic position in the
marketplace. In June 1994, Mr. Boyd Wainscott, an experienced multinational
chemical company manager, joined Petrowax to lead it in developing and
implementing a strategic business plan. This strategic business plan included
(i) improving marketing functions and product distribution, (ii) developing more
higher-margin, value-added products, (iii) improving manufacturing operations
and increasing manufacturing capacity and (iv) pursuing acquisition
opportunities in the consolidating specialty chemicals industry. By implementing
this strategic plan, Petrowax was able to achieve EBITDA of $3.2 million, a net
loss of $1.5 million and generated cash flow from operating activities of
$859,000 for the year ended March 31, 1995. See "Business -- Recent History."
To further its strategic plan, simultaneously with its emergence from
bankruptcy and its recapitalization pursuant to the Reorganization Plan as of
June 28, 1995, Petrowax acquired ABI and changed its name from Petrowax to Astor
Corporation, a trade name of ABI. ABI had $11.4 million in EBITDA for the year
ended March 31, 1995.
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The combination of Astor and ABI created one of the largest producers of
specialty waxes in the world, based on sales, and a recognized U.K. manufacturer
of adhesives and sealants. The acquisition of ABI furthered Astor's strategic
plan by providing enhanced marketing capabilities and industry-recognized
product development capabilities. The acquisition and recapitalization also (i)
enabled Astor to increase its capital expenditures resulting in improved
production capacity and reliability, (ii) improved Astor's in-house marketing
and packaging capabilities resulting in improved product placement and (iii)
improved Astor's applied research and product development capabilities resulting
in the development of better uses for lower-valued production streams.
The following summary provides additional information concerning the key
elements of the Reorganization Plan. It reflects only certain basic elements of
the Reorganization Plan, which are more fully set forth in the Disclosure
Statement and the Reorganization Plan, copies of which are available from the
Company upon request.
FORMATION OF PARENT. CC 1800, a then-existing creditor and indirect
stockholder of Petrowax, organized the Parent for the purpose of (i) acquiring
100% of the common stock of Petrowax and (ii) simultaneously therewith acquiring
not less than 90% of the capital stock of ABI. Immediately prior to the
Effective Date of the Reorganization Plan, CC 1800 and its affiliates were the
beneficial owners of approximately 42.5% of the outstanding common stock of
Petrowax, had the power to elect all of the directors of Petrowax and were
creditors of Petrowax with claims aggregating approximately $12.9 million. CC
1800 is the general partner of each of the Investment Partnerships that own all
of the outstanding Common Stock of the Parent and all of the Series B Preferred
Stock of the Parent and is itself controlled by Gerald L. Parsky, a director of
the Parent, Astor Holdings II and Astor Corporation. See "Ownership of Voting
Securities."
CAPITAL INFUSION. Immediately prior to the Effective Date, the Parent
issued its currently outstanding shares of Common Stock and Preferred Stock for
an aggregate of $30.7 million. Of this amount $10.0 million was used to purchase
shares of capital stock of Petrowax, $17.2 million was contributed to the
capital of corporations that became subsidiaries of Astor Corporation upon
consummation of the ABI Acquisition, and the balance was used to pay a portion
of the fees and expenses incurred in connection with the Prior Transactions.
Pursuant to the Reorganization Plan, the shares of capital stock of Petrowax
were canceled without the payment of any consideration, and thus after the
effectiveness of the Reorganization Plan, the reorganized entity was a
wholly-owned subsidiary of the Parent. In connection with the effectiveness of
the Reorganization Plan and the Prior Transactions, Astor Corporation and
certain of its subsidiaries entered into the UBS Credit Facility, which included
a term loan facility in the principal amount of $57.5 million and a revolving
facility in the principal amount of $20.0 million. See "Certain Transactions."
PURCHASE OF ASTOR AND ABI. On the Effective Date, the Parent, through its
subsidiaries, acquired all of the outstanding shares of ABI for L40.0 million,
including the issuance of approximately L3.7 million of 8% Subordinated Notes
due 2003 (the "ABI Acquisition"). As a result of a series of subsequent
reorganization transactions, all of the U.S. assets and businesses of ABI were
transferred to Astor Corporation.
TREATMENT OF CREDITORS. The Reorganization Plan provided for the following
resolution and treatment of specific types and classes of claims:
(i) PRIORITY CLAIMS. Priority claims of the kind described in Sections
507(a)(1) through 507(a)(7) of the Bankruptcy Code, consisting generally of
professional fees and taxes, totaled approximately $1.6 million and were
paid in full under the Reorganization Plan.
(ii) SECURED CLAIMS OF SANWA. In connection with borrowings by Petrowax
under a loan agreement with Sanwa Business Credit Corporation ("Sanwa"),
Sanwa and Petrowax agreed, based on the value of certain collateral for this
indebtedness, that Sanwa had a secured claim of $7.6 million and an
unsecured claim of approximately $29.8 million. In satisfaction of Sanwa's
secured claim, Sanwa received $7.6 million in cash under the Reorganization
Plan.
(iii) SECURED AND ADMINISTRATIVE CLAIMS OF CC 1800. In connection with
borrowings by Petrowax from CC 1800 under a revolving loan facility entered
into in October 1990 and a debtor-in-possession financing entered into in
February 1992, CC 1800 and Petrowax agreed, based on the value of certain
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collateral for this indebtedness, that CC 1800 had secured and
administrative claims of approximately $3.5 million and a total unsecured
claim of approximately $9.4 million. In full satisfaction of CC 1800's
secured and administrative claims, CC 1800 received $3.5 million in cash
under the Reorganization Plan plus cash in an amount equal to the accrued
but unpaid interest owed on the debtor-in-possession financing.
(iv) SECURED AND ADMINISTRATIVE CLAIMS OF BRIDGE LENDERS. In connection
with borrowings in April 1990 by Petrowax under a bridge loan agreement with
certain bridge lenders (including WSGP International, Inc. (an affiliate of
CC 1800) and Alan J. Andreini, a director of the Parent, Astor Holdings II
and Astor Corporation) the bridge lenders and Petrowax agreed, based on the
value of certain collateral for this indebtedness, that the bridge lenders
had secured and administrative claims of $4.75 million and an unsecured
claim of approximately $1.3 million. In full satisfaction of their secured
and administrative claims, the bridge lenders received $4.75 million in cash
under the Reorganization Plan plus cash in an amount equal to the accrued
but unpaid interest owed on the bridge loan.
(v) UNSECURED CLAIMS. Unsecured claims consisting of trade claims,
claims for damages arising from the rejection of executory contracts,
contingent claims, certain environmental claims, litigation awards,
deficiency claims and all other unsecured claims totaled an estimated $48
million. Each holder of an unsecured claim received its pro rata share of
$875,000, payable in cash, except that no payments were made to Sanwa, CC
1800 or the bridge lenders, whose unsecured claims totaled approximately
$29.8 million, $9.4 million and $1.3 million, respectively.
The above-described reorganization transactions undertaken pursuant to the
Reorganization Plan, including the establishment of the UBS Credit Facility and
the completion of the ABI Acquisition, are collectively referred to in this
Memorandum as the "Prior Transactions."
SENIOR BANK FACILITY
Astor Corporation has entered into a Senior Secured Credit Agreement (the
"Senior Bank Facility") with The Chase Manhattan Bank (the "Bank") providing for
a six-year term loan (the "Bank Term Loan") denominated in eurosterling in an
amount not exceeding the U.S. dollar equivalent of $20.0 million and a six-year
revolving credit facility (the "Revolving Credit Facility") in an amount not
exceeding the U.S. dollar equivalent of $30.0 million (subject to borrowing base
limitations), which will be available in U.S. dollars or eurosterling on a
revolving basis. The Bank, which is acting as agent for the lenders (the
"Lenders"), is an affiliate of one of the Initial Purchasers. The following
description summarizes the principal terms of the Senior Bank Facility and is
qualified in its entirety by reference to such agreement.
The Bank Term Loan was made in a single drawing concurrent with the closing
of the Transactions and all of the proceeds were lent by Astor Corporation to
Astor Stag Ltd. and used to repay to UBS existing indebtedness of Astor Stag
Ltd. and ABI Acquisition 2 plc, both of which are subsidiaries of Astor
Corporation based in the U.K. The note evidencing the intercompany loan (the
"Intercompany Term Loan") by Astor Corporation to Astor Stag Ltd. is secured by
substantially all the assets of Astor Stag Ltd. and pledged in favor of the
Lenders. The Bank Term Loan is repayable in 21 quarterly installments, beginning
with a $1,000,000 installment on October 31, 1997 and continuing with
installments totaling $1,500,000 in 1998, $2,500,000 in 1999, $4,500,000 in
2000, $4,500,000 in 2001 and $6,000,000 in 2002. The final maturity of the Bank
Term Loan is October 31, 2002. The Intercompany Term Loan is repayable on
demand.
Subject to the satisfaction of customary conditions and meeting certain
borrowing base requirements, advances under the Revolving Credit Facility may be
made at any time prior to October 31, 2002 (the "Termination Date") to be used
(i) to finance permitted acquisitions, (ii) to refinance existing indebtedness
of Astor Corporation, ABI Acquisition 2 plc and Astor Stag Ltd. and (iii) to
finance the working capital needs of the Astor Corporation and its subsidiaries.
Up to $10.0 million of the Revolving Credit Facility will be available for
letters of credit. The funds available to be advanced may not exceed the
aggregate of 85% of
the eligible accounts receivable of Astor Corporation and certain of its
subsidiaries and 50% of the eligible inventory of Astor Corporation and its U.S.
subsidiaries and certain of its foreign subsidiaries, in each case as
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defined in the Senior Bank Facility and provided that eligible inventory cannot
constitute over half the borrowing base. All amounts advanced under the
Revolving Credit Facility become due and payable on the Termination Date. Astor
Corporation may pre-pay outstanding advances in whole or in part without
incurring any premium or penalty. Proceeds from revolver advances to be used by
subsidiaries in Europe will be lent by Astor Corporation to Astor Stag Ltd. and
the note evidencing such intercompany advances (the "Intercompany Advances")
will be secured and pledged on the same basis as the note evidencing the
Intercompany Term Loan. The Intercompany Advances will be repayable on demand
and there can be no assurance that they will remain outstanding at any time.
The Senior Bank Facility is secured by a first priority security interest in
all assets of Astor Corporation, all of the capital stock of Astor Corporation's
direct and indirect U.S. subsidiaries, 65% of the voting capital stock and 100%
of the non-voting capital stock of ABI Acquisition 2 plc and all of the capital
stock of Astor Corporation. The obligations of Astor Corporation under the
Senior Bank Facility are guaranteed on a senior secured basis by each of Astor
Corporation's existing and future U.S. subsidiaries.
The Bank Term Loan bears interest at the Eurosterling Rate plus 2.5%. At
Astor Corporation's election, amounts advanced under the Revolving Credit
Facility will bear interest at (i) the Alternate Base Rate plus 1.25%, (ii) the
Eurodollar Rate plus 2.5% or (iii) the Eurosterling Rate plus 2.5%. The
foregoing margins are subject to reduction to specified amounts if the ratio of
Total Debt to EBITDA (as such terms are defined in the Senior Bank Facility) is
3.5 or lower for the most recent four-quarter period. The "Alternate Base Rate"
is equal to the highest of (a) the Bank's prime rate, (b) the secondary market
rate for three-month certificates of deposit plus 1.0% and (c) the federal funds
rate plus 0.5%, in each case as in effect from time to time. The "Eurodollar
Rate" is the rate offered to the Bank for eurodollar deposits for one, three or
six months (as selected by Astor Corporation) in the interbank eurodollar market
in the approximate amount of the Bank's share of the advance under the Revolving
Credit Facility. The "Eurosterling Rate" is the rate offered to the Bank for
eurosterling deposits for one, three or six months (as selected by Astor
Corporation) in the interbank eurosterling market in the approximate amount of
the Bank's share of the Bank Term Loan or the advance under the Revolving Credit
Facility. Interest payments on advances which bear interest based upon the
Alternate Base Rate are due quarterly in arrears and on the Termination Date,
and interest payments on the Bank Term Loan or advances which bear interest
based upon the Eurodollar Rate or the Eurosterling Rate are due on the last day
of each relevant interest period (or, if such period exceeds three months,
quarterly after the first day of such period).
Astor Corporation is required to prepay the Bank Term Loan (or if the Bank
Term Loan is fully repaid, to repay and permanently reduce the Revolving Credit
Facility) with (i) 100% of the net proceeds of sales of equity or incurrence of
certain indebtedness (provided that up to 50% of the net proceeds of any
issuance of equity may be used by the Parent to repurchase its preferred stock),
(ii) 100% of the net proceeds of asset sales (with exceptions set forth in the
Senior Bank Facility) and (iii) 50% of annual excess cash flow (as defined in
the Senior Bank Facility) of Astor Corporation and its subsidiaries, beginning
with the fiscal year ended March 31, 1999.
The Senior Bank Facility contains extensive affirmative and negative
covenants, including among others, covenants relating to leverage, interest and
fixed charge coverage and certain limits on, among other things, the ability of
Astor to incur indebtedness, make capital expenditures, create liens, engage in
mergers and consolidations, make restricted payments, make asset sales, make
capital expenditures or investments, make optional payments and modifications of
subordinated and other debt instruments, engage in transactions with affiliates,
engage in sale/leasebacks, effect changes in fiscal year end, grant negative
pledges or agree to restrictions on Astor subsidiaries' ability to pay dividends
or make distributions. The Senior Bank Facility also contains customary events
of default provisions, including upon a change of control. Astor Corporation
will pay various fees and closing costs in connection with the arrangement of
the Senior Bank Facility customary for transactions of this type.
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DESCRIPTION OF NOTES
Set forth below is a summary of certain provisions of the Notes. The Notes
will be issued pursuant to an indenture (the "Indenture"), dated as of October
8, 1996, by and among the Company, the Guarantor and State Street Bank and Trust
Company, as trustee ( the "Trustee"). The terms of the Indenture are also
governed by certain provisions contained in the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The following summaries of certain
provisions of the Indenture are summaries only, do not purport to be complete
and are qualified in their entirety by reference to all of the provisions of the
Indenture. Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Indenture. Wherever particular provisions
of the Indenture are referred to in this summary, such provisions are
incorporated by reference as a part of the statements made, and such statements
are qualified in their entirety by such reference. A copy of the Indenture is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The definitions of certain terms used in the following summary are set
forth below under "-- Certain Definitions."
The description of the Notes contained herein assumes that all Old Notes are
exchanged for Notes in the Offer. To the extent that Old Notes remain
outstanding after the consummation of the Offer, Old Notes and Notes will be
repurchased PRO RATA purusant to the repurchase provisions contained herein.
GENERAL
The Notes will be unsecured senior subordinated obligations of the Company,
limited in aggregate principal amount to $110.0 million, subordinated in right
of payment to all existing and future Senior Debt of the Company, including
Indebtedness pursuant to the Senior Bank Facility, and will be fully and
unconditionally Guaranteed by the Guarantors on a senior subordinated basis
pursuant to Note Guarantees that will be subordinated in right of payment to all
Senior Debt of the Guarantors. The Notes will be effectively subordinated to all
indebtedness and liabilities of the Company's Subsidiaries which are not
Guarantors. See "-- Subordination."
As of the Issue Date, all of the Company's Subsidiaries will be Restricted
Subsidiaries. However, under certain circumstances, the Company will be able to
designate current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $110.0 million
and will mature on October 15, 2006. Interest on the Notes will accrue at the
rate of 10 1/2% per annum and will be payable semi-annually in arrears on each
October 15 and April 15, commencing on April 15, 1997, to Noteholders of record
on the immediately preceding October 1 and April 1. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of and, premium, if any, and interest and Liquidated Damages (as
defined herein), if any, on the Notes will be payable at the office or agency of
the Company maintained for such purpose within the City and State of New York
or, at the option of the Company, payment of interest may be made by check
mailed to the Noteholders at their respective addresses set forth in the
register of Noteholders. Interest payable on the Notes held through DTC will be
available to DTC participants (as defined herein) on the business day following
payment thereof by the Company. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of $1,000
in principal amount and integral multiples thereof; provided that Notes will
initially be issued only to Institutional Accredited Investors (as defined
herein) in denominations of $250,000 of principal amount and any integral
multiple of $1,000 in excess thereof.
NOTE GUARANTEES
The Company's payment obligations under the Notes will be jointly and
severally Guaranteed by Astor Holdings II and Restricted Subsidiaries that
become Subsidiary Guarantors in accordance with the Indenture after the Issue
Date (collectively, the "Guarantors"). See "-- Certain Covenants -- Future
Subsidiary
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Guarantors." The Note Guarantee of each Guarantor will be subordinated to the
prior payment in full of all Senior Debt of such Guarantor on substantially the
same terms as the Notes are subordinated to the Senior Debt of the Company. The
obligations of each Subsidiary Guarantor under its Note Guarantee will be
limited so as not to constitute a fraudulent conveyance under applicable law.
The obligations of any future Restricted Subsidiary of the Company that
Guarantees the Notes may be subject to avoidance under state or federal
fraudulent transfer laws in the event of the bankruptcy, insolvency or other
financial difficulty of such Guarantor. Under those laws, if a court in a
lawsuit by an unpaid creditor (or representative of creditors of such Guarantor,
such as a trustee in bankruptcy or such Guarantor as debtor-in-possession) were
to find that at the time such Guarantor incurred its obligations under its Note
Guarantee, (a) it did not receive reasonably equivalent value for incurring such
Guarantee and (b) it either (i) was insolvent, (ii) was rendered insolvent,
(iii) was engaged in a business or transaction for which its remaining
unencumbered assets constituted unreasonably small capital or (iv) intended to
incur or believed that it would incur debts beyond its ability to pay as such
debts matured, such court could avoid the Guarantee and such Guarantor's
obligations thereunder and direct the return of any amounts paid thereunder to
the Guarantor or to a fund for the benefit of its creditors. In addition,
regardless of the factors identified in the foregoing clauses (a) and (b), the
court could avoid the Note Guarantee and direct such repayment if it found that
the Note Guarantee was entered into with actual intent to hinder, delay or
defraud such Guarantor's creditors. The measure of insolvency for purposes of
the foregoing will vary depending on the law of the jurisdiction being applied.
Generally, however, an entity would be considered insolvent if the sum of its
debts (including contingent, disputed and unliquidated debts) is greater than
all of its property at a fair valuation or if the present fair salable value of
its assets is less then the amount that will be required to pay its probable
liability on its existing debts as they become due.
SUBORDINATION
The payment by the Company of principal of, and premium, if any, interest
and Liquidated Damages, if any, on the Notes, and by the Guarantors of such
amounts under their respective Note Guarantees (pursuant to the terms thereof or
by acceleration), will be subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Debt of such obligor,
whether outstanding on the Issue Date or thereafter incurred. As of June 30,
1996, on a pro forma basis after giving effect to the issuance of the Old Notes
and the application of the estimated net proceeds therefrom, the completion of
the ADCO Acquisition, the funding of the Senior Bank Facility and the repayment
of amounts outstanding under the UBS Credit Facility, the aggregate amount of
outstanding Senior Debt of the Company and its Subsidiaries would be $21.8
million.
Upon any distribution to creditors of the Company or any Guarantor in a
liquidation or dissolution of the Company or such Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or such Guarantor or its property, any assignment for the benefit of
creditors or any marshalling of the assets and liabilities of the Company or
such Guarantor, the holders of Senior Debt of such entity will be entitled to
receive payment from such entity in full of all Obligations due in respect of
such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt, whether or not
payable or allowable in such proceeding) before the Noteholders will be entitled
to receive any payment or distribution with respect to the Notes, and until all
Obligations of such entity with respect to Senior Debt are paid in full, any
payment or distribution to which the Noteholders would be entitled shall be made
to the holders of Senior Debt of such entity (except Noteholders may receive
Permitted Junior Securities and payments made from the trust described under "--
Legal Defeasance and Covenant Defeasance").
The Company and each Guarantor also may not make any payment upon or in
respect of the Notes, including the principal of, premium, if any, or interest
on the Notes, or to repurchase or redeem any Notes or to pay any Liquidated
Damages (except in such Permitted Junior Securities or from the trust described
under "Legal Defeasance and Covenant Defeasance") if (i) a default in the
payment of the principal of, premium, if any, or interest on Designated Senior
Debt (or, in the case of Senior Debt under the Senior Bank Facility, any other
monetary obligations in respect thereof) occurs and is continuing beyond any
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applicable period of grace (whether at maturity, at a date of required
prepayment, by declaration or otherwise) or (ii) any other default occurs and is
continuing with respect to Designated Senior Debt that permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity (or, in the case of letters of credit, to require cash
collateralization) and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Company or the holders of any Designated Senior Debt.
Payments on the Notes may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any Designated
Senior Debt has been accelerated (or cash collateral is required for letters of
credit). No new period of payment blockage under clause (ii) above may be
commenced pursuant to a Payment Blockage Notice unless and until 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice.
The Indenture further requires that the Company promptly notify holders of
Designated Senior Debt if payment of the Notes is accelerated because of an
Event of Default. Neither the Company nor any Guarantor may pay the Notes until
five Business Days after such holders receive notice of acceleration and,
thereafter, may not pay the Notes unless the subordination provisions of the
Indenture otherwise permit payment at that time.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or any Guarantor (other than Permitted
Junior Securities) shall be received by the Trustee or the Noteholders at a time
when such payment or distribution is prohibited by the subordination provisions
of the Indenture, such payment or distribution shall be held in trust for the
benefit of the holders of such Senior Debt, and shall be paid or delivered by
the Trustee or such Noteholders, as the case may be, to the holders of such
Senior Debt remaining unpaid or to their representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Debt may have been issued, ratably according to
the aggregate principal amounts remaining unpaid on account of such Senior Debt
held or represented by each, for application to the payment of all such Senior
Debt in full after giving effect to any concurrent payment or distribution to
the holders of such Senior Debt.
As a result of the subordination provisions described above, in the event of
a liquidation, insolvency or similar proceeding, Noteholders may recover less
ratably than creditors of the Company or a Guarantor who are holders of Senior
Debt of the Company or such Guarantor or who are not subject to similar
subordination provisions. See "Risk Factors -- Subordination of the Notes and
the Guarantee."
OPTIONAL REDEMPTIONS
The Notes will not be redeemable at the Company's option prior to October
15, 2001, except in connection with Public Equity Offerings as set forth below.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, together with accrued and unpaid interest and Liquidated
Damages thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on October 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------ -----------
<S> <C>
2001.................................................................... 105.25%
2002.................................................................... 103.50%
2003.................................................................... 101.75%
2004 and thereafter..................................................... 100.00%
</TABLE>
Until October 15, 1999, upon one or more Public Equity Offerings, up to $35.0
million aggregate principal amount of the Notes may be redeemed at the option of
the Company within 75 days after such Public Equity Offering, on not less than
30 days' but not more than 60 days' notice to each holder of the Notes to be
redeemed, with cash from the net cash proceeds of such Public Equity Offering in
the case of an offering by
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the Company, or from such proceeds invested directly or indirectly by the Parent
or Astor Holdings II in Qualified Capital Stock in the case of an offering by
the Parent or Astor Holdings II, as the case may be, at 109.5% of principal,
together with accrued and unpaid interest to the date of redemption; PROVIDED
that immediately following each such redemption not less than $75.0 million
aggregate principal amount of the Notes is outstanding.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a PRO RATA basis, by lot
or by such other method as the Trustee deems fair and appropriate; PROVIDED that
no Notes with a principal amount of $1,000 or less shall be redeemed in part.
Notice of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each Noteholder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Noteholder thereof upon cancellation of the original Note. On and after the
redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption.
Except as set forth below under "-- Change of Control" and "-- Certain
Covenants -- Asset Sales and Sales of Subsidiary Stock," the Company is not
required to make any mandatory redemption or sinking fund payments with respect
to the Notes.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Noteholder will have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Noteholder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
will mail a notice to each Noteholder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes pursuant
to the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the foregoing provisions, the
Company shall comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the Change of Control
provisions in the Indenture.
On the date upon which the Company is to make a Change of Control Payment
(the "Change of Control Payment Date"), the Company will, to the extent lawful,
(1) accept for payment all Notes or portions thereof properly tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Notes or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Noteholder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each
Noteholder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any, PROVIDED that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 30 days following a Change of Control, the
Company will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Notes required by this covenant. The Company may be
prohibited in certain circumstances,
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including, without limitation, if it fails to obtain such requisite consents,
from making such repurchases. In addition, there can be no assurance that the
Company would have sufficient resources to repay all outstanding Senior Debt and
to repurchase the Notes tendered for repurchase by the Noteholders. See "Risk
Factors -- Control by Indirect Stockholder; Consequences of Change of Control."
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Noteholders to require that the Company repurchase or
redeem the Notes in the event of a takeover, recapitalization or similar
restructuring.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole,
of the assets of Astor Holdings II, the Company and its Restricted Subsidiaries
taken as a whole and of the assets of the Parent, Astor Holdings II, the Company
and its Restricted Subsidiaries taken as a whole. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precise established definition of the phrase under applicable law. Accordingly,
the ability of a Noteholder to require the Company to repurchase such Notes as a
result of a sale, lease, transfer, conveyance or other disposition of less than
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole, of the assets of Astor Holdings II, the Company and its Restricted
Subsidiaries taken as a whole and of the assets of the Parent, Astor Holdings
II, the Company and its Restricted Subsidiaries taken as a whole to another
Person or group may be uncertain.
CERTAIN COVENANTS
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, and Astor Holdings II will not, directly or
indirectly, create, incur, issue, assume, Guarantee or otherwise become directly
or indirectly liable with respect to (collectively, "incur") any Indebtedness
(including as a result of an acquisition) and will not issue any Disqualified
Stock; PROVIDED that the Company and the Subsidiary Guarantors may incur
Indebtedness or issue shares of Disqualified Stock if (i) no Default or Event of
Default shall have occurred and be continuing at the time of, or would occur
after giving effect on a pro forma basis to, such incurrence of Indebtedness or
issuance of Disqualified Stock and (ii) the Fixed Charge Coverage Ratio for
Astor Holdings II's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least (x) 2.0 to 1 if such incurrence or issuance
occurs on or before October 8, 1998 or (y) 2.25 to 1 if such incurrence or
issuance occurs at any time thereafter, in each case determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom) as if
the additional Indebtedness had been incurred or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company and any Domestic Restricted Subsidiary
of Indebtedness pursuant to the Senior Bank Facility in a maximum amount not
to exceed at any time (A) an aggregate principal amount of $20.0 million (or
its foreign currency equivalent) under the Bank Term Loan LESS the aggregate
amount of all Net Proceeds applied to permanently reduce principal
Indebtedness under the Bank Term Loan pursuant to the covenant entitled
"Asset Sales and Sales of Subsidiary Stock" and (B) in the case of other
Indebtedness under the Senior Bank Facility consisting of revolving credit,
working capital and/or letters of credit issued thereunder, in an aggregate
principal amount (with letters of credit being deemed to have a principal
amount equal to the maximum reimbursement obligation of the Company or the
relevant Restricted Subsidiary thereunder) outstanding at any time not
greater
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than the greater of (such greater amount, the "Working Capital Amount") (1)
$30.0 million (or its foreign currency equivalent), LESS the amount of all
Net Proceeds applied to permanently reduce the commitments under the
Revolving Credit Facility and (2) the Borrowing Base; PROVIDED that a change
in currency exchange rates which causes the amount of Indebtedness of the
Company and its Domestic Restricted Subsidiaries outstanding to exceed the
levels specified above shall not be deemed an incurrence of Indebtedness;
(ii) the incurrence by the Company and any Restricted Subsidiary of
Indebtedness that is fully secured by letters of credit permitted pursuant
to clause (i)(B) above or clause (vi) below;
(iii) the incurrence by the Company and any Guarantor of Indebtedness
represented by the Notes and the Note Guarantees;
(iv) the incurrence by the Company or any Restricted Subsidiary of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund
Existing Indebtedness, Existing Disqualified Stock or other Indebtedness
that was permitted by the Indenture to be incurred;
(v) the incurrence (a) by any Wholly Owned Restricted Subsidiary of
Indebtedness owing to and held by the Company, (b) by the Company or any
Wholly Owned Restricted Subsidiary of Indebtedness owing to and held by any
Wholly Owned Restricted Subsidiary or (c) by ABI Acquisition 2 plc of
Indebtedness owing to and held by ABI Acquisition 1 plc, by ABI Acquisition
1 plc of Indebtedness owing to and held by Astor Holdings II or by Astor
Holdings II of Indebtedness owing to and held by the Parent, in each case
pursuant to the provisions of the ABI Shareholder Intercompany Notes;
PROVIDED that such Indebtedness owed by the Company or any Wholly Owned
Restricted Subsidiary that is a Guarantor to any Wholly Owned Restricted
Subsidiary that is not a Guarantor is made expressly subordinate to the
payment in full of all Obligations with respect to the Notes and the Note
Guarantees;
(vi) the incurrence by Restricted Subsidiaries, other than Domestic
Restricted Subsidiaries, of Indebtedness incurred for working capital
purposes and any Guarantee thereof by the Company or Astor Holdings II in an
aggregate outstanding principal amount for all such Indebtedness permitted
solely pursuant to this clause (vi), and together with the aggregate
outstanding principal amount of Indebtedness permitted pursuant to clause
(i)(B) above, does not exceed at any time the Working Capital Amount; and
(vii) the incurrence by the Company, Astor Holdings II or any Restricted
Subsidiary of Indebtedness (in addition to Indebtedness permitted by clauses
(i) - (vi)) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $10 million (or its
foreign currency equivalent).
For purposes of this covenant each of the following events (but not solely
the following events) shall be deemed to constitute an "incurrence" of
Indebtedness upon the happening thereof: (i) any event that causes any
Unrestricted Subsidiary to be a Restricted Subsidiary shall be deemed to be the
incurrence of such former Unrestricted Subsidiary's Indebtedness by such
Restricted Subsidiary and (ii) any sale of equity or other event that results in
any Wholly Owned Restricted Subsidiary ceasing to be a Wholly Owned Restricted
Subsidiary or a transfer of any such Indebtedness by the Company to a Person
that is not the Company, or by a Wholly Owned Restricted Subsidiary to a Person
that is not a Wholly Owned Restricted Subsidiary, shall be deemed to be an
incurrence by such former Wholly Owned Restricted Subsidiary or such Person upon
the happening of such event.
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, and Astor Holdings II will not, directly or
indirectly; (i) declare or pay any dividend or make any other payment or
distribution on account of any Equity Interests of Astor Holdings II, the
Company or any Restricted Subsidiary including, without limitation, any payment
in connection with any merger or consolidation involving the Company (other than
(x) dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company, Astor Holdings II or a Restricted Subsidiary
and (y) dividends or distributions payable to the Company or any other
Restricted Subsidiary (and, if such Restricted Subsidiary
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has shareholders other than the Company or another Restricted Subsidiary, to its
other shareholders on a PRO RATA basis to such other shareholders); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of Astor Holdings II, the Company or any Restricted Subsidiary; (iii) make any
principal payment on, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes, except at
the original final maturity thereof or in accordance with the scheduled
mandatory redemption or repayment provisions set forth in the documentation
governing such Indebtedness at the Issue Date or, if later, the date such
Indebtedness was incurred or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto (including, in the case of a Restricted
Investment, the pro forma effect thereof) as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Disqualified
Stock;" and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and any Restricted Subsidiary and
Astor Holdings II, without duplication, after the Issue Date (excluding
Restricted Payments permitted by any of clauses (ii), (iv), (v)(B), (vi),
(vii) and (viii) of the next succeeding paragraph), is less than the sum of
(1) 50% of the Consolidated Net Income for the period (taken as one
accounting period) from the beginning of the fiscal quarter during which the
Indenture is executed to the end of Astor Holdings II's most recently ended
fiscal quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, minus 100% of such deficit) PLUS (2) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale
since the Issue Date of Equity Interests of the Company or of debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or convertible debt securities) sold
to a Restricted Subsidiary and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock) or by way of
other capital contributions to the Company PLUS (3) to the extent that any
Restricted Investment that was made after the Issue Date is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (A) the cash return
of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted
Investment; PROVIDED that no amounts received by the Company by way of
capital contributions will be counted in determining the amount available
for Restricted Payments under this clause (c) to the extent such proceeds or
amounts are excluded in accordance with clause (ii) of the next succeeding
paragraph.
The foregoing provisions will not prohibit the following:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) the defeasance, redemption or repurchase of subordinated
Indebtedness with (A) the proceeds from an incurrence of Permitted
Refinancing Indebtedness or (B) the proceeds from the substantially
concurrent sale (other than to a Subsidiary of the Parent) of Equity
Interests of the Parent received by the Company by way of capital
contributions; PROVIDED that the amounts of any such capital contributions
that are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of the preceding paragraph;
(iii) the payment of dividends by the Company or ABI Acquisition 1 plc
to Astor Holdings II and by Astor Holdings II to the Parent, solely in
amounts and at the times necessary, to permit payment of amounts required
for any repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Parent (or of Equity Interests of Astor
Holdings II) held by any member of the
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Company's, Astor Holdings II's or the Parent's management pursuant to any
management equity subscription agreement or stock option agreement or
similar agreement, or otherwise upon their death, disability, retirement or
termination of employment or departure from the Board of Directors of the
Parent, Astor Holdings II or the Company; PROVIDED that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed (A) $500,000 in any twelve-month period and (B)
$2.0 million in the aggregate from and after the Issue Date;
(iv) the repurchase or other acquisition of Existing Disqualified Stock
held by ABI Corporation or Astor Holdings II;
(v) the payment of dividends by the Company or ABI Acquisition 1 plc to
Astor Holdings II, or by Astor Holdings II to the Parent, in amounts and at
times necessary to permit payment of (A) unless prohibited and not waived by
or on behalf of the lenders under the Senior Bank Facility, amounts payable
by the Parent under the Management Services Agreement, consisting of (1)
management fees in aggregate amount not to exceed $412,000 in any
twelve-month period (as adjusted in proportion to increases in the consumer
price index), (2) transaction fees equal to not more than 2% of the
aggregate acquisition consideration (as the amount of such consideration is
determined in accordance with the Management Services Agreement as in effect
on the Issue Date) in connection with merger and acquisition services
rendered by certain financial advisors in connection with acquisitions by
Astor Holdings II and its Subsidiaries and (3) certain reasonable expenses
incurred by such advisors in connection with the performance of their
obligations under such Management Services Agreement, (B) amounts due under
the Tax Sharing Agreement, (C) administrative fees in respect of certain
partnerships that are investors in the Parent, in an aggregate amount not
exceeding $28,000 in any twelve-month period, and (D) operating expenses of
the Parent and Astor Holdings II incurred in the ordinary course of business
in an aggregate amount not to exceed $50,000 in any twelve-month period PLUS
audit fees and fees paid with respect to filings by the Parent or Astor
Holdings II with the Commission;
(vi) the payment of dividends on Existing Disqualified Stock owned by
ABI Corporation or Astor Holdings II;
(vii) subject to the subordination provisions contained in the ABI
Shareholder Intercompany Notes, payments under the ABI Shareholder
Intercompany Notes by ABI Acquisition 2 plc to ABI Acquisition 1 plc, by ABI
Acquisition 1 plc to Astor Holdings II and by Astor Holdings II to the
Parent, in each case of amounts due and payable under the terms of the ABI
Shareholder Notes and necessary for any required repurchase, payment of
principal or payment of interest of or on the ABI Shareholder Notes; and
(viii) the purchase of the remaining Equity Interests of Rheochem owned
by RCI such that Rheochem becomes a Wholly Owned Restricted Subsidiary that
is a Subsidiary Guarantor pursuant to the Rheochem Shareholders' Agreement,
if the Company delivers to the Trustee an Officer's Certificate certifying
that such purchase has been approved by a majority of the disinterested
members of the Board of Directors and attaching a resolution of the Board of
Directors (A) to such effect and (B) to the effect that it has determined in
good faith that such purchase is at a price no less favorable to the Company
than the fair market value of such Equity Interests;
PROVIDED that, in the case of clauses (ii), (iii), (iv), (v)(C) and (vi) of this
paragraph, no Default or Event of Default shall have occurred or be continuing
at the time of such Restricted Payment or would occur as a consequence thereof.
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and any Restricted Subsidiary and Astor Holdings II
(except to the extent repaid in cash) in the Subsidiary so designated will be
deemed to be Restricted Payments at the time of such designation and will reduce
the amount available for Restricted Payments under the first paragraph of this
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount
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equal to the greater of (x) the net book value of such Investments at the time
of such designation and (y) the fair market value of such Investments at the
time of such designation. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Not later than the date of making any Restricted Payment under the
provisions described in the first paragraph of "Restricted Payments," the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed, which
calculations shall be based upon the Astor Holdings II's latest available
financial statements; PROVIDED that the Company shall not have to deliver such
an Officer's Certificate in connection with Restricted Payments of less than
$200,000 in aggregate amount in any twelve-month period.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, and Astor Holdings II will not, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to: (i)(a) pay dividends or make any other distributions to the
Company or any Restricted Subsidiary (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by, its profits
or (b) pay any Indebtedness owed to the Company or any Restricted Subsidiary;
(ii) make loans or advances to the Company or any Restricted Subsidiary; or
(iii) transfer any of its properties or assets to the Company or any Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reasons of (a) Existing Indebtedness; (b) the Senior Bank Facility as in effect
on the Issue Date and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
PROVIDED that the applicable restrictions in such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are not materially more restrictive with respect to such
transactions than those contained in the Senior Bank Facility as in effect on
the Issue Date; (c) the Indenture, the Note Guarantees, the Notes, Pari Passu
Debt and any notes with substantially identical terms as the Notes issued in
exchange for the Notes or the Pari Passu Debt; (d) applicable law; (e) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any Restricted Subsidiary, as in effect at the time of acquisition
(except to the extent such Indebtedness was incurred in connection with, or in
contemplation of, such acquisition), which encumbrance or restriction is not
applicable to the Company, any Restricted Subsidiary (other than the Person
acquired) or Astor Holdings II, or the properties or assets thereof (other than
the properties or assets of the Person so acquired), PROVIDED that, in the case
of Indebtedness, such Indebtedness was permitted by the terms of the Indenture
to be incurred; (f) by reason of customary non-assignment or no-subletting
provisions in leases or other contracts entered into in the ordinary course of
business and consistent with past practices; (g) purchase money obligations or
Capital Lease Obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired; (h) Permitted Liens on assets securing permitted
Senior Debt; (i) Permitted Refinancing Indebtedness, PROVIDED that the
applicable restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are not materially more restrictive than those
contained in the agreements governing the Indebtedness being refinanced; (j)
restrictions with respect solely to a Restricted Subsidiary imposed pursuant to
a binding agreement which has been entered into for the sale or disposition
(including by merger or consolidation) of all or substantially all of the
Capital Stock or assets of such Restricted Subsidiary, PROVIDED such
restrictions apply solely to the Capital Stock or assets of such Restricted
Subsidiary; or (k) the agreement governing Indebtedness permitted pursuant to
the provision described in clause (vi) of the second paragraph of "Incurrence of
Indebtedness and Issuance of Disqualified Stock" to the extent such agreement
restricts transfers of collateral securing such Indebtedness.
ANTI-LAYERING
The Indenture provides that (i) the Company will not incur, create, issue,
assume, Guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior
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Debt and senior in any respect in right of payment to the Notes, (ii) no
Guarantor will incur, create, issue, assume, Guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
its Senior Debt and senior in any respect in right of payment to the Note
Guarantee executed by such Guarantor and (iii) no Restricted Subsidiary which is
not a Guarantor will incur, create, issue, assume, Guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
its Senior Debt (other than Indebtedness owing to Astor Holdings II, the Company
or any Restricted Subsidiary as permitted under the Indenture).
ASSET SALES AND SALES OF SUBSIDIARY STOCK
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, and Astor Holdings II will not, engage in any Asset
Sale unless (i) the Company delivers to the Trustee an Officers' Certificate
stating that such officers have determined in good faith that the Company, the
Restricted Subsidiary or Astor Holdings II, as the case may be, will receive
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Sale at least equal to the fair market value of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 80%
of the consideration therefor (excluding contingent liabilities assumed by the
transferee of any such assets) received by the Company, such Restricted
Subsidiary or Astor Holdings II, as the case may be, is in the form of cash paid
at the closing thereof, PROVIDED that the amount of (x) any liabilities as shown
on the most recent balance sheet of the Company or such Restricted Subsidiary or
Astor Holdings II, as the case may be (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Guarantee
thereof) that are assumed by the transferee of any such assets pursuant to an
agreement that releases the Company or such Restricted Subsidiary or Astor
Holdings II, as the case may be, from further liability with respect thereto
will be deemed to be cash for purposes of this provision and (y) any notes,
securities or other items of property received by the Company or any such
Restricted Subsidiary or Astor Holdings II, as the case may be, from such
transferee that are promptly and in any event within 30 days converted by the
Company or such Restricted Subsidiary or Astor Holdings II, as the case may be,
into cash (to the extent of the cash received) will be deemed to be cash for
purposes of this provision and (iii) the Company delivers to the Trustee (a)
with respect to any Asset Sale or series of related Asset Sales involving
aggregate consideration in excess of $1.0 million, an Officers' Certificate
certifying that such Asset Sale has been approved by a majority of the
disinterested members of the applicable Board of Directors, and attaching a
resolution of such Board of Directors (x) to such effect and (y) to the effect
that it has determined in good faith that the consideration to be received by
the Company, the Restricted Subsidiary or Astor Holdings II at the time of such
Asset Sale is at least equal to the fair market value of the assets or Equity
Interests to be issued or otherwise disposed of and (b) with respect to any
Asset Sale or series of related Asset Sales involving aggregate consideration in
excess of $5.0 million, a written opinion as to the fairness to the Company or
such Restricted Subsidiary or Astor Holdings II, as the case may be, of such
Asset Sale from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing. Notwithstanding the foregoing
provision, if the Company is required to sell all of its Equity Interests in
Rheochem in accordance with the terms of the Rheochem Shareholders' Agreement,
the consideration received by the Company therefor shall be deemed to be fair
market value, and the Company shall not have to provide any evidence to the
Trustee as to the fairness of the consideration so received.
Within 300 days after the receipt of any Net Proceeds from an Asset Sale,
the Company and Astor Holdings II may or may cause the relevant Restricted
Subsidiary to apply such Net Proceeds, at the Company's option, (a) to
permanently reduce Indebtedness under the Senior Bank Facility (and, in the case
of revolving Indebtedness under the Senior Bank Facility, to permanently reduce
the commitments thereunder), (b) to permanently reduce Senior Debt of the
Company or a Subsidiary Guarantor or (c) to make an investment in a Permitted
Business or to make capital expenditures or to acquire other long-term/tangible
assets, in each case, engaged or used in a Permitted Business (or make a binding
commitment to make such investment, subject only to reasonable and customary
closing conditions, and in fact to make such investment within 60 additional
days). Pending the final application of any such Net Proceeds, the Company or
Astor
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Holdings II may or may cause the relevant Restricted Subsidiary to temporarily
reduce revolving indebtedness under the Senior Bank Facility or otherwise invest
such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
two immediately preceding sentences of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
received by the Company, if any, any Restricted Subsidiary, if any, and Astor
Holdings II, if any, exceeds $5.0 million, Astor Holdings II and the relevant
Restricted Subsidiaries will pay to the Company all Excess Proceeds, and the
Company will be required to make an offer to all Noteholders and to holders of
Pari Passu Debt (an "Asset Sale Offer") to purchase, on a PRO RATA basis from
the Noteholders and the holders of Pari Passu Debt, the maximum principal amount
of Notes and Pari Passu Debt that may be purchased out of the Excess Proceeds,
at an offer price in cash in an amount equal to 100% of the principal amount
thereof PLUS accrued and unpaid interest and liquidated damages, if any, thereon
to the date of purchase, in accordance with the procedures set forth in the
Indenture (the "Excess Proceeds Payment"). The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with such a repurchase of the Notes. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes and Pari
Passu Debt surrendered by Noteholders and holders of Pari Passu Debt exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes and Pari Passu
Debt to be purchased on a PRO RATA basis. Upon completion of such Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero. In certain
circumstances, the Company may be prohibited from purchasing the Notes. See
"Risk Factors -- Subordination of the Notes and the Guarantee" and "Risk Factors
- -- Control by Indirect Stockholder; Consequences of Change of Control."
LIENS
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, and Astor Holdings II will not, directly or
indirectly, create, incur, assume or suffer to exist any Lien on any property or
asset now owned or hereafter acquired, or on any income or profits therefrom or
assign or convey any right to receive income therefrom except Permitted Liens,
unless the Obligations due under the Indenture and the Notes are secured, on an
equal and ratable basis (or on a senior basis, in the case of Obligations under
Indebtedness subordinated in right of payment to the Notes), with the
Obligations so secured.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, and Astor Holdings II will not, make any payment to,
or sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
contract, agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or such Restricted Subsidiary or Astor Holdings II, as the case may
be, than those that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary or Astor Holdings II, as the case may be,
with an unrelated Person and (ii) the Company delivers to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $500,000, an Officers'
Certificate certifying that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors, and attaching a
resolution of the Board of Directors (x) to such effect and (y) to the effect
that it has determined in good faith that such transaction complies with clause
(i) above, and (b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, a written opinion as to the fairness to the Company or such
Restricted Subsidiary or Astor Holdings II, as the case may be, of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing; provided that
transactions with Rheochem in the ordinary course of business consistent with
past practice will not be subject to clause (ii) above (see "Business --
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Rheochem Joint Venture"), and PROVIDED FURTHER that the following shall not be
deemed Affiliate Transactions: (a) any reasonable and customary employment
agreement, employment benefit plan or other compensation plan entered into by
the Company or any Restricted Subsidiary or Astor Holdings II, as the case may
be, in the ordinary course of business, (b) reasonable and customary directors'
fees and indemnification arrangements in the ordinary course of business, (c)
reasonable and customary payment of compensation to employees, officers,
directors or consultants in the ordinary course of business, (d) loans or
advances to officers or employees of the Company or any Restricted Subsidiary to
pay business related travel expenses or reasonable relocation costs of such
officers or employees in connection with their employment by the Company or any
Restricted Subsidiary, (e) transactions between or among any combination of the
Company and the Guarantors, (f) any transfer of tax benefits and any tax sharing
or tax loss surrender arrangements and any intercompany sales of inventory
between or among any combination of the Company, Astor Holdings II and any
Restricted Subsidiary or between or among one or more Restricted Subsidiaries,
(g) payments under the Management Services Agreement, (h) payments under the Tax
Sharing Agreement, (i) payment of administrative fees in respect of certain
partnerships that are investors in the Parent, in an aggregate amount not
exceeding $28,000 per twelve-month period, (j) payments to the Parent or Astor
Holdings II to pay operating expenses of the Parent and Astor Holdings II
incurred in the ordinary course of business in an aggregate amount not to exceed
$50,000 in any twelve-month period, (k) payments made to the Parent or Astor
Holdings II to reimburse the Parent or Astor Holdings II for costs, fees and
expenses incident to a registration of any of the capital stock of the Parent or
Astor Holdings II for an offering under the Securities Act, so long as (A) a
portion of the proceeds of such offering (if it is completed) are contributed
to, or otherwise used for the benefit of, the Company and (B) the costs, fees
and expenses are allocated among the Parent or Astor Holdings II and any selling
shareholders in such proportions as is required by the Stockholders Agreement as
in effect on the Issue Date or, if or to the extent that the Stockholders
Agreement is not applicable, as is appropriate to reflect the relative proceeds
received by the Parent or Astor Holdings II and such selling shareholders and
(l) Restricted Payments permitted by the provisions of the Indenture described
above under clauses (i), (iii), (iv), (v), (vi) and (vii) of the second
paragraph of the covenant entitled "Restricted Payments."
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company and Astor Holdings II may not
consolidate or merge with or into (whether or not the Company or Astor Holdings
II, as the case may be, is the surviving entity), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions to, another corporation, Persons
or entity unless (i) the Company or Astor Holdings II, as the case may be, is
the surviving corporation or entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company or Astor Holdings II, as
the case may be) or to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company or Astor Holdings II, as the
case may be) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made assumes all the
obligations of the Company or Astor Holdings II, as the case may be, under the
Notes and the Indenture pursuant to a supplemental indenture in form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction, no
Default or Event of Default exists; and (iv) except in the case of a merger of
the Company or Astor Holdings II, as the case may be, with or into the Company
or Astor Holdings II, as the case may be, or the entity or Person formed by or
surviving any such consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been made (A) will
have Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of the Company or Astor Holdings II, as
the case may be, immediately preceding the transaction and (B) will, at the time
of such transaction after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Disqualified
Stock."
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Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company or Astor Holdings II in accordance with the
foregoing, the successor corporation formed by such consolidation or into which
the Company or Astor Holdings II is merged or to which such transfer is made,
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company or Astor Holdings II, as the case may be, under the Indenture
with the same effect as if such successor corporation had been named therein as
the Company or Astor Holdings II, as the case may be, and the Company or Astor
Holdings II, as the case may be, shall be released from the obligations under
the Notes, the Note Guarantees and the Indenture except with respect to any
obligations that arise from, or are related to, such transaction.
LINE OF BUSINESS
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Permitted Business. Astor Holdings II will
hold the Capital Stock of and certain instruments representing the Indebtedness
of the Company and/or Restricted Subsidiaries, but will not have any other
assets.
FUTURE SUBSIDIARY GUARANTORS
The Indenture provides that if the Company shall acquire or create after the
Issue Date, directly or indirectly, another Domestic Restricted Subsidiary
(including upon any Unrestricted Subsidiary ceasing to be an Unrestricted
Subsidiary and becoming a Domestic Restricted Subsidiary), then such newly
acquired or created Domestic Restricted Subsidiary shall execute a Note
Guarantee and deliver an opinion of counsel in accordance with the terms of the
Indenture. The Company may elect, from time to time, on or after the Issue Date,
to cause one or more other Restricted Subsidiaries to become a Subsidiary
Guarantor by executing a Note Guarantee and delivering an opinion of counsel in
accordance with the terms of the Indenture.
As of the Issue Date, (i) ABI Corporation holds Capital Stock of the Company
and (ii) ABI Acquisitions 1 plc holds Capital Stock of a Restricted Subsidiary
and certain instruments representing Indebtedness of ABI Acquisition 2 plc. The
Indenture provides that the Company will not permit either of ABI Corporation or
ABI Acquisition 1 plc to have any other assets or to conduct any other business
activities until such time as such entity executes a Note Guarantee in
accordance with the terms of the Indenture.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Note Guarantee, PROVIDED that such sale or other disposition is
permitted by and the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the Indenture. See "-- Certain
Covenants -- Asset Sales and Sales of Subsidiary Stock."
STATUS AS INVESTMENT COMPANY
The Indenture prohibits the Company and its Subsidiaries and Astor Holdings
II from being required to register as an "investment company" (as that term is
defined in the Investment Company Act of 1940, as amended) or from otherwise
becoming subject to regulation under the Investment Company Act.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, Astor Holdings II will furnish to the
Noteholders (at their addresses set forth in the Register of Notes) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if Astor
Holdings II were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of Astor Holdings II
and its Consolidated Subsidiaries and, with respect to the annual information
only, a report thereon by Astor Holdings II's certified independent accountants
and (ii) all
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current reports that would be required to be filed with the Commission on Form
8-K if Astor Holdings II were required to file such reports. In addition,
whether or not required by the rules and regulations of the Commission, Astor
Holdings II will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company and the Guarantors
will be required, for so long as any Notes remain outstanding, to furnish to the
Noteholders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default:
(i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not prohibited by the
subordination provisions of the Indenture);
(ii) default in payment when due of principal of, or premium, if any,
on the Notes when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise (whether or not prohibited by the
subordination provisions of the Indenture) including, without limitation,
payments of any required Change of Control Payment or Excess Proceeds
Payment;
(iii) failure by the Company or any Guarantor to comply with its
obligations with respect to the making of a Change of Control Offer or an
Asset Sale Offer as described under "Change of Control" or under "Asset
Sales and Sales of Subsidiary Stock";
(iv) failure by the Company or any Guarantor to comply with its other
obligations described under "Change of Control" or "Asset Sales and Sales of
Subsidiary Stock" or its obligations described under "Incurrence of
Indebtedness and Issuance of Disqualified Stock" or "Restricted Payments"
and such failure continues for a period of 30 consecutive days after written
notice by the Trustee or the holders of at least 25% in aggregate principal
amount of the Notes then outstanding;
(v) failure by the Company or any Guarantor to comply with its other
agreements in the Indenture or the Notes and such failure continues for 60
consecutive days after written notice by the Trustee or the holders of at
least 25% in aggregate principal amount of the Notes then outstanding;
(vi) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Restricted Subsidiary
or Astor Holdings II (or the payment of which is Guaranteed by the Company
or any Restricted Subsidiary or Astor Holdings II) whether such Indebtedness
or Guarantee exists on the Issue Date, or is created after the Issue Date,
which default (a) is caused by a failure to pay any such Indebtedness at its
stated final maturity after giving effect to any grace period provided in
such Indebtedness on the date of such default (the amount of such missed
payment of principal, a "Payment Default Amount") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the aggregate principal amount of all such Indebtedness referred to in
clause (b) together with the aggregate Payment Default Amount at such time
aggregates $5.0 million or more;
(vii) failure by the Company or any Restricted Subsidiary or Astor
Holdings II to pay final judgments aggregating in excess of $5.0 million,
which judgments are not stayed, bonded or discharged within 60 days after
their entry;
(viii) except as permitted by the Indenture, any Note Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Note Guarantee; and
(ix) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries or Astor Holdings II.
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If any Event of Default occurs and is continuing, the Trustee or the
Noteholders holding at least 25% in aggregate principal amount of the then
outstanding Notes may declare, by notice in writing to the Company (and to the
Trustee if given by Noteholders) all the Notes to be due and payable
immediately. If any Senior Debt is outstanding pursuant to the Senior Bank
Facility, upon a declaration of such acceleration, such principal and interest
shall be due and payable upon the earlier of (x) the day that is five Business
Days after the provision to the Company and the Agent under the Senior Bank
Facility of such written notice, unless such Event of Default is cured or waived
prior to such date and (y) the date of acceleration of any Senior Debt under the
Senior Bank Facility. Noteholders holding more than 50% in aggregate principal
amount of the then outstanding Notes generally are authorized to rescind any
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on the Notes which have become
due solely by such acceleration, have become cured or waived. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to (i) the Company, (ii) any Subsidiary
that would constitute a Significant Subsidiary or any group of Subsidiaries
that, taken together, would constitute a Significant Subsidiary or (iii) Astor
Holdings II, all outstanding Notes will become due and payable without further
action or notice. Noteholders holding the Notes may not enforce the Indenture or
the Notes except as provided in the Indenture. Subject to certain limitations,
Noteholders holding more than 50% in aggregate principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
October 15, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to October 15, 2001, then the
premium specified in the Indenture with respect to an optional redemption of the
Notes shall also become immediately due and payable to the extent permitted by
law upon the acceleration of the Notes.
The Noteholders of at least 50% in aggregate principal amount of the Notes
then outstanding, by notice to the Trustee, may on behalf of the Noteholders of
all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture, except a continuing Default or Event of
Default in the payment of interest, premium or Liquidated Damages on, or
principal of, the Notes. The Trustee may withhold from Noteholders notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in such Noteholders' interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with certain provisions of the Indenture, and the Company
is required upon becoming aware of any Default or Event of Default to deliver to
the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator, direct or indirect stockholder
or affiliate (other than the Company and the Guarantors) as such of the Company
or any Guarantor shall have any liability for any obligations of the Company or
any Guarantor under the Notes, the Note Guarantees or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Noteholder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations with respect to the outstanding Notes and all of the Guarantor's
obligations with respect to the Note Guarantees discharged
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("Legal Defeasance") except for (i) the rights of Noteholders of outstanding
Notes to receive payments in respect of the principal of, and premium, if any,
and interest and Liquidated Damages, if any, on such Notes when such payments
are due from the trust referred to below, (ii) the Company's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company and the Guarantors released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Noteholders of the outstanding Notes, cash in U.S. dollars, noncallable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, and premium, if any, and interest and
Liquidated Damages, if any, on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance prior to April 15, 2006,
the Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issue Date there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Noteholders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred; (iii) in the case
of Covenant Defeasance prior to April 15, 2006, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that the Noteholders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied
to such deposit) or, insofar as certain insolvency-related Events of Default
specified in the Indenture are concerned, at any time in the period ending on
the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of or constitute a default
under any material agreement or instrument (other than the Indenture) to which
Astor Holdings II, the Company or any Restricted Subsidiary is a party or by
which any of such Persons is bound; (vi) the Company must deliver to the Trustee
an Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the Noteholders over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (vii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been met.
TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Noteholder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Noteholder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
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The registered Noteholder of a Note will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Noteholders of
at least a majority in aggregate principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes).
Without the consent of each Noteholder affected, however, an amendment or
waiver may not (with respect to any Note held by a non-consenting Noteholder):
(i) reduce the principal amount of Notes whose Noteholders must consent to an
amendment, supplement or waiver; (ii) reduce the principal of or change the
fixed maturity of any Note; (iii) reduce the rate of or change the time for
payment of interest on any Notes; (iv) waive a Default or Event of Default in
the payment of principal of or premium, if any, or interest or Liquidated
Damages, if any, on the Notes (except that the Noteholders of more than 50% in
aggregate principal amount of the Notes may rescind acceleration of the Notes
and waive the payment default that resulted from such acceleration); (v) make
any Note payable in money other than that stated in the Notes; (vi) reduce the
price (including any premium) payable upon or change the time (other than
changes required by applicable law) of any required redemption or repurchase
with respect to any Note; or (vii) release any Note Guarantee. In addition, any
amendment to the provisions of Article XII of the Indenture (which relate to
subordination) and any amendment or waiver which would alter the provisions
(other than a change of time not required by applicable law or a reduction of
price) obligating the Company to purchase Notes described under "Change of
Control" and "Asset Sales and Sales of Subsidiary Stock" will require the
consent of the Noteholders of at least 75% in aggregate principal amount of the
Notes then outstanding if such amendment should adversely affect the rights of
Noteholders.
Notwithstanding the foregoing, without the consent of any Noteholder, the
Company and the Trustee may amend or supplement the Indenture or the Notes or
the Note Guarantees to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
provide for additional Guarantors of the Notes or the release, in accordance
with the Indenture, of any Guarantor or the Note Guarantees, to provide for the
assumption of the Company's or any Guarantor's obligations to Noteholders of the
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Noteholders of the Notes or
that does not adversely affect the legal rights under the Indenture of any such
Noteholder, or to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should the Trustee become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions with the Company; PROVIDED that, if the Trustee acquires any
conflicting interest, it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue as Trustee or resign.
The Noteholders of at least 50% in aggregate principal amount of the then
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur and not be cured, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Noteholder unless such Noteholder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
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ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to the Company at 8521
Forks Road, North Carolina 27615, Attention: Corporate Secretary.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form without interest coupons. Notes sold in offshore transactions in reliance
on Regulation S under the Securities Act will initially be represented by one or
more permanent global Notes in definitive, fully registered form without
interest coupons (each a "Regulation S Global Note") and will be deposited with
the Trustee as custodian for, and registered in the name of, a nominee of The
Depository Trust Company ("DTC") for the accounts of Euroclear and Cedel. Prior
to the commencement of the Exchange Offer or the effectiveness of a Shelf
Registration Statement with respect to the Notes, beneficial interests in the
Regulation S Global Note may only be held through Euroclear or Cedel, and any
resale or transfer of such interests to U.S. Persons shall not be permitted
during such period unless such resale or transfer is made pursuant to Rule 144A
or Regulation S under the Securities Act.
Notes sold in reliance on Rule 144A will be represented by one or more
permanent global Notes in definitive, fully registered form without interest
coupons (each a "Restricted Global Note", and together with the Regulation S
Global Note, the "Global Notes") and will be deposited with the Trustee as
custodian for, and registered in the name of, a nominee of DTC.
Each Global Note (and any Notes issued in exchange therefor) will be subject
to certain restrictions on transfer set forth therein as described under "Notice
to Investors." Except in the limited circumstances described below under
"Certificated Notes," owners of beneficial interests in a Restricted Global Note
will not be entitled to receive physical delivery of Certificated Notes (as
defined below).
Notes originally purchased by or transferred to Institutional Accredited
Investors who are not QIBs ("Non-Global Purchasers") will be in registered form
without interest coupons ("Certificated Notes"). Upon the transfer of
Certificated Notes initially issued to a Non-Global Purchaser to a QIB, such
Certificated Notes will, unless the Restricted Global Note has previously been
exchanged in whole for Certificated Notes, be exchanged for an interest in such
Restricted Global Note. For a description of the restrictions on the transfer of
Certificated Notes, see "Notice to Investors."
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interest in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). QIBs may hold their interests in a Restricted
Global Note directly through DTC if they are participants in such system, or
indirectly through organizations which are participants in such system.
Investors may hold their interests in a Regulation S Global Note directly
through Cedel or Euroclear, if they are participants in such systems, or
indirectly through organizations that are participants in such systems. Upon the
commencement of the Exchange Offer, but not earlier, investors may hold such
interests through organizations other than Cedel or Euroclear that are
participants in the DTC system. Cedel and Euroclear will hold interests in the
Regulation S Global Notes on behalf of their participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture and, if applicable, those of Euroclear and Cedel.
Payments of the principal of, and premium, if any, interest and Liquidated
Damages, if any, on a Global Note will be made to DTC or its nominee, as the
case may be, as the registered owner thereof. Neither the
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Company, the Trustee nor any Paying Agent will have any responsibility or
liability for any aspects of the records relating to or payments made on account
of beneficial ownership interests in a Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest or Liquidated Damages, if any, in respect
of a Global Note, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Note as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
such Global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Cedel will be effected in the ordinary way
in accordance with their respective rules and operating procedures.
The Company expects that DTC will take any action permitted to be taken by a
Noteholder only at the direction of one or more participants to whose account
the DTC interests in a Global Note is credited and only in respect of such
portion of the aggregate principal amount of the Note as to which such
participant or participants has or have given direction. However, if there is an
Event of Default under the Notes, DTC will exchange the applicable Global Note
for Certificated Notes, which it will distribute to its participants and which
may be legended as set forth under the heading "Notice to Investors."
DTC had advised the Company that it is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and to facilitate the clearance and settlement of securities transactions
between participants through electronic book-entry changes in accounts of its
participants. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interests in a Global Note among
participants of DTC, Euroclear and Cedel, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as depositary for the
Global Notes and a successor depositary is not appointed by the Company within
90 days, the Company will issue Certificated Notes in exchange for the Global
Notes. Holders of an interest in a Restricted Global Note may receive
Certificated Notes, which may bear the legend referred to under "Notice to
Investors," in accordance with the DTC's rules and procedures in addition to
those provided for under the Indenture.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definitions are provided.
"ABI CORPORATION" means ABI Corporation, a Delaware corporation, and its
successors and assigns.
"ABI SHAREHOLDER INTERCOMPANY NOTES" means the amended and restated notes
dated October 1, 1996 of ABI Acquisition 2 plc, ABI Acquisition 1 plc and Astor
Holdings II to ABI Acquisition 1 plc, Astor
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Holdings II and the Parent, respectively, in connection with the acquisition of
ABI and each in a principal amount equal to L3,736,295 PLUS the principal amount
of all ABI Shareholder Notes issued from time to time in payment of interest on
the then outstanding ABI Shareholder Notes pursuant to the terms thereof.
"ABI SHAREHOLDER NOTES" means the Series A L2,285,307 8% Subordinated Notes
due 2003 and the Series B L1,450,988 8% Subordinated Notes due 2003 issued by
the Parent to the former shareholders of Associated British Industries Limited.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"AGENT" means The Chase Manhattan Bank and its successors and assigns under
the Senior Credit Facility.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback)
(PROVIDED that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of Astor Holdings II or of the Company and its
Restricted Subsidiaries taken as a whole will be governed by the provisions of
the Indenture described above under the covenant entitled "Change of Control"
and/or the provisions described above under the covenant entitled "Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant) and (ii) the issue or sale by Astor Holdings II of Equity Interests of
the Company or any Restricted Subsidiary or by the Company or any Restricted
Subsidiary of Equity Interests of any Restricted Subsidiary, in the case of
either of the foregoing clauses, whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $250,000 or
(b) for net proceeds in excess of $250,000. Notwithstanding the foregoing the
following will not be deemed to be Asset Sales: (i) a transfer of assets by the
Company to a Guarantor, by a Guarantor or a Subsidiary to the Company or to
another Guarantor or by a Restricted Subsidiary that is not a Guarantor to
another Restricted Subsidiary or the Company, (ii) the sale, lease, conveyance
or other disposition of inventory or cash management or hedging investments by
the Company or a Restricted Subsidiary of the Company in the ordinary course of
business, (iii) the sale, lease, conveyance or other disposition of property or
equipment that has become worn out, obsolete or damaged or otherwise unusable
for use in connection with the business of the Company or any Restricted
Subsidiary, as the case may be, (iv) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to any Guarantor, (v) a sale or other
disposition pursuant to and permitted by the covenant described above entitled
"Merger, Consolidation or Sale of Assets," (vi) the transfer by the Company to
any Restricted Subsidiary, or by any Restricted Subsidiary to the Company or any
other Restricted Subsidiary, of non-exclusive rights to use proprietary product
formulations, (vii) the merger of a Restricted Subsidiary into a Subsidiary
Guarantor or into the Company (provided that the Person surviving any such
merger must be either a Subsidiary Guarantor or the Company), (viii) the merger
of a Restricted Subsidiary that is not a Subsidiary Guarantor into another
Restricted Subsidiary that is not a Subsidiary Guarantor, and (ix) a Restricted
Payment that is permitted by the covenant described above entitled "Restricted
Payments."
"ASTOR HOLDINGS II" means Astor Holdings II, Inc., a Delaware corporation,
and its successors and assigns.
"BANK TERM LOAN" means the term loan facility provided under the Senior Bank
Facility.
"BORROWING BASE" means, as of any date of determination (and expressed in
dollars or foreign currency as appropriate), the sum of (i) 85% of the aggregate
unpaid portions of accounts receivable of the Company and its Restricted
Subsidiaries arising in the ordinary course of business from the sale of
products or the provision of services (after allowance for doubtful accounts and
net of any credits, rebates, offsets and similar adjustments) and (ii) 50% of
the value (determined at the lower of cost or market on a basis
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consistent with the consolidated financial statements of the Company, after
appropriate write-downs for obsolescence, quality problems and the like) of
inventories of the Company and its Restricted Subsidiaries held in the ordinary
course of business; PROVIDED that the amount determined pursuant to clause (ii)
above shall not constitute over 50% of the sum of the foregoing clauses.
"CAPITAL LEASE OBLIGATION" means rental obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of indebtedness represented by such obligations shall be
the capitalized amount of such obligations as determined in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CASH EQUIVALENT" means (i) securities issued or directly and fully
Guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits,
certificates of deposit and money market deposits issued by and commercial paper
issued by the parent corporation of, any domestic commercial bank of recognized
standing having capital and surplus in excess of $500 million and commercial
paper issued by others rated at least A-2 or the equivalent thereof by S&P or at
least P-2 or the equivalent thereof by Moody's and in each case maturing within
one year after the date of acquisition, (iii) repurchase obligations with a term
of not more than seven days for underlying securities of the types described in
clause (i) or deposits of the type described in clause (ii) above entered into
with a bank meeting the qualifications described in clause (ii) above and (iv)
investments in money market funds substantially all of whose assets comprise
securities of the types described in clauses (i), (ii) and (iii) above.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) any
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation) in one or a series of related transactions, of all or
substantially all of the assets of (A) the Company and its Restricted
Subsidiaries taken as a whole or (B) Astor Holdings II, the Company and its
Restricted Subsidiaries taken as a whole or (C) the Parent, Astor Holdings II,
the Company and its Restricted Subsidiaries taken as a whole to any "person" (as
defined in Section 13(d)(3) of the Exchange Act) or "group" (as defined in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) unless the "beneficial
owners" (as defined in Rule 13d-3 under the Exchange Act) of the Voting Stock of
the Parent, Astor Holdings II or the Company immediately prior to such
transaction own, directly or indirectly, more than 50% of the total Voting Stock
of such person immediately after such transaction, (ii) the adoption of a plan
for the liquidation or dissolution of the Parent, Astor Holdings II or the
Company, (iii) the Parent, Astor Holdings II or the Company consolidates with,
or merges with or into, another "person" (as defined above) or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any "person" (as defined above) or "group" (as defined above) in a
transaction or series of related transactions in which the Voting Stock of the
Parent, Astor Holdings II or the Company is converted into or exchanged for
cash, securities or other property, other than any transaction where (A) the
outstanding Voting Stock of the Parent, Astor Holdings II or the Company is
converted into or exchanged for (1) Voting Stock (other than Disqualified Stock)
of the surviving or transferee corporation and/or (2) cash, securities and other
property in an amount which could be paid by Astor Holdings II or the Company as
a Restricted Payment under the Indenture and (B) the "beneficial owners" (as
defined in Rule 13d-3 under the Exchange Act) of the Voting Stock of the Parent,
Astor Holdings II or the Company immediately prior to such transaction own,
directly or indirectly, more than 50% of the total Voting Stock of the surviving
or transferee corporation immediately after such transaction, (iv) the
consummation of any transaction or series of related restrictions (including,
without limitation, by way of merger or consolidation) the result of which is
that any "person" (as defined above) or "group" (as defined above), other than
Excluded Persons, becomes the "beneficial owner" (as defined above) of more than
50% of the Voting Stock of the Parent, Astor Holdings II or the Company or (v)
the first day on which a majority of the members of the Board of Directors of
the Parent, Astor Holdings II or the Company are not Continuing Directors.
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"COMPANY" means Astor Corporation, a Delaware corporation, and its
successors and assigns.
"CONSOLIDATED NET INCOME" means, for any period, the aggregate of the Net
Income of Astor Holdings II and its Consolidated Subsidiaries for such period,
on a consolidated basis, determined in accordance with GAAP, PROVIDED that (i)
the Net Income (but not loss) of any Person that is not a Consolidated
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to Astor Holdings II or a Consolidated Subsidiary thereof, (ii) the Net
Income of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary of that Net Income is not, at the date of determination, permitted
without any prior governmental approval (which has not been obtained) or
directly or indirectly by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its Consolidated Subsidiaries as of such date plus, (ii) the respective
amounts reported on, such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that is
outstanding on the date of this Indenture or, if not then outstanding, by its
terms is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within twelve months after the
acquisition of such business) subsequent to the Issue Date in the book value of
any asset owned by such Person or a Consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments) and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing being determined in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" means, as to any Person at any date, the
Subsidiaries of such Person the accounts of which would be consolidated with
those of such Person in accordance with GAAP at such date, but excluding any
Unrestricted Subsidiary (except that the interest of Astor Holdings II, the
Company or any Restricted Subsidiary in any Unrestricted Subsidiary shall be
acccounted for as an investment).
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Parent, Astor Holdings II or the Company who (i)
was a member of such Board of Directors on the Issue Date or (ii) was nominated
for election or elected to such Board of Directors with the approval of a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) so long as the Company has any Obligation
under the Senior Bank Facility, the Senior Bank Facility and (ii) any other
Senior Debt of the Company permitted under the Indenture the aggregate principal
amount of which is $5.0 million or more and that has been designated by the
Company by notice to the Trustee as "Designated Senior Debt."
"DISQUALIFIED STOCK" means (a) any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to date on
which the Notes mature and (b) with respect to any Restricted Subsidiary, any
Capital Stock other than any common stock with no preference, privilege, or
redemption or repayment provisions.
"DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that is
incorporated or organized under the laws of a jurisdiction in the United States
of America.
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"EBITDA" means, for any period, the Consolidated Net Income of Astor
Holdings II for such period PLUS (i) an amount equal to any extraordinary loss
plus any net loss realized in connection with an Asset Sale (to the extent such
losses were deducted in computing such Consolidated Net Income) PLUS (ii)
provision for taxes based on income or profits of Astor Holdings II and its
Consolidated Subsidiaries for such period to the extent that such provision for
taxes was included in computing such Consolidated Net Income PLUS (iii)
consolidated interest expense of Astor Holdings II and its Consolidated
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized but without duplication (including, without limitation, amortization
of original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
operating leases, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, the interest
expense actually paid on Indebtedness of another Person that is Guaranteed by,
or secured by a Lien on assets of Astor Holdings II or a Consolidated Subsidiary
and net payments (if any) pursuant to Hedging Obligations) to the extent that
any such expense was deducted in computing such Consolidated Net Income PLUS
(iv) depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of Astor Holdings II and its Consolidated Subsidiaries for
such period to the extent that such depreciation and amortization were deducted
in computing such Consolidated Net Income, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization of, a Consolidated Subsidiary shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in same proportion) that the
Net Income of such Restricted Subsidiary was included in calculating such
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended (or paid pursuant to the Tax Sharing
Agreement) to Astor Holdings II by such Consolidated Subsidiary without prior
approval (that has not been obtained) pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for Capital Stock).
"EXCLUDED PERSON" means (a) the Parent, (b) Astor Holdings II, (c) the
Company, (d) Century City 1800 Partners L.P. (provided the current general
partner of Century City 1800 Partners L.P. remains the general partner or
controls the general partner of such partnership), (e) any partnership of which
Century City 1800 Partners L.P. is the general partner or controls the general
partner of such partnership (provided the current general partner of Century
City 1800 Partners L.P. remains the general partner or controls the general
partner of Century City 1800 Partners L.P.) and (f) all Related Persons of any
of the foregoing.
"EXISTING DISQUALIFIED STOCK" means Disqualified Stock in existence on the
Issue Date of the Company or any Restricted Subsidiary or Astor Holdings II
until such Disqualified Stock is redeemed or retired.
"EXISTING INDEBTEDNESS" means Indebtedness in existence on the Issue Date of
the Company and its Restricted Subsidiaries and Astor Holdings II until such
amounts are repaid.
"FIXED CHARGES" means, for any period, the sum of (i) the consolidated
interest expense of Astor Holdings II and its Consolidated Subsidiaries for such
period, whether paid or accrued and whether or not capitalized but without
duplication (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to operating leases,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, the interest expense actually paid
on Indebtedness of another Person that is Guaranteed by, or secured by a Lien on
assets of Astor Holdings II or a Consolidated Subsidiary and net payments (if
any) pursuant to Hedging Obligations) and (ii) the product of (a) all cash
dividend payments (other than dividends on the Disqualified Stock of the Company
owned by ABI Corporation to the extent such dividends are returned by dividends
to the Company) on any series of Disqualified Stock of Astor Holdings II, the
Company or any Restricted Subsidiary that is not owned by Astor Holdings II, the
Company
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or a Restricted Subsidiary, times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of Astor Holdings II, expressed as a decimal,
in each case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio of EBITDA for
such period to Fixed Charges for such period. In the event that Astor Holdings
II or any Consolidated Subsidiary incurs, assumes, Guarantees or repays or
redeems any Indebtedness (other than revolving Indebtedness under the Senior
Bank Facility) or issues or redeems Disqualified Stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee, repayment or redemption of
Indebtedness, or such issuance or redemption of Disqualified Stock (and the
application of the proceeds therefrom to the extent used to refinance or retire
other Indebtedness or Disqualified Stock), as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by Astor Holdings II or any Consolidated Subsidiary, including through
mergers or consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have occurred on the
first day of the four-quarter reference period and EBITDA for such reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income, (ii) the EBITDA
attributable to discontinued operations as determined in accordance with GAAP
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, and (iii) the Fixed Charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed or
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of
Astor Holdings II or any Consolidated Subsidiary following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America which are in effect on the Issue
Date.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
Guaranteed by the United States of America for the payment of which Guarantee or
obligations the full faith and credit of the United States of America is
pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness. The term "Guarantee" used as a verb has a corresponding meaning.
"GUARANTORS" means Astor Holdings II and all Restricted Subsidiaries that
become Subsidiary Guarantors in accordance with the Indenture after the Issue
Date.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, (i) any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments, (ii) letters of
credit (or reimbursement agreements in respect thereof), (iii) Capital Lease
Obligations, (iv) the balance deferred and unpaid of the purchase price of any
property, (v) any Hedging Obligations and Oil and Currency Obligations, other
than Hedging Obligations and Oil and Currency Obligations incurred in accordance
with such Person's customary practices for bona fide risk hedging purposes and
not for speculative purposes, (vi) Indebtedness referred to in the preceding
clauses of others secured by a Lien on any asset
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of such Person (whether or not such Indebtedness is assumed by such Person) and
(vii) to the extent not otherwise included, any Guarantee by such Person of any
Indebtedness referred to in the preceding clauses of any other Person. The
principal amount of Indebtedness represented by letters of credit shall be
deemed to be equal to the maximum potential liability thereunder. With respect
to the Company, issuances by the Company of subordinated promissory notes in an
aggregate principal amount not to exceed $2.75 million to Quaker State Company
in respect of certain environmental liabilities of the Company under the Asset
Purchase and Sale Agreement dated as of March 30, 1990, as amended by the
Amendment Agreement and Joint Release dated April 22, 1994 between the Company
and Quaker State Company shall not be deemed to be an incurrence of
Indebtedness. Notwithstanding the foregoing, items referred to in clauses (i),
(iii) and (iv) above shall not constitute Indebtedness to the extent that such
items constitute an accrued expense or trade payable of such Person arising in
the ordinary course of business, and items referred to in clauses (i), (iii) and
(iv) above shall constitute Indebtedness of such Person only if and to the
extent any of such Indebtedness would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP at such time.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees or other Indebtedness but excluding
Guarantees and other Indebtedness permitted by the covenant described in
"Incurrence of Indebtedness and Issuance of Disqualified Stock"), advances or
capital contributions (excluding commission, travel, relocation and similar
loans or advances to officers and employees, accounts receivable and bank demand
deposits made or arising in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; PROVIDED that
an acquisition of Indebtedness, Equity Interests or other securities by the
Company for consideration consisting of Equity Interests (other than
Disqualified Stock) of the Company or Astor Holdings II shall not be deemed to
be an Investment and a redemption or repurchase of the Notes or other
Indebtedness of the Company or any Restricted Subsidiary or Astor Holdings II
shall not be deemed an Investment. If the Company or any Restricted Subsidiary
sells or otherwise disposes of any Equity Interests of any Restricted Subsidiary
or Wholly Owned Restricted Subsidiary such that, after giving effect to any such
sale or disposition, such Person is no longer a Restricted Subsidiary or a
Wholly Owned Restricted Subsidiary (as the case may be), the Company and/or such
Restricted Subsidiary making such sale or disposition shall be deemed to have
made an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such former Restricted Subsidiary not
sold or disposed of.
"ISSUE DATE" means the date and time at which the Notes are originally
issued under the Indenture.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement (other than
precautionary filings by lessors in respect of operating leases) under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"MANAGEMENT SERVICES AGREEMENT" means the Management Services Agreement
dated June 28, 1995 among the Parent, UBS Capital Corporation and Century City
1800 Partners, L.P., a Delaware limited partnership, as in effect on the Issue
Date and as it may be amended from time to time; PROVIDED that no such amendment
shall increase any obligation thereunder in a manner that would create a
Restricted Payment.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any deduction in
respect of Disqualified Stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale or (b) the disposition of
any securities by such Person or the extinguishment of any Indebtedness of such
Person and (ii) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
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"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any Restricted Subsidiary or Astor Holdings II in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits, tax loss
carryforwards or deductions and any tax sharing arrangements), amounts required
to be applied to the repayment of Indebtedness (other than Senior Debt) secured
by a Lien on the asset or assets that were the subject of such Asset Sale and
any reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary nor Astor Holdings II (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any Restricted Subsidiary or
Astor Holdings II to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any Restricted
Subsidiary or Astor Holdings II.
"NOTE GUARANTEES" means the Guarantees of Astor Holdings II and any
Restricted Subsidiaries that become Subsidiary Guarantors in accordance with the
Indenture after the Issue Date with respect to the Company's payment obligations
under the Notes.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICER" means the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers.
"OIL AND CURRENCY OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) agreements designed to protect such Person
against fluctuations in the price of oil or oil-related products and (ii)
agreements designed to protect such Person against fluctuations in foreign
currencies.
"PARENT" means Astor Holdings, Inc., a Delaware corporation, and its
successors and assigns.
"PARI PASSU DEBT" means Indebtness that is PARI PASSU with the Notes
maturing on the same day as the Notes.
"PERMITTED BUSINESS" means any business engaged in the development,
manufacture, distribution or sale of (i) adhesives and sealants, (ii) special
waxes and other waxes or (iii) specialty chemicals; and businesses that are
reasonable extensions or reasonably incidental to the foregoing.
"PERMITTED INVESTMENTS" means (i) any Investment in the Company or in a
Subsidiary Guarantor that is a Wholly Owned Restricted Subsidiary, (ii) any
Investment in Cash Equivalents, (iii) any Investments by the Company or any
Restricted Subsidiary in a Person if, as a result of such Investment, (a) such
Person becomes a Subsidiary Guarantor that is a Wholly Owned Restricted
Subsidiary, or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets (or all or
substantially all the assets of a Subsidiary or operating division) to, or is
liquidated into, the Company or a Subsidiary Guarantor that is a Wholly Owned
Restricted Subsidiary, (iv) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described under "Asset Sales and Sales of
Subsidiary Stock," (v) Investments received as part of the settlement of
litigation or in satisfaction of extensions of credit to any Person otherwise
permitted under the Indenture pursuant to the reorganization, bankruptcy or
liquidation of such Person or a good faith settlement of debts with such Person,
(vi) any Investment in a Restricted Subsidiary, other than a Domestic
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Restricted Subsidiary, which Investment is represented by a Guarantee of
Indebtedness incurred by such Restricted Subsidiary pursuant to and in
compliance with the provision described in clause (vi) of the second paragraph
of "Incurrence of Indebtedness and Issuance of Disqualified Stock," (vii) any
Investment not permitted by the foregoing clauses of this definition by the
Company or its Restricted Subsidiaries in a Person that is, or immediately after
giving effect to such Investment becomes, a Wholly Owned Restricted Subsidiary
that is not a Subsidiary Guarantor in aggregate amount not exceeding $9.0
million (or its foreign currency equivalent) and (viii) any Investment not
permitted by the foregoing clauses of this definition by the Company or its
Restricted Subsidiaries in (a) a Person in which the Company and/or its
Restricted Subsidiaries owns, or immediately after giving effect to such
Investment will own, more than 20% of such Person's outstanding Capital Stock
(but which Person is not, and will not be, after giving effect to such
Investment, a Subsidiary) and (b) an Unrestricted Subsidiary in aggregate amount
for all such Investments permitted solely by this clause (viii) not exceeding
$1.0 million (or its foreign currency equivalent).
"PERMITTED JUNIOR SECURITIES" means any Qualified Capital Stock and debt
securities of the Company or any Guarantor, as the case may be, that (i) are
subordinated at least to the same extent as the Notes to Senior Debt of the
Company or the Note Guarantee of such Guarantor to the Senior Debt of such
Guarantor, as the case may be, and (ii) have no scheduled installment of
principal due, by redemption, sinking fund payment or otherwise, on or prior to
the stated maturity of the Notes; PROVIDED that the effect of any such security
is not to cause the Notes to be treated in any case or proceeding or similar
event related to bankruptcy, insolvency or receivership as part of the same
class of claims as the Senior Debt or any class of claims on a parity with or
senior to the Senior Debt for any payment or distribution and, PROVIDED FURTHER,
that if any such security includes any shares of stock of the Company or any
Guarantor as reorganized or readjusted, or securities of the Company or any
Guarantor or any other corporation provided for by a plan of arrangement,
reorganization or readjustment, (a) the Senior Debt is assumed by the new
corporation, if any, resulting from any such arrangement, reorganization or
adjustment, and (b) the rights of the holders of the Senior Debt are not,
without the consent of such holders, altered by such arrangement, reorganization
or readjustment.
"PERMITTED LIENS" means (i) Liens on assets securing Senior Debt permitted
under the Indenture; (ii) Liens on assets securing Indebtedness incurred
pursuant to and in compliance with clause (vi) or (vii) of the second paragraph
of "Incurrence of Indebtedness and Issuance of Disqualified Stock"; (iii) Liens
in favor of the Company, (iv) Liens on assets of any Restricted Subsidiary that
is not a Subsidiary Guarantor in favor of Astor Holdings II or a Subsidiary
Guarantor; (v) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Restricted Subsidiary,
PROVIDED, that such Liens (x) were not incurred in connection with, or in
contemplation of, such merger or consolidation and (y) do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or such Restricted Subsidiary; (vi) Liens on property existing at the
time of acquisition thereof by the Company or any Restricted Subsidiary
(including (A) Liens securing or comprising Capital Lease Obligations and (B)
Liens securing Oil and Currency Obligations that do not constitute Indebtedness;
PROVIDED that such Liens do not extend to any assets of the Company or any
Restricted Subsidiary other than the property that is the subject of such Oil
and Currency Obligations); (vii) Liens to secure the performance of statutory
obligations, surety or appeal bonds or performance bonds, or landlords',
carriers', warehousemen's, mechanics', suppliers', materialmen's or other like
Liens, in any case incurred in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
process of law, if a reserve or other appropriate provision, if any, as is
required by GAAP shall have been made therefor; (viii) Liens existing on the
Issue Date; (ix) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded; PROVIDED
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (x) Liens securing
Indebtedness incurred to refinance Indebtedness that has been secured by a Lien
permitted under the Indenture; PROVIDED that (a) any such Lien shall not extend
to or cover any assets or property not securing the Indebtedness so refinanced
and (b) the refinancing Indebtedness secured by such Lien shall have been
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permitted to be incurred under the covenant entitled "Incurrence of Indebtedness
and Issuance of Disqualified Stock"; and (xi) Liens to secure the Obligations
under the Notes, the Indenture or the New Notes (or Indebtedness evidenced by
instruments that rank PARI PASSU in right of payment with the Notes as permitted
under the Indenture).
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness or Disqualified
Stock of the Company or any Restricted Subsidiary of the Company or Astor
Holdings II issued in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund other Indebtedness or
Disqualified Stock of the Company or any Restricted Subsidiary or Astor Holdings
II, as the case may be, or constituting an amendment, modification or supplement
thereto (but such new or modified Indebtedness shall have only the same obligor
or obligors as the Indebtedness so extended, refinanced, renewed, replaced,
defeased, refunded, amended, modified or supplemented); PROVIDED that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness or the liquidation value of
Disqualified Stock so extended, refinanced, renewed, replaced, defeased,
refunded, amended, modified or supplemented (plus the amount of reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness or Disqualified Stock
being extended, refinanced, renewed, replaced, defeased, refunded, amended,
modified or supplemented and (iii) if the Indebtedness or Disqualified Stock
being extended, refinanced, renewed, replaced, defeased, refunded, amended,
modified or supplemented is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date not earlier than
and is subordinated in right of payment to the Notes on terms at least as
favorable to the Noteholders as those contained in the documentation governing
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PUBLIC EQUITY OFFERING" means an underwritten offering of common stock of
the Company, Astor Holdings II or the Parent pursuant to an effective
registration statement under the Securities Act after which the common stock of
the Company, Astor Holdings II or the Parent, as applicable, is listed on a
national securities exchange or quoted on the Nasdaq National Market.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of the Company that is not
Disqualified Stock.
"RCI" means Rheochem Inc., a New Jersey corporation, and its successors and
assigns.
"RELATED PERSON" means, with respect to any Excluded Person, (a) any Person
who controls, is controlled by or under common control with such Excluded
Person; PROVIDED that for purposes of this definition "control" means the
beneficial ownership of more than 50% of the total voting power of a Person
normally entitled to vote in the election of directors, managers or trustees, as
applicable of a Person and (b) as to any natural person, (i) such Person's
spouse, parents and descendants (whether by blood or adoption, and including
stepchildren) and the spouses of any of such natural persons and (ii) any
corporation, partnership, trust or other Person in which no one has any interest
(directly or indirectly) except for any of such natural person, such spouse,
parents and descendants (whether by blood or adoption, and including
stepchildren) and the spouses of any of such natural persons.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means a Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"REVOLVING CREDIT FACILITY" means the revolving credit facility provided
under the Senior Bank Facility.
"RHEOCHEM" means Rheochem Technologies, Inc., a Delaware corporation, and
its successors and assigns.
"RHEOCHEM SHAREHOLDERS' AGREEMENT" means the Rheochem Shareholders'
Agreement dated as of June 30, 1994 by and among ABI Corporation, Rheochem Inc.
and Rheochem, as in effect on the Issue Date and as it may be amended from time
to time; PROVIDED that no such amendment shall increase any obligation
thereunder in a manner that would create a Restricted Payment.
113
<PAGE>
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SENIOR BANK FACILITY" means the credit agreement, dated on October 8, 1996,
by and among the Company, The Chase Manhattan Bank, as administrative agent, and
the lenders (and their successors and assigns) from time to time party thereto,
including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith and in each case as amended,
modified, renewed, extended, refunded, replaced or refinanced from time to time,
whether or not with the same agent, trustee, representative lenders or holders
and irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Bank Facility" shall
include agreements in respect of Hedging Obligations entered into with respect
to loans thereunder with lenders party to the Senior Bank Facility and shall
also include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Senior Bank Facility and all
refundings, refinancings and replacements of any Senior Bank Facility, including
any agreement (i) extending the maturity of any Indebtedness incurred thereunder
or contemplated thereby, (ii) adding or deleting borrowers, issuers or
guarantors thereunder, (iii) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder or (iv) otherwise altering the
terms and conditions thereof.
"SENIOR DEBT" means (i) with respect to the Company (A) Obligations under
the Senior Bank Facility and (B) any other Indebtedness permitted to be incurred
by the Company under the terms of the Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is PARI PASSU
with or subordinated in right of payment to the Notes and (ii) with respect to
any Guarantor (A) Obligations under the Senior Bank Facility and (B) any other
Indebtedness permitted to be incurred by such Guarantor under the terms of the
Indenture unless the instrument under which such Indebtedness is incurred
expressly provides that such Indebtedness is PARI PASSU with or subordinated in
right of payment to the Note Guarantee of such Guarantor, including in any event
in the case of all such Obligations of the Company or any Guarantor, interest
accruing on Indebtedness after the filing of a petition initiating any
proceeding under any bankruptcy, insolvency or similar law, whether or not
allowable as a claim in any such proceeding. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (w) any liability for
federal, state, local or other taxes, (x) any Indebtedness of the Company or any
Guarantor to any Affiliates, (y) any trade payables or (z) that portion of any
Indebtedness that is incurred in violation of the Indenture.
"SIGNIFICANT SUBSIDIARY" means, with respect to any Person, any Subsidiary
of such Person that would be a "significant subsidiary" as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
Regulation is in effect on the date hereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of Voting Stock is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or one
or more Subsidiaries of such Person (or any combination thereof). ABI
Acquisition 1 plc shall be deemed to be a Subsidiary of the Company for all
purposes of this Agreement at any time if at such time it is a Subsidiary (as
determined above) of the Company and/or Astor Holdings II. Because on the Issue
Date, the Company owns, directly or indirectly, no more than 50% of the Voting
Stock of Rheochem, on the Issue Date Rheochem is not a Subsidiary of the
Company.
"SUBSIDIARY GUARANTOR" means any Restricted Subsidiary that executes a Note
Guarantee in accordance with the provisions of the Indenture, and their
respective successors and assigns.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement dated June 28, 1995
among the Parent, Astor Holdings II and the Company.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that at the
time of determination shall be designated by the Board of Directors of the
Company as an Unrestricted Subsidiary pursuant to a Board Resolution, but only
if such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is
not
114
<PAGE>
party to any material agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; and (c) is a Person with respect
to which neither the Company nor any Restricted Subsidiary has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results. Any such designation by
the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
entitled "Restricted Payments." If, at any time, any Unrestricted Subsidiary,
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant entitled "Incurrence
of Indebtedness and Issuance of Disqualified Stock," the Company shall be in
default of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant entitled "Incurrence of Indebtedness and
Issuance of Disqualified Stock," and (ii) no Default or Event of Default would
be in existence following such designation.
"VOTING STOCK" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any Person (irrespective of whether or not, at the time, stock of any other
class or classes shall have or might have, voting power by reason of the
happening of any contingency).
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
principal amount of such Indebtedness into (ii) the total of the product
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary all of
the outstanding Capital Stock or other ownership interests of which (other than
directors' qualifying shares or one share held by a director for statutory
purposes) shall at the time be owned by the Company, Astor Holdings II or by one
or more Wholly Owned Restricted Subsidiaries of the Company, or by the Company,
Astor Holdings II and one or more Wholly Owned Restricted Subsidiaries.
115
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Notes for its own account pursuant to the
Offer (a "Participating Broker") must acknowledge that it will deliver a
prospectus in connection with any resale of such Notes. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker in connection with any resale of Notes received in exchanged for Old
Notes where such Old Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that for a period of 180
days from the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any Participating Broker for use in connection with
any such resale. In addition, until , 1996 (90 days from the date of
this Prospectus), all dealers effecting transactions in the Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Notes by
broker-dealers. Notes received by any Participating Broker may be sold from time
to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such Notes.
Any Participating Broker that resells Notes that were received by it for its own
account pursuant to the Offer and any broker or dealer that participates in a
distribution of such Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver, and by delivering, a
prospectus as required, a Participating Broker will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days from the Expiration Date, the Company will send a
reasonable number of additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker that requests such
documents in the Letter of Transmittal. The Company will pay all the expenses
incident to the Offer (which shall not include the expenses of any Holder in
connection with resales of the Notes). The Company has agreed to indemnify
Holders of the Notes, including any Participating Broker, against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereby and the Guarantee will be passed
upon for the Company by Gibson, Dunn & Crutcher LLP, Los Angeles, California.
INDEPENDENT AUDITORS
The Consolidated Financial Statements of Astor Holdings II as of March 31,
1995 and 1996 and for each of the three years ended March 31, 1996 included in
this Prospectus have been audited by Ernst & Young LLP, independent auditors, as
stated in their report appearing herein. The Consolidated Financial Statements
of Associated British Industries Limited for the periods ended June 30, 1993 and
March 31, 1994 and 1995 included in this Memorandum have been audited by KPMG,
independent auditors, as stated in their report appearing herein. The
Consolidated Financial Statements of Adco Technologies, Inc. as of December 31,
1994 and 1995 and for each of the two years ended December 31, 1995 and the
period of May 14, 1993 to December 31, 1993 included in this Memorandum have
been audited by Ernst & Young LLP, independent auditors, as stated in their
report appearing herein. The Consolidated Financial Statements of Adco Products,
Inc. for the period January 1, 1993 to May 13, 1993 (date of sale) included in
this Memorandum have been audited by Ernst & Young LLP, independent auditors, as
stated in their report appearing herein.
116
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ASTOR HOLDINGS II, INC.
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets at March 31, 1995 and 1996..................................................... F-3
Consolidated Statements of Operations for the years ended March 31, 1994, 1995 and 1996.................... F-5
Consolidated Statements of Stockholder's Equity (Deficit) for the years ended March 31, 1994, 1995 and
1996...................................................................................................... F-6
Consolidated Statements of Cash Flows for the years ended March 31, 1994, 1995 and 1996.................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
Consolidated Balance Sheets at September 30, 1995 and 1996 (unaudited)..................................... F-22
Consolidated Statements of Operations and Retained Earnings (Deficit) for the six months ended September
30, 1995 and 1996 (unaudited)............................................................................. F-24
Consolidated Statements of Cash Flows for the six months ended September 30, 1995 and 1996 (unaudited)..... F-25
Notes to Consolidated Financial Statements................................................................. F-26
ASSOCIATED BRITISH INDUSTRIES LIMITED
Report of Independent Auditors............................................................................. F-27
Consolidated Profit and Loss Account for the periods ended March 31, 1994 and 1995 and June 30, 1993....... F-28
Consolidated Cash Flow Statement for the periods ended March 31, 1994 and 1995 and June 30, 1993........... F-29
Notes...................................................................................................... F-30
ADCO TECHNOLOGIES INC.
Report of Independent Auditors............................................................................. F-38
Consolidated Balance Sheets at December 31, 1994 and 1995.................................................. F-39
Consolidated Statements of Income for the period May 14, 1993 to December 31, 1993 and for the years ended
December 31, 1994 and 1995................................................................................ F-41
Consolidated Statements of Redeemable Preferred Stock of Subsidiary and Stockholders' Equity for the period
May 14, 1993 to December 31, 1993 and for the years ended December 31, 1994 and 1995...................... F-42
Consolidated Statements of Cash Flows for the period May 14, 1993 to December 31, 1993 and for the years
ended December 31, 1994 and 1995.......................................................................... F-43
Notes to Consolidated Financial Statements................................................................. F-44
Consolidated Balance Sheets at September 30, 1995 and 1996 (unaudited)..................................... F-52
Consolidated Statements of Income for the nine months ended September 30, 1995 and 1996 (unaudited)........ F-53
Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and 1996 (unaudited).... F-54
Notes to Consolidated Financial Statements................................................................. F-55
ADCO PRODUCTS, INC.
Report of Independent Auditors............................................................................. F-57
Statement of Income for the period January 1, 1993 to May 13, 1993......................................... F-58
Statement of Stockholders' Equity for the period January 1, 1993 to May 13, 1993........................... F-59
Statement of Cash Flows for the period January 1, 1993 to May 13, 1993..................................... F-60
Notes to Financial Statements.............................................................................. F-61
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Astor Holdings II, Inc.
We have audited the accompanying consolidated balance sheets of Astor
Holdings II, Inc. (formerly Petrowax PA Inc.) as of March 31, 1995 and 1996, and
the related consolidated statements of operations, stockholder's equity, and
cash flows for each of the three years in the period ended March 31, 1996. 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 Astor Holdings
II, Inc. at March 31, 1995 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1996 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Buffalo, New York
June 7, 1996
F-2
<PAGE>
ASTOR HOLDINGS II, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------
1995 1996
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 718,744 $ 1,156,622
Cash escrow..................................................................... 102,169 --
Accounts receivable (net of allowance for doubtful accounts of $208,000 and
$725,638, respectively)........................................................ 4,651,366 23,810,998
Receivable from Rheochem Technologies, Inc...................................... -- 566,000
Inventory....................................................................... 7,434,825 18,586,188
Prepaid expenses................................................................ 410,019 1,754,867
Other current assets............................................................ 157,724 1,603,917
------------- --------------
Total current assets.......................................................... 13,474,847 47,478,592
Restricted cash................................................................... 175,000 --
Deposits.......................................................................... 51,000 --
Property, plant and equipment:
Land and improvements........................................................... 582,084 7,441,900
Buildings and improvements...................................................... 1,240,273 7,078,157
Machinery and equipment......................................................... 14,197,717 40,895,658
------------- --------------
Total cost........................................................................ 16,020,074 55,415,715
Less accumulated depreciation................................................... (1,344,115) (4,461,309)
------------- --------------
Property, plant and equipment -- net.............................................. 14,675,959 50,954,406
Investment in Rheochem Technologies, Inc.......................................... -- 4,039,987
Goodwill.......................................................................... -- 29,940,493
Other intangible assets........................................................... 1,789,547 6,572,429
Deferred tax asset................................................................ -- 3,919,644
------------- --------------
Total assets.................................................................. $ 30,166,353 $ 142,905,551
------------- --------------
------------- --------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
ASTOR HOLDINGS II, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31,
------------------------------
1995 1996
-------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................................... $ 3,717,141 $ 16,271,224
Accrued interest payable....................................................... 618,086 815,953
Accrued reorganization costs................................................... 1,008,019 --
Accrued wages and other payroll related items.................................. 443,147 1,408,614
Accrued vacation............................................................... 673,349 1,090,684
Accrued taxes.................................................................. 147,331 746,411
Accrued professional fees...................................................... -- 1,245,901
Other accrued liabilities...................................................... -- 1,278,060
PCDR inventory financing....................................................... 3,600,000 --
Current portion of long-term debt.............................................. 3,500,000 4,746,683
-------------- --------------
Total current liabilities.................................................... 13,707,073 27,603,530
Long-term debt................................................................... 6,436,721 66,069,960
Due to affiliated company........................................................ -- 5,435,662
Deferred income taxes............................................................ -- 4,781,652
Other long-term liabilities...................................................... -- 2,657,076
Prepetition liabilities subject to compromise.................................... 54,137,966 --
Stockholder's Equity (Deficit):
Redeemable preferred stock:
Senior preferred, par value $.0001 per share; authorized, 260,000 shares;
issued and outstanding, 190,000 shares in 1995 at stated value, $100 per
share....................................................................... 19,000,000 --
Junior preferred, par value $.0001 per share; authorized, issued and
outstanding, 100,000 shares in 1995 at stated value, $100 per share......... 10,000,000 --
-------------- --------------
Total redeemable preferred stock............................................... 29,000,000 --
Common stock:
Par value $.01 per share; authorized 10,000 shares; issued and outstanding,
1,000 shares in 1996........................................................ -- 10
Class A, par value $.0001 per share; authorized, 1,000,000 shares; issued and
outstanding, 102,779 shares in 1995......................................... 10 --
Class B, par value $.0001 per share; non-voting; authorized, 100,000 shares;
issued and outstanding, 2,164 shares in 1995................................ -- --
Class C, par value $.0001 per share; non-voting; authorized, 1,000,000
shares; no shares issued and outstanding in 1995............................ -- --
Additional paid-in capital..................................................... 1,157,924 36,670,838
Retained earnings (deficit) -- net of transfer of $23,863,808 accumulated
deficit as a result of the March 31, 1996 quasi-reorganization................ (74,273,341) --
Foreign currency translation adjustment........................................ -- (313,177)
-------------- --------------
Total stockholder's equity (deficit)......................................... (44,115,407) 36,357,671
-------------- --------------
Total liabilities and stockholder's equity................................. $ 30,166,353 $ 142,905,551
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
ASTOR HOLDINGS II, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------
1994 1995 1996
-------------- ------------- --------------
<S> <C> <C> <C>
Sales............................................................. $ 54,665,017 $ 61,852,091 $ 135,418,195
Cost of goods sold................................................ 50,906,000 54,549,640 108,176,220
-------------- ------------- --------------
Gross profit before depreciation and amortization................. 3,759,017 7,302,451 27,241,975
Selling, general and administrative expenses...................... 3,652,121 4,132,225 13,767,202
Depreciation and amortization..................................... 4,041,275 1,992,559 5,416,228
Asset impairment write-down....................................... 25,882,953 -- --
-------------- ------------- --------------
Operating income (loss)........................................... (29,817,332) 1,177,667 8,058,545
Income from Rheochem Technologies, Inc............................ -- -- 91,000
Interest expense.................................................. (1,470,716) (1,605,985) (5,251,079)
Reorganization expense............................................ (1,255,660) (1,087,944) (856,335)
-------------- ------------- --------------
Income (loss) before taxes and extraordinary item................. (32,543,708) (1,516,262) 2,042,131
Benefit from income taxes......................................... -- -- 3,434,166
-------------- ------------- --------------
Income (loss) before extraordinary item........................... (32,543,708) (1,516,262) 5,476,297
Extraordinary item -- gain on cancellation of debt................ -- -- 44,933,236
-------------- ------------- --------------
Net income (loss)................................................. $ (32,543,708) $ (1,516,262) $ 50,409,533
-------------- ------------- --------------
-------------- ------------- --------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
ASTOR HOLDINGS II, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
REDEEMABLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ ------------------------------------------------ PAID-IN
SENIOR JUNIOR CLASS A CLASS B CLASS C CAPITAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1993................. $19,000,000 $10,000,000 $ 10 $ -- $ -- $ -- $ 1,157,924
Net loss................................. -- -- -- -- -- -- --
----------- ----------- ----------- ----- ----- --------- -----------
Balance at March 31, 1994................ 19,000,000 10,000,000 10 -- -- -- 1,157,924
Net loss................................. -- -- -- -- -- -- --
----------- ----------- ----------- ----- ----- --------- -----------
Balance March 31, 1995................... 19,000,000 10,000,000 10 -- -- -- 1,157,924
Cancellation of shares upon adoption of
plan of reorganization.................. (19,000,000) (10,000,000) (10) -- -- -- 29,000,010
Sale of common stock..................... -- -- -- -- -- 10 30,376,712
Net income............................... -- -- -- -- -- -- --
Foreign currency translation
adjustment.............................. -- -- -- -- -- -- --
Effect of quasi-reorganization as of
March 31, 1996.......................... -- -- -- -- -- (23,863,808)
----------- ----------- ----------- ----- ----- --------- -----------
Balance March 31, 1996................... $ -- $ -- $ -- $ -- $ -- $ 10 $36,670,838
----------- ----------- ----------- ----- ----- --------- -----------
----------- ----------- ----------- ----- ----- --------- -----------
<CAPTION>
FOREIGN TOTAL
CURRENCY RETAINED STOCKHOLDER'S
TRANSLATION EARNINGS EQUITY
ADJUSTMENT (DEFICIT) (DEFICIT)
----------- ----------- ------------
<S> <C> <C> <C>
Balance at April 1, 1993................. $ -- $(40,213,371) ($10,055,437)
Net loss................................. -- (32,543,708) (32,543,708)
----------- ----------- ------------
Balance at March 31, 1994................ -- (72,757,079) (42,599,145)
Net loss................................. -- (1,516,262) (1,516,262)
----------- ----------- ------------
Balance March 31, 1995................... -- (74,273,341) (44,115,407)
Cancellation of shares upon adoption of
plan of reorganization.................. -- -- --
Sale of common stock..................... -- -- 30,376,722
Net income............................... -- 50,409,533 50,409,533
Foreign currency translation
adjustment.............................. (313,177) -- (313,177)
Effect of quasi-reorganization as of
March 31, 1996.......................... -- 23,863,808 --
----------- ----------- ------------
Balance March 31, 1996................... $(313,177) $ -- $36,357,671
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
ASTOR HOLDINGS II, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------
1994 1995 1996
-------------- ------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................................. $ (32,543,708) $ (1,516,262) $ 50,409,533
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization................................... 4,041,275 1,992,559 5,416,228
Income from debt cancellation................................... -- -- (44,933,236)
Write down for impairment of assets............................. 25,882,953 -- --
Equity in income of Rheochem Technologies, Inc.................. -- -- (91,000)
Changes in operating assets and liabilities (net of business
acquired in 1996):
Cash escrow................................................... (31,901) 25,082 102,169
Accounts receivable........................................... (394,973) (921,870) (2,322,833)
Receivable from Rheochem Technologies, Inc.................... -- -- (566,000)
Inventory..................................................... 539,055 (290,077) (17,668)
Prepaid and other current assets.............................. (937,968) 472,402 641,478
Deposits...................................................... -- -- 51,000
Accounts payable.............................................. 2,458,141 1,161,213 1,326,103
Accrued reorganization costs.................................. 815,567 192,452 (1,008,019)
Deferred taxes................................................ -- -- (4,452,809)
Other long-term liabilities................................... -- -- (508,000)
Accrued interest payable...................................... 14,493 603,593 335,854
Accrued expenses.............................................. 548,267 (860,225) (3,026,198)
-------------- ------------- --------------
Net cash provided by operating activities......................... 391,201 858,867 1,356,602
INVESTING ACTIVITIES
Additions to property, plant and equipment........................ (259,819) (273,979) (4,639,815)
Acquisition of business, net of cash acquired of $1,510,342....... -- -- (60,830,982)
Dividends received from Rheochem Technologies, Inc................ -- -- 110,000
Decrease in restricted cash....................................... -- -- 175,000
-------------- ------------- --------------
Net cash used in investing activities............................. (259,819) (273,979) (65,185,797)
FINANCING ACTIVITIES
Capital lease payments............................................ (146,996) (113,594) (95,040)
Increase in deferred debt issuance costs.......................... (40,000) -- (6,800,561)
Proceeds from long-term debt...................................... -- -- 70,321,438
Payments of long-term debt........................................ -- -- (26,656,840)
Issuance of stock, net of fees.................................... -- -- 30,376,722
Decrease in PCDR inventory financing.............................. -- -- (3,600,000)
Decrease in post-petition debt.................................... (14,330) -- --
Decrease in pre-petition liabilities.............................. (306,388) -- --
Decrease in due to affiliated company............................. -- -- (510,278)
-------------- ------------- --------------
Net cash provided by (used in) financing activities............... (507,714) (113,594) 63,035,441
Effect of exchange rate changes on cash........................... -- -- 1,231,632
-------------- ------------- --------------
Net increase (decrease) in cash and cash equivalents.............. (376,332) 471,294 437,878
Cash and cash equivalents at beginning of period.................. 623,782 247,450 718,744
-------------- ------------- --------------
Cash and cash equivalents at end of period........................ $ 247,450 $ 718,744 $ 1,156,622
-------------- ------------- --------------
-------------- ------------- --------------
Supplementary cash flows data:
Interest paid................................................... $ 1,461,000 $ 1,002,000 $ 5,053,000
Income taxes paid............................................... -- -- $ 2,411,000
Noncash investing and financing activities:
Assets acquired by incurring notes payable...................... -- -- $ 5,945,940
</TABLE>
See accompanying notes.
F-7
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION
Astor Holdings II, Inc. ("Astor Holdings II") is a wholly-owned subsidiary
of Astor Holdings, Inc. (the "Parent") and the holding company of Astor
Corporation. Astor Holdings II's operations primarily include the manufacturing
of specialty wax products for sale to end users, in a diverse range of
industries both domestically and internationally, whose applications require
specialized products and blends. Astor Holdings II performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral.
Astor Corporation was incorporated in 1989 as Petrowax PA Inc. ("Petrowax").
On June 28, 1995 certain investors (including certain former stockholders of
Petrowax) capitalized MSC Holdings I, Inc. (whose name was subsequently changed
to Astor Holdings, Inc.) which then capitalized MSC Holdings II, Inc. (whose
name was subsequently changed to Astor Holdings II, Inc.). Astor Holdings II
then acquired shares of common stock of Petrowax for $10 million and the shares
of common stock held by the former stockholders of Petrowax were cancelled for
no consideration. As a result, Astor Corporation is a wholly-owned subsidiary of
Astor Holdings II. Petrowax had operated as a debtor-in-possession under Chapter
11 of the United States Bankruptcy Code from February 1992 until June 1995.
Effective June 28, 1995, Petrowax emerged from bankruptcy. The funds necessary
to pay claims in accordance with Petrowax's plan of reorganization
("Reorganization Plan") were generated from the $10 million capital contribution
noted above and term loan borrowings of $14 million. As a result of implementing
the Reorganization Plan, Petrowax recorded a gain on the forgiveness of debt of
$44.9 million, net of the write-off of related deferred financing costs of $1.6
million. The net gain has been recorded as an extraordinary item in the
accompanying statement of operations. Subsequent to the implementation of the
Reorganization Plan, Petrowax's name was changed to Astor Corporation.
2. ACQUISITION OF ASSOCIATED BRITISH INDUSTRIES LIMITED
On June 28, 1995, Astor Holdings II through its wholly-owned subsidiaries,
purchased 100% of the outstanding stock of Associated British Industries Limited
("ABI") for cash of $57.4 million plus expenses of $5.0 million and notes of
$5.9 million. ABI is a United Kingdom manufacturer of petroleum wax blends
marketed to end users located throughout the world. ABI included the following
wholly-owned active subsidiaries at the date of the acquisition: Astor Stag Ltd.
(United Kingdom) and its wholly-owned subsidiary Astor Stag SA (Belgium), and
ABI Corporation (United States).
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the purchase price of $68.3 million has been
allocated to the assets purchased in the amount of $75.0 million and the
liabilities assumed in the amount of $37.6 million based upon the fair values at
the date of acquisition. The excess of the purchase price over the fair values
of the net assets acquired of $30.9 million has been recorded as goodwill, which
is being amortized on a straight-line basis over 25 years.
The operating results of this acquired business have been included in the
consolidated statement of operations from the date of the acquisition. If the
acquisition had taken place at the beginning of fiscal 1996 rather than at June
28, 1995, pro forma consolidated net sales would have been $158.8 million for
fiscal 1996. Consolidated pro forma income before extraordinary item would have
been $6.1 million for fiscal 1996. If the acquisition had taken place at the
beginning of fiscal 1995 pro forma consolidated net sales would have been $146.7
million and pro forma consolidated net income would have been $1.5 million for
fiscal 1995. Such pro forma amounts are not necessarily indicative of what the
actual consolidated results of operations might have been if the acquisition had
been effective at the beginning of fiscal 1996.
3. QUASI-REORGANIZATION
Effective March 31, 1996, having attained consistent earnings for the
nine-month period since its emergence from bankruptcy, Astor Holdings II, with
stockholder approval, effected a quasi-reorganization. Astor Holdings II
revalued its assets and liabilities resulting in no significant adjustments to
the financial
F-8
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. QUASI-REORGANIZATION (CONTINUED)
statements and transferred its retained earnings deficit of $23.9 million to
additional paid-in capital. As a result, retained earnings had a zero balance at
March 31, 1996 and in the future will represent accumulated earnings from that
date forward.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Astor Holdings
II and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
INVENTORY
Inventory is stated at the lower of cost or market, with cost determined
using the first-in, first-out (FIFO) method of inventory valuation.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less the recognition of
permanent impairment and depreciation recorded subsequent to such recognition.
Depreciation is provided principally on the straight-line method over the
respective estimated useful lives of the assets. The estimated useful lives of
buildings are 20 to 50 years and the estimated useful lives of machinery and
equipment are generally 10 to 16 years. Capital leases are amortized over the
estimated useful life of the asset or lease term, as appropriate, using the
straight-line method. Depreciation expense includes amortization of assets
recorded under capital leases. For income tax purposes, accelerated methods of
depreciation are used. Depreciation expense for the years ended March 31, 1994,
1995 and 1996 was $1,941,000, $1,078,000 and $3,528,000, respectively.
DEFERRED COSTS
The costs related to the issuance of debt and certain organizational costs
of Astor Holdings II have been deferred and are being amortized on a straight
line basis over 7 years, which is the life of the loan agreement, and 5 years,
respectively. The straight line method of amortization is materially the same as
the effective interest method.
GOODWILL
Goodwill represents the excess of acquisition cost over the value of net
assets acquired and is being amortized over a period of 25 years. At March 31,
1996, accumulated amortization amounted to $926,000. The carrying value of
goodwill will be reviewed if the facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be recoverable, as
determined based on the undiscounted cash flows of the entity acquired over the
remaining amortization period, Astor Holdings II's carrying value of the
goodwill will be reduced by the estimated shortfall of cash flows.
REVENUE RECOGNITION
Revenue is recognized when products are delivered or when title is passed to
the customers.
TRANSLATION OF FOREIGN CURRENCIES
The functional currency for the majority of Astor Holdings II's and its
subsidiaries' foreign operations is the applicable local currency. The
translation from the applicable foreign currency to U.S. dollars is performed
for balance sheet accounts using current exchange rates in effect at the balance
sheet date and for revenue and expense accounts using a weighted average
exchange rate during the period. Translation adjustments resulting from such
translation are included as a separate component of stockholder's equity. Gains
or losses resulting from foreign currency transactions are included in income.
CASH ESCROW
Cash escrow represents segregated cash funds to satisfy tax obligations, in
accordance with the bankruptcy code.
F-9
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESTRICTED CASH
Restricted cash includes cash pledged as collateral for an irrevocable
letter of credit in favor of one of Astor Holdings II's feedstock suppliers.
CASH EQUIVALENTS
Astor Holdings II considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
INCOME TAXES
Astor Holdings II accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), ACCOUNTING FOR INCOME
TAXES. Under SFAS No. 109, deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
effect of a change in tax rates is recognized in the period that includes the
enactment date.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred. Research
and development expenses approximated $903,000 in fiscal year 1996. The Company
did not incur research development expense prior to fiscal year 1996.
STOCK OPTIONS
Astor Holdings II has elected to follow Accounting Principles Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25,
compensation expense is recognized when the exercise price of employee stock
options is less than the market price of the underlying stock on the date of
grant. See Note 12 for information regarding the Parent's stock option plan.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In estimating the fair value of its fixed rate long-term debt instruments,
Astor Holdings II used a discounted cash flow analysis, based upon the current
incremental borrowing rate for similar types of borrowing arrangements. At March
31, 1996, the carrying amounts of debt instruments approximate fair value.
INTEREST RATE SWAP AGREEMENTS
Astor Holdings II enters into interest rate swap agreements to effectively
convert a portion of its variable-rate borrowings into fixed-rate obligations.
The interest rate differential to be received or paid is recognized over the
lives of the agreements as an adjustment to interest expense. Astor Holdings II
is exposed to credit risk in the event of default by counterparties to the
extent of any amounts that have been recorded in the balance sheet and market
risk as a result of potential future decreases in LIBOR.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-10
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INVENTORY
Inventory consists of the following at March 31:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Raw materials.................................................. $ 1,666,271 $ 7,428,538
Work-in-progress............................................... 4,138,785 4,761,551
Finished goods................................................. 1,749,769 6,766,970
Allowance for inventory obsolescence........................... (120,000) (370,871)
------------- -------------
$ 7,434,825 $ 18,586,188
------------- -------------
------------- -------------
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets consists of the following at March 31:
<TABLE>
<CAPTION>
1995 1996
------------ -------------
<S> <C> <C>
Trade names...................................................... $ -- $ 479,986
Deferred organization costs...................................... -- 24,482
Deferred debt issuance costs..................................... 5,532,079 6,800,561
------------ -------------
5,532,079 7,305,029
Less accumulated amortization.................................... (3,742,532) (732,600)
------------ -------------
$ 1,789,547 $ 6,572,429
------------ -------------
------------ -------------
</TABLE>
Amortization expense for the years ended March 31, 1994, 1995 and 1996 was
$806,000, $915,000 and $732,600, respectively. During the fiscal year ended
March 31, 1996, the $1,789,547 deferred debt issuance costs that remained
unamortized at March 31, 1995 was written off upon the emergence of Petrowax
from bankruptcy and concurrent forgiveness of debt. In addition, during the
fiscal year ended March 31, 1996, $6,800,561 of deferred debt issuance costs
were recorded in connection with Astor Corporation's incurrence of debt related
to the emergence from bankruptcy and the acquisition of ABI.
7. LONG-TERM DEBT
Long-term debt at March 31, 1996 consists of the following:
<TABLE>
<S> <C>
Term Note payable to Union Bank of Switzerland ("UBS") up to
$37,500,000 plus L12,500,000 ($19,096,250) in the aggregate.
The term note matures on June 28, 2002. Interest is due on the
last day of each interest period and on the date three months
after the first date of such interest period in the case of
interest periods of six months. Interest set at a LIBOR based
rate plus 2.25% (L12,282,625, ($18,764,166) at 8.875%,
$18,195,550 at 7.6875% and $18,000,000 at 7.875% at March 31,
1996). Astor Corporation has entered into swap agreements, the
effect of which is to fix the interest rate on notional amounts
of L9,000,000 ($13,749,300) at 9.48%, $10,000,000 at 8.22%, and
$18,000,000 at 8.23% through September 1998. The net effect of
the swap agreements on interest expense in the year ended March
31, 1996 resulted in additional interest expense of $67,570.
Principal is due in equal quarterly payments commencing
December 28, 1995.............................................. $54,959,916
</TABLE>
F-11
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C>
Revolving Credit Note payable to UBS up to $20,00,000 in the
aggregate. Revolving Credit Facility matures on June 28, 2002.
Interest is due on the last day of each interest period and on
the date three months after the first date of such interest
period in the case of interest periods of six months. Interest
set at prime plus 1%, or LIBOR plus 2.25% (L2,400,000, or
($3,666,480), at 8.5% and $9,800,000 at 7.875%)................ 13,466,480
Swing Line Credit Note payable to UBS. Interest at prime plus
1.75% (10.25%). Principal due April 4, 1996.................... 700,000
Subordinated environmental note payable to Quaker State
Corporation. Principal due in one installment on December 31,
2008. Interest due monthly at the rate of 9%................... 148,097
Obligations under capital leases............................... 172,430
Mortgage....................................................... 150,000
Revolving line of credit....................................... 1,219,720
----------
Long term debt................................................. 70,816,643
Less current portion........................................... (4,746,683)
----------
$66,069,960
----------
----------
</TABLE>
On June 16, 1995 ABI Acquisition 2 plc ("ABI A2") and Astor Corporation
entered into a facility agreement (the "facility") with UBS. A term loan
facility in the amounts of $23,500,000 and L12,500,000, or ($19,062,250), was
granted to ABI A2. The term loans were intended for the purpose of financing
part of the purchase of the entire issued share capital of ABI, the payment of
interest on such borrowings and the payment of transaction fees and expenses up
to $7,500,000. A term loan facility in the amount of $14,000,000 was granted to
Astor Corporation for the purpose of paying claims in accordance with the
Reorganization Plan.
A revolving credit and letter of credit facility in an aggregate principal
amount of $20,000,000 was granted to Astor Corporation and any additional
borrower provided that the dollar amount of the revolving advances made or to be
made by way of the issue of a letter of credit shall at no time exceed
$5,000,000 and any swing-line advances made shall reduce the revolving advances
available. The facility was intended for the purpose of refinancing certain
existing indebtedness of ABI and its subsidiaries up to a maximum aggregate
amount of $9,500,000, for the general working capital requirements of each
borrower, to refinance swing-line advances, to pay transaction fees and expenses
up to $400,000 in connection with the merger of the U.S. subsidiaries of ABI
into Astor Corporation, and to pay transaction fees and expenses of up to
$1,500,000 in connection with the acquisition of ABI. Availability is subject to
a borrowing base for each borrower. The borrowing base shall equal a percentage
to be established by UBS from time to time in its sole reasonable discretion
(initially 80% and 50%, respectively) of certain accounts receivable and
inventory, subject to eligibility requirements and reserves to be established
and revised by UBS from time to time in its sole discretion. At March 31, 1996,
the borrowing base was $21.7 million.
A swing-line credit facility in an aggregate principal amount of $2,000,000
was granted to Astor Corporation for its general working capital requirements.
The above domestic facilities are secured by substantially all of the
domestic assets of Astor Corporation and its subsidiaries, while the foreign
facilities are secured by substantially all of the worldwide assets of Astor
Corporation and its subsidiaries.
F-12
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
The facility agreement subjects Astor Corporation and its subsidiaries to
various affirmative and negative covenants and prohibits, among other things,
the payment of dividends on any class of stock. As of March 31, 1996, Astor
Corporation and its subsidiaries were in compliance with these covenants.
Scheduled maturities on long-term debt for each of the next five years as of
March 31, 1996 are as follows:
<TABLE>
<S> <C>
Year ending March 31, 1997..................................... $4,746,683
1998....................................... 6,711,070
1999....................................... 7,383,704
2000....................................... 9,598,781
2001....................................... 11,075,439
Thereafter................................. 31,300,966
----------
$70,816,643
----------
----------
</TABLE>
8. LONG-TERM POST-PETITION DEBT
Long-term post-petition debt consisted of the following at March 31, 1995:
<TABLE>
<S> <C>
Debtor in possession financing from Century City 1800 Partners
LP ("CC1800").................................................. $3,500,000
Assumed obligations -- bridge loan.............................. 6,038,624
Notes payable, secured.......................................... 250,000
Environmental note.............................................. 148,097
---------
9,936,721
Less current portion............................................ 3,500,000
---------
$6,436,721
---------
---------
</TABLE>
On February 29, 1992, Petrowax entered into a secured debtor-in-possession
financing arrangement ("DIP loan") pursuant to which Petrowax borrowed $3.5
million which was secured by liens on Petrowax's accounts receivable and
inventory. The DIP loan was repaid upon reorganization of Petrowax.
On April 27, 1990, Petrowax entered into a bridge loan agreement pursuant to
which the bridge lenders loaned Petrowax $5.0 million. The principal amount
outstanding under this facility was $4.75 million at March 31, 1995. The bridge
lenders' asserted secured claim relating to this facility, which included
accrued interest and fees, totaled $6,038,624 at March 31, 1995. This obligation
was settled upon reorganization of Petrowax.
9. PCDR INVENTORY FINANCING
In November 1992, Petrowax entered into a tolling agreement with PCDR, an
affiliated entity. The agreement allowed PCDR to purchase selected crude oil and
inventories aggregating $3.6 million from Petrowax, for later re-sale back to
Petrowax. This agreement resulted in increased working capital available to
Petrowax for use in its manufacturing operations. The agreement required
Petrowax to re-purchase all inventories upon confirmation of a plan of
reorganization. For financial reporting purposes at March 31, 1995, the
agreement is considered a financing arrangement, and the inventory and
corresponding PCDR borrowings are included in the balance sheet. The PCDR
borrowings were paid upon the reorganization of Petrowax.
F-13
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. PRE-PETITION LIABILITIES
Pre-petition liabilities consisted of the following at March 31, 1995:
<TABLE>
<S> <C>
Secured debt................................................... $45,398,186
Unsecured debt................................................. 1,366,354
Taxes payable.................................................. 196,377
Capital lease obligations...................................... 29,471
Unsecured trade payables....................................... 7,147,578
----------
$54,137,966
----------
----------
</TABLE>
These liabilities were settled upon reorganization of Petrowax.
11. LEASES
Astor Corporation is obligated under noncancelable operating leases expiring
on various dates through March 31, 2003. Future minimum annual lease payments as
of March 31, 1996 are as follows:
<TABLE>
<S> <C>
Year ending March 31, 1997...................................... $1,656,000
1998....................................... 1,528,000
1999....................................... 1,179,000
2000....................................... 936,000
2001....................................... 923,000
</TABLE>
Rent expense for all operating leases for the years ended March 31, 1994,
1995 and 1996 was $1.3 million, $1.4 million and $1.6 million, respectively.
12. STOCK OPTIONS AND WARRANTS
Effective June 28, 1995, Astor Holdings, Inc. adopted its 1995 Option
Incentive Plan (the "Plan"). The Plan reserved 204,545 shares of the Parents'
Class D common stock for purchase by management. On June 28, 1995 ("date of
grant"), the Parent issued options for 204,545 shares of its Class D common
stock to members of management at a purchase price of $10 per share, which was
the fair market value of the Class D common stock at that date. Accordingly,
there was no compensation expense recorded in the financial statements related
to the granting of the options. On each of the first, second, third, fourth and
fifth anniversaries of the date of grant ("vesting date"), the options become
exercisable to purchase at a rate of 20% per annum. The vesting of each option
is contingent upon the Parent meeting certain target financial performance goals
for the fiscal year immediately preceding such vesting date. If these goals are
not met, the committee of the Board of Directors, in its sole discretion, may
cause the vesting of all or any portions of the options. If both of the previous
two conditions are not met in a particular year, the options subject to vesting
for such vesting date will not vest, but shall automatically vest upon the next
succeeding vesting date for which the financial performance goals are met or at
the sole discretion of the committee of the Board of Directors. No awards shall
be made under this Plan after June 28, 2005 and no Class D common stock shall be
issued under this Plan after June 28, 2015. There have been no options exercised
under the Plan as of March 31, 1996.
The Parent has elected not to adopt early the provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), ADOPT ACCOUNTING FOR
STOCK-BASED COMPENSATION. The Parent will adopt the reporting provisions of SFAS
No. 123 in fiscal year 1997. The Parent expects the adoption to have no effect
on its financial condition or results of operations.
F-14
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES
The components of income before taxes and extraordinary item are as follows
at March 31:
<TABLE>
<CAPTION>
1994 1995 1996
-------------- ------------- --------------
<S> <C> <C> <C>
Domestic...................................... $ (32,543,708) $ (1,516,262) $ 2,053,901
Foreign....................................... -- -- (11,770)
-------------- ------------- --------------
$ (32,543,708) $ (1,516,262) $ 2,042,131
-------------- ------------- --------------
-------------- ------------- --------------
</TABLE>
In 1994 and 1995, no provision for federal income taxes was recorded as
Astor Holdings II incurred net losses for financial reporting as well as income
tax purposes. Income tax expense (credits) consist of the following at March 31,
1996:
<TABLE>
<S> <C>
Current:
Federal....................................................... $ 339,350
State......................................................... 312,520
Foreign....................................................... 200,662
Deferred:
Federal....................................................... (4,865,981)
State......................................................... 946,337
Foreign....................................................... (367,054)
----------
$(3,434,166)
----------
----------
</TABLE>
Deferred taxes available to Astor Holdings II as of March 31 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------- -------------- -----------------------------
DOMESTIC DOMESTIC DOMESTIC FOREIGN
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Deferred tax liabilities:
Property, plant and equipment.......... $ -- $ -- $ (4,229,030) $ (4,156,585)
Intangible assets...................... -- -- -- (881,000)
Other.................................. -- -- (8,231) (135,110)
------------- -------------- ------------- --------------
$ -- $ -- $ (4,237,261) $ (5,172,695)
Deferred tax assets:
Federal net operating loss
carryforward.......................... $ 15,095,000 $ 14,620,000 $ 8,413,560 $ --
Accounts receivable.................... -- -- 145,278 70,704
Inventory.............................. -- -- 32,000 88,434
Property, plant and equipment.......... 6,110,000 5,408,000 -- --
Intangible assets...................... 3,174,000 3,046,000 -- --
Accrued expenses and other long-term
liabilities........................... -- -- 1,151,067 231,905
Other.................................. 374,000 487,000 -- --
Valuation allowance.................... (24,753,000) (23,561,000) (1,585,000) --
------------- -------------- ------------- --------------
$ -- $ -- $ 8,156,905 $ 391,043
------------- -------------- ------------- --------------
Net deferred taxes....................... $ -- $ -- $ 3,919,644 $ (4,781,652)
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
At March 31, 1996, Astor Holdings II had an operating loss carryforward for
tax reporting purposes of approximately $24 million expiring in years 2007
through 2009, which was available to offset future federal taxable income. The
utilization of the net operating losses would be limited under Section 382 of
the Internal Revenue Code (the "Code") if Astor Corporation were to undergo, or
is deemed to have previously
F-15
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES (CONTINUED)
undergone, an ownership change. Although Astor Corporation has completed
transactions that have involved substantial changes to its equity ownership,
Astor Corporation believes that an ownership change, as defined by the Code, has
not occurred since June 1991. Approximately $4.6 million of net operating losses
generated prior to the June 1991 change in control could potentially be subject
to annual limitation of future use. The deferred tax asset related to these June
1991 and prior net operating losses has been offset by a valuation allowance of
$1,585,000 as of March 31, 1996.
Astor Corporation had incurred operating losses through fiscal year 1995 and
therefore had recorded a valuation allowance for the entire deferred tax asset.
In fiscal year 1996, as a result of several positive factors, Astor Corporation
determined it could eliminate the valuation allowance, with the exception of the
amount required for the 1991 and prior net operating losses noted above. The
positive factors included the emergence from bankruptcy, the achievement of
operational efficiencies, the acquisition of ABI which has a consistent history
of positive earnings, and the achievement of consolidated net income for the
fiscal year. In addition to generating a profit in fiscal year 1996, Astor
Corporation determined it would have been profitable in 1995 had the
reorganization and acquisition of ABI taken place at the beginning of that year.
As a result, Astor Corporation believes it is more likely than not that the
deferred tax asset will be realized.
Total income tax expense for the fiscal year ended March 31, 1996 differed
from the amounts computed by applying the U.S. federal income tax rate to income
before taxes and extraordinary item as a result of the following:
<TABLE>
<S> <C>
Income tax expense at the 34% statutory federal income tax
rate........................................................... $ (694,325)
State and local income taxes, net of federal income tax
benefit........................................................ (1,152,837)
Realization of the net operating losses previously subject to
valuation allowance............................................ 920,091
Non-deductibility of goodwill amortization...................... (315,000)
Reduction of the valuation allowance on unused net operating
loss carryforward.............................................. 4,865,981
Other........................................................... (189,744)
----------
Total income tax benefit........................................ $3,434,166
----------
----------
</TABLE>
14. EMPLOYEE BENEFIT PLANS
Astor Corporation, through its acquisition of ABI, has a contributory,
defined-benefit pension plan covering certain employees in the United Kingdom.
Benefits are based on length of service and a negotiated benefit rate. Astor
Corporation's policy is to fund the plan based upon statutory requirements.
Plan assets are primarily invested in domestic and international stocks and
bonds.
F-16
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following tables present the funded status and amounts recognized in the
balance sheet at March 31, 1996:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations
Vested....................................................... $10,541,000
Non-vested................................................... --
----------
Accumulated benefit obligation................................. $10,541,000
----------
----------
Projected benefit obligation................................... $12,150,000
Plan assets at fair value...................................... 13,172,000
----------
Plan assets in excess of projected benefit obligation.......... 1,022,000
Unrecognized net gain.......................................... (613,000)
----------
Net pension asset.............................................. $ 409,000
----------
----------
</TABLE>
Net pension expense for the fiscal year ended March 31, 1996 was comprised
of the following:
<TABLE>
<S> <C>
Service cost..................................................... $ 209,000
Interest cost on projected benefit obligation.................... 718,000
Expected return on plan assets................................... (816,000)
---------
$ 111,000
---------
---------
</TABLE>
At March 31, 1996, the assumed long-term rates of return on assets and
settlement rate used in determining net pension expense were 9% and 8%,
respectively. The assumed rate of increase in the future compensation level was
6%.
Astor Corporation also sponsors defined-contribution plans under Section
401(k) of the Internal Revenue Code. These plans cover employees at the Refining
and Blending divisions in the United States. Employees may elect to contribute
up to 15% of their annual compensation to the plans, subject to limits
established by the Internal Revenue Code. Astor Corporation's contributions to
the plans are based on 100% of the first 3% of compensation contributed by
employees. Astor Corporation also may make discretionary contributions. Astor
Corporation's contributions to the plans for the year ended March 31, 1996 was
$47,000. There were no contributions to these plans for the years ended March
31, 1995 and 1994.
15. POSTRETIREMENT MEDICAL BENEFITS
Astor Corporation provides certain health insurance benefits to eligible and
formerly full-time retired United States employees. Participants generally
become eligible for these benefits after achieving certain age and years of
service requirements.
The United States Blending Division, which relates to the ABI acquisition,
will provide 100% of eligible employees' premium coverage for individuals
retiring between the ages of 62 and 65 under the group health plan, and will
provide premium coverage for eligible retirees greater than age 65 for coverage
supplemental to Medicare.
Effective February 1, 1996, the United States Refining Division ratified a
new union contract which provides for Astor Corporation to continue to pay for
80% of eligible individual employee group health and dental plan coverage for
employees who retire between the ages of 62 and 65 with coverage ending upon
attainment of age 65. The accumulated postretirement benefit obligation at the
effective date was $538,000 and will be recognized over 20 years.
Astor Corporation's current policy is to fund these benefits on a
pay-as-you-go basis.
F-17
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. POSTRETIREMENT MEDICAL BENEFITS (CONTINUED)
The amounts recognized in Astor Holdings II's March 31, 1996 balance sheet
are as follows:
<TABLE>
<S> <C>
Accumulated postretirement benefits obligation:
Retirees...................................................... $ 291,936
Fully eligible active......................................... 564,599
Other, not fully eligible..................................... 247,965
---------
Total accumulated postretirement benefits obligation............ 1,104,500
Unrecognized prior service costs................................ (533,500)
---------
Accrued postretirement benefit obligation....................... $ 571,000
---------
---------
</TABLE>
These obligations are included in other long-term liabilities on Astor
Holdings II's March 31, 1996 balance sheet.
Net periodic postretirement benefit costs for the fiscal year ended March
31, 1996 included the following components:
<TABLE>
<S> <C>
Service cost -- benefits earned during the period.................. $ 13,000
Interest cost...................................................... 37,000
Amortization....................................................... 4,482
---------
Net periodic postretirement benefit cost........................... $ 54,482
---------
---------
</TABLE>
For measuring the postretirement benefit obligation, an initial 8% annual
rate of increase in the net medical claims cost was assumed. The rate was
assumed to decrease by 1% per year commencing in the fiscal year ended March 31,
1997 to an ultimate rate of 5%. Increasing the annual rate of increase in the
net medical claims cost by one percentage point in each year would increase the
accumulated postretirement benefit obligation by 12.4% or $137,000 and would
increase the service cost and interest cost components of net periodic
postretirement benefit cost by 15.2% or $7,600 in the aggregate. The discount
rate used in determining the accumulated postretirement benefit obligation was
7% per annum.
16. SWAP AGREEMENTS
Astor Corporation has entered into a series of price swap contracts to fix
the purchase price of crude oil, primarily through October 31, 1996. The
contracts are intended to mitigate the impact of market fluctuations related to
the cost of crude oil on feedstock costs. Gains and losses on the contracts are
deferred and are recognized in income during the periods affected. At March 31,
1996, Astor Corporation had open price swap contracts covering a notional amount
of crude oil equivalent to 571,000 barrels.
17. COMMITMENTS AND CONTINGENCIES
As is prevalent in the refining industry, Astor Corporation has
environmental issues that it is addressing. The United States Refining Division
has issues related to the remediation of contaminated soils and ground water.
Quaker State Corporation (QSC) is responsible for the vast majority of the costs
associated with the issues. Astor Corporation's potential liability is limited
to sharing fifty percent of the first $5,500,000 of non-ground water remediation
with QSC. Astor Corporation will pay for its share of the above costs by issuing
subordinated 9% notes payable to QSC, which will be due December 31, 2008. As of
March 31, 1996, Astor Corporation has issued environmental notes to Quaker State
in the amount of $148,097 for shared costs (Note 7). The future cost to Astor
Corporation for non-ground water remediation, if any, is not known at this time.
The United States Blending Division has environmental issues related to
contamination at its Titusville, Pa. facility. Under the terms of the L1,450,988
of 8% subordinated debt issued to ABI's former shareholders by the Parent, the
Parent is entitled to set-off costs in excess of $350,000 relating to this site
against the principal and interest otherwise payable, so long as the Parent
notifies the shareholders by June 28, 1999 of
F-18
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. COMMITMENTS AND CONTINGENCIES (CONTINUED)
the existence of a condition that could give rise to a set-off claim. Astor
Holdings II has accrued the initial $350,000 for which it is responsible. Astor
Corporation believes it has provided for probable losses with respect to these
issues and does not anticipate a material impact on future operating results,
financial position or liquidity.
18. INVESTMENT IN RHEOCHEM TECHNOLOGIES, INC.
Astor Corporation's investment in Rheochem Technologies, Inc. ("Rheochem")
represents its 50% ownership of Rheochem, which was obtained through the
acquisition of ABI. Rheochem, whose operations are based in Columbia, Missouri,
develops and manufactures products such as paraffin lubricants, synthetic
stearate and other lubricating systems which are used in the extrusion of
polyvinyl chloride (PVC) products. Astor Corporation accounts for its investment
using the equity method.
During the fiscal year ended March 31, 1996, Astor Corporation had sales to
Rheochem of approximately $4,300,000 and at March 31, 1996 has a receivable from
Rheochem of $566,000. Also during the fiscal year ended March 31, 1996, Astor
Corporation received a management fee from Rheochem of $1,100,000, which is
netted against selling, general and administrative expenses in the accompanying
consolidated statement of operations.
Under a joint venture agreement, neither the Company nor Rheochem, Inc.
("RCI"), the other 50% joint venture partner in Rheochem may sell its interests
in Rheochem without first complying with right of first offer and right of first
refusal procedures in favor of the other party. After December 31, 1997, either
Astor Corporation or RCI may compel the other party to purchase all its Rheochem
interests or to sell to it all of the other party's Rheochem interests. In
addition, if the principal of RCI ceases to render services to Rheochem as a
result of death, disability or other reasons, then Astor Corporation will have a
six-month call option to require RCI to sell its Rheochem interests and RCI will
concurrently have a seven month put option to require Astor Corporation to
purchase RCI's Rheochem interests, in either case at aggregate current value
determined under procedures set forth in the agreement.
The differences between the carrying amount of the investment on Astor
Holdings II's books and the amount of Astor Corporation's share of Rheochem's
underlying equity in net assets of approximately $2,889,000 is being amortized
over 25 years by Astor Corporation.
The following summarized financial statement information for Rheochem is for
the year ending or as of December 31, 1995:
<TABLE>
<S> <C>
ASSETS:
Current...................................................... $4,446,000
Non-current.................................................. $1,818,000
----------
LIABILITIES:
Current...................................................... $3,524,000
Non-current.................................................. $ 268,000
----------
NET SALES...................................................... $25,908,000
----------
Gross profit................................................... $4,676,000
Net income..................................................... $ 416,000
----------
</TABLE>
19. RELATED PARTIES
As discussed in Note 17, Astor Corporation transacts business with Rheochem
in which it has a 50% ownership.
The Parent has issued redeemable preferred stock. The series A preferred
stock has a liquidation preference and stated value of $14,250,000 and has a
cumulative 14.5% dividend rate. The holders of the
F-19
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. RELATED PARTIES (CONTINUED)
series A preferred stock may require the Parent to redeem the shares after June
15, 2007 or upon a change in control. The series B preferred stock has a
liquidation preference and stated value of $8,250,000 and has a cumulative 14.5%
dividend rate. The holders of the series B preferred stock may require the
Parent to redeem the shares upon a change in control. The Parent's source of
funds for any redemption or payment of dividends will likely be distributions
received from Astor Corporation.
Astor Holdings II has incurred debt of $5,707,938 payable to the Parent in
conjunction with the purchase of ABI. The intercompany debt accrues interest at
6% per annum, which is payable semi-annually through 2003. The principal balance
is due in one installment on July 5, 2003. The Parent is expected to use the
proceeds from this debt to pay its subordinated notes payable to the former
shareholders of ABI.
The Parent has entered into a management agreement with a company related to
its principal stockholders. The Parent incurred a management fee of $300,000
during the fiscal year ended March 31, 1996 related to this agreement. During
the fiscal year ended March 31, 1996 Astor Corporation advanced approximately
$270,000 to the Parent to provide funds for the management fee and other
expenses. The Parent's sources of funds to repay these advances will likely be
distributions funded by Astor Corporation.
20. MAJOR CUSTOMERS
For the year ended March 31, 1994, sales made to two customers represented
approximately 31% of Astor Corporation's total sales. For the year ended March
31, 1995, sales made to one customer represented approximately 11% of Astor
Corporation's total sales. The related accounts receivable balances from these
customers represented approximately 23% and 2% of total accounts receivable at
March 31, 1994 and 1995, respectively. For the year ended March 31, 1996, there
were no sales to any single customer which exceeded 10% of Astor Corporation's
total sales.
21. FOREIGN OPERATIONS
Prior to the acquisition of ABI in the fiscal year ended March 31, 1996,
substantially all business was conducted domestically and there were no foreign
operations. The following table represents the applicable geographic operations
for the fiscal year ended March 31, 1996:
<TABLE>
<CAPTION>
UNITED
STATES EUROPE ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers......................... $ 89,487,567 $ 45,930,628 $ -- $ 135,418,195
Intra-group sales....................................... 8,631,250 6,764,915 (15,396,165) --
------------ ------------ ------------- -------------
Total net sales..................................... 98,118,817 52,695,543 (15,396,165) 135,418,195
Operating income........................................ 5,609,216 2,449,329 -- 8,058,545
Net income.............................................. 50,254,911 154,622 -- 50,409,533
Identifiable total assets............................... 86,646,993 56,258,558 -- 142,905,551
Total liabilities....................................... 69,361,310 37,186,570 -- 106,547,880
</TABLE>
U.S. operations' sales to unaffiliated customers include approximately
$7,800,000 for the year ended March 31, 1996 for export. Intra-group sales are
recorded at amounts generally above cost and in accordance with the rules and
regulations of the respective governing tax authorities.
F-20
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22. SUMMARY FINANCIAL INFORMATION
The following represents summarized financial information of Astor Holdings
II and its wholly-owned subsidiary Astor Corporation for the year ended March
31, 1996:
<TABLE>
<CAPTION>
ASTOR
HOLDINGS II, ASTOR
INC. CORPORATION ELIMINATIONS CONSOLIDATED
--------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Current assets..................................... $ 9,175,193 $ 47,478,592 $ (9,175,193) $ 47,478,592
Non current assets................................. 33,059,673 95,406,077 (33,038,791) 95,426,959
--------------- ------------- ------------- -------------
Total assets....................................... $ 42,234,866 $ 142,884,669 $ (42,213,984) $ 142,905,551
--------------- ------------- ------------- -------------
--------------- ------------- ------------- -------------
Current liabilities................................ $ (61,686) $ 27,665,216 $ -- $ 27,603,530
Non current liabilities............................ 5,938,881 82,180,662 (9,175,193) 78,944,350
Preferred stock of subsidiary...................... -- 1,744,721 (1,744,721) --
Stockholder's equity............................... 36,357,671 31,294,070 (31,294,070) 36,357,671
--------------- ------------- ------------- -------------
Total liabilities and stockholder's equity......... $ 42,234,866 $ 142,884,669 $ (42,213,984) $ 142,905,551
--------------- ------------- ------------- -------------
--------------- ------------- ------------- -------------
Sales.............................................. $ -- $ 135,418,195 $ -- $ 135,418,195
Operating income................................... (3,600) 8,062,145 -- 8,058,545
Net income......................................... $ 50,409,533 $ 50,396,989 $ (50,396,989) $ 50,409,533
</TABLE>
23. ASSET IMPAIRMENT
During the fiscal year ended March 31, 1994, as a result of continued
operating losses, Petrowax assessed whether the value of its long lived assets
were impaired. As a result of this process, Petrowax recorded an asset
impairment write-down of approximately $25.9 million, comprised of $22.3 million
pertaining to property, plant and equipment and $3.6 million pertaining to other
intangible assets. Using an estimated 15% incremental borrowing rate, Petrowax
calculated the present value of the expected future cash flows, excluding
interest charges, to determine the fair value of these assets.
24. SUBSEQUENT EVENT (UNAUDITED)
On July 12, 1996, Astor Corporation entered into an agreement to acquire all
of the outstanding capital stock and issued and unexercised stock options of
Adco Technologies, Inc. for an aggregate consideration of approximately $54.4
million. On October 8, 1996, the merger with Adco Technologies, Inc. was
consummated using the proceeds from a debenture offering.
Since 1990, Astor Corporation has purchased crude oil ("A/B Crude") under a
long-term Crude Oil Purchase Agreement with ANR Production Corporation ("ANR"),
a subsidiary of Coastal Oil Corporation ("Coastal"). This agreement provided for
Astor to purchase all of ANR's A/B Crude production at a formula price based on
posted prices for West Texas Intermediate Crude Oil. Under the contract, Astor
Corporation was obligated to purchase all of ANR's production of A/B Crude.
Astor Corporation also had the right of first refusal on any new availability at
ANR of A/B Crude.
Astor Corporation was party to a Crude, Processing and Reciprocal Purchase
Agreement with Big West Oil Company. Pursuant to this agreement, Astor
Corporation sold the crude oil purchased from ANR to Big West. Big West then
processed the crude oil at its refinery, for a fee to Astor Corporation, and
sold portions of the waxy feedstocks derived from the A/B Crude.
On October 1, 1996, these agreements were replaced by a long-term contract
with L&W, a joint venture of Coastal and Big West Oil Company, for the purchase
of its wax feedstocks derived from A/B Crude at a formula price based on posted
prices for West Texas Intermediate Crude Oil. This contract expires on October
1, 2006, subject to certain early termination rights.
F-21
<PAGE>
ASTOR HOLDINGS II, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1995 1996
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 2,408,514 $ 1,764,919
Accounts receivable (net of allowance for doubtful accounts
of $703,541 and $725,190, respectively)....................................... 23,683,312 23,644,694
Receivable from Rheochem Technologies, Inc..................................... 490,000 635,000
Inventory...................................................................... 21,421,352 21,835,505
Prepaid expenses............................................................... 2,317,058 1,862,333
Other current assets........................................................... 452,948 2,362,470
-------------- --------------
Total current assets......................................................... 50,773,184 52,104,921
Property, plant and equipment:
Land and improvements.......................................................... 7,710,451 7,633,141
Buildings and improvements..................................................... 7,187,459 7,097,708
Machinery and equipment........................................................ 38,827,622 42,291,768
-------------- --------------
Total cost....................................................................... 53,725,532 57,022,617
Less accumulated depreciation.................................................. (2,587,569) (6,058,749)
-------------- --------------
Property, plant and equipment -- net............................................. 51,137,963 50,963,868
Investment in joint venture...................................................... 4,166,000 4,392,000
Goodwill......................................................................... 30,537,429 29,180,493
Other intangible assets.......................................................... 7,164,527 6,161,355
Deferred tax asset............................................................... -- 4,692,196
-------------- --------------
Total assets................................................................. $ 143,779,103 $ 147,494,833
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-22
<PAGE>
ASTOR HOLDINGS II, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1995 1996
-------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................................... $ 15,188,034 $ 16,308,769
Accrued interest payable....................................................... 795,750 521,741
Accrued expenses............................................................... 13,175,340 8,086,770
Current portion of long-term debt.............................................. 4,125,000 5,360,776
-------------- --------------
Total current liabilities.................................................... 33,284,124 30,278,056
Long-term debt................................................................... 64,837,273 62,846,000
Due to affiliated company........................................................ 5,630,090 5,263,509
Deferred income taxes............................................................ 6,371,052 4,856,026
Other long-term liabilities...................................................... 3,408,396 2,472,000
Stockholder's Equity:
Common stock:
Par value $.01 per share; authorized 10,000 shares issued and outstanding,
1,000 shares................................................................ 10 10
Additional paid-in capital................................................... 60,534,646 36,670,838
Retained earnings (deficit) -- net of transfer of $23,863,808 accumulated
deficit as a result of March 31, 1996 quasi-reorganization.................. (29,925,191) 5,091,915
Foreign currency translation adjustment...................................... (361,297) 16,479
-------------- --------------
Total stockholder's equity................................................. 30,248,168 41,779,242
-------------- --------------
Total liabilities and stockholder's equity................................. $ 143,779,103 $ 147,494,833
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-23
<PAGE>
ASTOR HOLDINGS II, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER
30,
-----------------------------
1995 1996
-------------- -------------
<S> <C> <C>
Sales.............................................................................. $ 54,195,420 $ 87,826,894
Cost of goods sold................................................................. 44,189,862 67,735,624
-------------- -------------
Gross profit before depreciation and amortization.................................. 10,005,558 20,091,270
Selling, general and administrative expenses....................................... 5,024,061 9,009,859
Depreciation and amortization...................................................... 2,242,360 3,345,003
-------------- -------------
Operating income................................................................... 2,739,137 7,736,408
Income from Rheochem Technologies, Inc............................................. (65,000) 441,000
Interest expense................................................................... (1,837,096) (3,275,645)
Reorganization expense............................................................. (856,364) --
-------------- -------------
Income (loss) before taxes and extraordinary item.................................. (19,323) 4,901,763
Provision for (benefit from) income taxes.......................................... 565,763 190,152
-------------- -------------
Income (loss) before extraordinary item............................................ (585,086) 5,091,915
Extraordinary item -- gain on cancellation of debt................................. 44,933,236 --
-------------- -------------
Net income......................................................................... 44,348,150 5,091,915
Retained earnings (deficit) at beginning of period................................. (74,273,341) --
-------------- -------------
Retained earnings (deficit) at end of period....................................... $ (29,925,191) $ 5,091,915
-------------- -------------
-------------- -------------
</TABLE>
See accompanying notes.
F-24
<PAGE>
ASTOR HOLDINGS II, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER
30,
---------------------------
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................................... $ 44,348,150 $ 5,091,915
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization..................................................... 2,242,360 3,345,003
Income from debt cancellation..................................................... (44,933,236) --
Equity in income of Rheochem Technologies, Inc.................................... 65,000 (441,000)
Changes in operating assets and liabilities (net of business acquired on June 28,
1995):
Cash escrow..................................................................... 102,169 --
Accounts receivable............................................................. (2,792,499) 243,366
Receivable from Rheochem Technologies, Inc...................................... (39,000) (69,000)
Inventory....................................................................... (2,597,388) (3,176,550)
Prepaid and other current assets................................................ 1,483,576 (866,019)
Deposits........................................................................ 51,000 --
Accounts payable................................................................ (113,955) 48,947
Accrued reorganization costs.................................................... (465,998) --
Deferred taxes.................................................................. 127,911 (698,178)
Other long-term liabilities..................................................... 561,307 (185,076)
Accrued interest payable........................................................ 177,664 (294,212)
Accrued expenses................................................................ 6,516,195 2,317,100
------------ -------------
Net cash provided by operating activities........................................... 4,733,256 5,316,296
INVESTING ACTIVITIES
Additions to property, plant and equipment.......................................... (1,786,195) (2,094,404)
Acquisition of business, net of cash acquired of $1,510,342......................... (60,830,982) --
Decrease in restricted cash......................................................... 175,000 --
------------ -------------
Net cash used in investing activities............................................... (62,442,177) (2,094,404)
FINANCING ACTIVITIES
Capital lease payments.............................................................. (18,474) (64,096)
Increase in deferred debt issuance costs............................................ (6,800,561) --
Proceeds from long-term debt, net of fees........................................... 67,787,028 --
Payments of long-term debt.......................................................... (4,255,856) (2,545,771)
Issuance of stock, net of fees...................................................... 30,376,722 --
Payment of PCDR inventory financing................................................. (3,600,000) --
Payment of debtor in possession financing........................................... (3,500,100) --
Payment of bridge loan payable...................................................... (5,000,000) --
Payment of pre-petition liabilities................................................. (8,827,840) --
Decrease in due to affiliated company............................................... (6,261,790) (172,153)
------------ -------------
Net cash (used in) provided by financing activities................................. 59,899,229 (2,782,020)
------------ -------------
Effect of exchange rate changes on cash............................................. (500,538) 168,425
------------ -------------
Net increase in cash and cash equivalents........................................... 1,689,770 608,297
Cash and cash equivalents at beginning of period.................................... 718,744 1,156,622
------------ -------------
Cash and cash equivalents at end of period.......................................... $ 2,408,514 $ 1,764,919
------------ -------------
------------ -------------
Noncash investing and financing activities
Asset acquired by incurring notes payable......................................... $ 5,945,940 --
</TABLE>
See accompanying notes.
F-25
<PAGE>
ASTOR HOLDINGS II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (including
solely normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six month period ended September
30, 1996 are not necessarily indicative of the results that may be expected for
the year ended March 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto of Astor Holdings II,
Inc. for the year ended March 31, 1996.
2. INVENTORY
Inventory consists of the following at September 30:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Raw Materials............................................................ $ 7,616,587 $ 8,671,328
Work-in-progress......................................................... 5,082,551 5,200,625
Finished goods........................................................... 9,146,921 8,303,151
Allowance for inventory obsolescence..................................... (424,707) (339,559)
------------- -------------
$ 21,421,352 $ 21,835,305
------------- -------------
------------- -------------
</TABLE>
3. INCOME TAXES
Income tax expense recorded for the six month period ended September 30,
1995 is greater than the amount computed by applying the U.S. federal income tax
rate to income before taxes and extraordinary item as a result of taxes being
provided on the income of a subsidiary of Astor Holdings II which was not part
of the consolidated federal tax return for the quarter ended September 30, 1995.
Income tax expense recorded for the six month period ended September 30, 1996 is
less than the amount computed by applying the U.S. federal income tax rate to
income before taxes and extraordinary item due primarily to the elimination of a
valuation allowance related to Astor Holdings II's deferred tax assets. During
the quarter ended September 30, 1996, Astor Holdings II elected for tax purposes
to partially offset the gain on cancellation of debt against the 1991 and prior
net operating losses rather than against the basis of property and equipment.
Therefore the $1.6 million valuation allowance for the deferred tax asset
resulting from those net operating losses was no longer necessary.
F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the shareholders of Associated British Industries Limited
We have audited the accompanying consolidated profit and loss accounts and
cash flow statements of Associated British Industries Limited and subsidiaries
for the year ended 31 March 1995, the nine months ended 31 March 1994 and the
year ended 30 June 1993. These are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom and in the United States. 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 above statements. An audit also includes assessing the
accounting principles used and significant estimates made by managment, 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated operating results and
cash flows of Associated British Industries Limited and subsidiaries for the
year ended 31 March 1995, the nine months ended 31 March 1994 and the year ended
30 June 1993 in conformity with generally accepted accounting principles in the
United Kingdom.
Generally accepted accounting prinicples in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected the results of operations for the periods
ended 31 March 1995 and 1994 to the extent summarized in Note 9 to the
consolidated financial statements.
KPMG
Chartered Accountants
Registered Auditors
London, England
24 October 1996
F-27
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
NOTE
----- YEAR ENDED NINE MONTHS YEAR ENDED
30 JUNE ENDED* 31 MARCH
1993 31 MARCH 1995
----------- 1994 -----------
(RESTATED)
L000 ------------ L000
L000
<S> <C> <C> <C> <C>
TURNOVER............................................................ 2 45,930 43,135 57,099
Cost of sales....................................................... (34,282) (32,325) (42,569)
----------- ------------ -----------
GROSS PROFIT........................................................ 11,648 10,810 14,530
Distribution costs.................................................. (2,972) (2,675) (3,601)
Administrative expenses............................................. (5,601) (4,887) (6,429)
Other operating income.............................................. -- 172 468
----------- ------------ -----------
OPERATING PROFIT.................................................... 3,075 3,420 4,968
Provision for loss on disposal of land and buildings................ -- (73) --
----------- ------------ -----------
Profit on ordinary activities before interest....................... 3,075 3,347 4,968
Other interest receivable and similar income........................ 4 -- 19 16
Income from interests in associated undertaking..................... -- -- 442
Interest payable and similar charges................................ 5 (754) (557) (644)
----------- ------------ -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION....................... 3 2,321 2,809 4,782
Tax on profit on ordinary activities................................ 6 (830) (1,138) (1,789)
----------- ------------ -----------
PROFIT FOR THE FINANCIAL YEAR/PERIOD*............................... 1,491 1,671 2,993
Dividends:
Paid.............................................................. (142) (188) --
Proposed.......................................................... (230) (239) (244)
----------- ------------ -----------
RETAINED PROFIT FOR THE YEAR/PERIOD................................. 1,119 1,244 2,749
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
There were no material acquisitions or discontinued activities in the year ended
31 March 1995, the nine months ended 31 March 1994 or the year ended 30 June
1993.
*The profit and loss account for the nine months ended 31 March 1994 includes 12
months' results for ABI Corporation, a subsidiary undertaking (note 1).
See accompanying notes.
F-28
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
CONSOLIDATED CASH FLOW STATEMENT
<TABLE>
<CAPTION>
NOTE
---------- 30 JUNE 1993 31 MARCH 1994 31 MARCH 1995
-------------------- -------------------- --------------------
L000 L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES.......................... 8(I) 4,120 4,339 7,924
RETURN ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received.................... -- -- 16
Interest paid........................ (727) (504) (549)
Interest element of finance lease
rental payments..................... (27) (25) (27)
Dividends paid....................... (343) (412) (239)
--------- --------- ---------
NET CASH OUTFLOW FROM RETURNS ON
INVESTMENT AND SERVICING OF
FINANCE............................. (1,097) (941) (799)
TAXATION.............................
Tax paid............................. (227) (1,350) (1,311)
INVESTMENT ACTIVITIES
Purchase of tangible fixed assets.... (2,478) (1,374) (1,964)
Purchase of investment in associated
undertaking......................... -- -- (1,320)
Purchase of goodwill................. (171) -- --
Purchase of fixed asset
investments......................... -- -- (24)
Sale of tangible fixed assets........ 91 47 415
--------- --------- ---------
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES.......................... (2,554) (1,327) (2,893)
--------- --------- ---------
NET CASH INFLOW BEFORE FINANCING..... 242 721 2,921
FINANCING
Issue of share capital............... -- -- 20
Repayment of amounts borrowed........ (121) (474) (384)
Capital element of finance lease
rental payments..................... 47 (46) (67)
--------- --------- ---------
NET CASH OUTFLOW FROM FINANCING...... 8(IV) (74) (520) (431)
--------- --------- ---------
INCREASE IN CASH AND CASH
EQUIVALENTS......................... 8(II)/(III) 168 201 2,490
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-29
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
NOTES
(FORMING PART OF THE FINANCIAL STATEMENTS)
1. ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the Company's financial
statements.
BASIS OF PREPARATION
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules modified to
include the revaluation of land and buildings.
BASIS OF CONSOLIDATION
The Group financial statements consolidate the financial statements of the
Company and all of its subsidiary undertakings. These financial statements are
made up to 31 March 1995. The consolidated financial statements are based on
financial statements which are coterminous with those of the ultimate parent
company, with the exception of the participating interest in 50% of the common
stock of Rheochem Manufacturing Company Inc acquired in the year, whose year end
is 31 December 1994. The results of Rheochem Manufacturing Company Inc for the
three month period to 31 March 1995 have been included based upon management
information.
Unless otherwise stated, the acquisition method of accounting has been
adopted for all subsidiary undertakings. Under this method, the results of
subsidiary undertakings acquired or disposed of in the period are included in
the consolidated profit and loss account from the date of acquisition or up to
the date of disposal. For associated undertakings, the equity method of
accounting has been adopted. Goodwill arising on consolidation (representing the
excess of the fair value of the consideration given over the fair value of the
separable net assets required) is written off against reserves on acquisition.
CHANGE OF YEAR END
In 1994 the Company changed the financial year end for its European
subsidiaries and itself from 30 June to 31 March bringing it into alignment with
that of its US subsidiaries. Consequently, the financial statements for the
period to 31 March 1994 contain the results of the Company and its European
subsidiaries for the nine months to that date and those of its US subsidiaries
for the year to that date.
FIXED ASSETS AND DEPRECIATION
Depreciation is provided by the Group to write off the cost or valuation
less the estimated residual value of tangible fixed assets by equal installments
over their estimated useful economic lives as follows:
<TABLE>
<S> <C> <C>
Freehold buildings -- 2% per annum
Leased assets -- life of lease
Plant and
machinery -- between 10% and 33%
</TABLE>
Patents and trade marks are shown at cost less amortization calculated on a
straight line basis at between 10% and 20% per annum.
No depreciation is provided on freehold land.
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date, except where matched by forward foreign
exchange contracts, and the gains or losses on translation are included in the
profit and loss account.
F-30
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
NOTES (CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
For consolidation purposes, the assets and liabilities and profit and loss
accounts of overseas subsidiary undertakings are translated at the closing
exchange rates. Exchange differences arising on these translations are taken to
reserves as well as exchange differences arising on related foreign currency
borrowings that have been designated and are effective as a hedge of the net
investment in the overseas subsidiaries.
GOVERNMENT GRANTS
Capital based government grants are included within accruals and deferred
income in the balance sheet and credited to trading profit over the estimated
useful economic lives of the assets to which they relate.
LEASES
Where the Group enters into a lease which entails taking substantially all
the risks and rewards of ownership of an asset, the lease is treated as a
"finance lease". The asset is recorded in the balance sheet as a tangible fixed
asset and is depreciated over its estimated useful life or the term of the
lease, whichever is shorter. Future installments under such leases, net of
finance charges, are included with creditors. Rentals payable are apportioned
between the finance element, which is charged to the profit and loss account,
and the capital element which reduces the outstanding obligation for future
installments.
All other leases are accounted for as "operating leases" and the rental
charges are charged to the profit and loss account on a straight line basis over
the life of the lease.
PENSIONS AND OTHER POST-RETIREMENT BENEFITS
Eligible UK employees belong to the Associated British Industries Group
Retirement Benefit Scheme which is operated by Associated British Industries
Limited. The Scheme provides benefits based on final pensionable salary and its
assets are held separately from those of the Group. Contributions to the scheme
are charged to the profit and loss account so as to spread the cost of pensions
over the remaining service lives of employees. Deferred tax has been accounted
for in respect of the Group pension provision.
In addition, the costs of post-employment medical benefits are charged to
the profit and loss account so as to recognize them over the members' working
lives. This represents a change in accounting policy following the adoption of
Urgent Issues Task Force Abstract 6 (see note 7).
RESEARCH AND DEVELOPMENT EXPENDITURE
Expenditure on research and development is written off against profits in
the year in which it is incurred.
STOCKS
Stocks are stated at the lower of cost (calculated on the first in, first
out ("FIFO") basis) and net realizable value. For work in progress and finished
goods manufactured by the Group, cost is taken as production cost, which
includes an appropriate proportion of attributable overheads.
TAXATION
The charge for taxation is based on the profit for the year and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes. Provision is made for
deferred tax only to the extent that it is probable that an actual liability
will crystallize. UK companies make payments for group relief received equal to
the value of loss surrendered. No provision for deferred taxation on the
retained profits of overseas subsidiaries and associates has been made as there
is currently no intention to remit them to the UK.
TURNOVER
Turnover represents the amounts (excluding value added tax) derived from the
provision of goods and services to third party customers during the period.
F-31
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
NOTES (CONTINUED)
2. SEGMENTAL INFORMATION
<TABLE>
<CAPTION>
UK REST OF EUROPE AMERICAS OTHER
------------------------------- ------------------------------- ------------------------------- ---------
1993 1994 1995 1993 1994 1995 1993 1994 1995 1993
L000 L000 L000 L000 L000 L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Turnover by
destination:
Sales to third
parties....... 15,948 12,047 18,690 8,711 7,361 12,575 16,270 19,757 20,253 5,001
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
TOTAL
-------------------------------
1994 1995 1993 1994 1995
L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C>
Turnover by
destination:
Sales to third
parties....... 3,970 5,581 45,930 43,135 57,099
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Information relating to turnover by geographical segment of origin, profit
on ordinary activities before taxation by geographical segment and net assets by
geographical segment have not been disclosed on the basis that, in the opinion
of the directors, the disclosure of such information would be seriously
prejudicial to the interests of the Group. In the opinion of the directors the
Group only operates in one business segment.
3. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit on ordinary activities before taxation is stated after
charging/(crediting) the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
30 JUNE 31 MARCH 31 MARCH
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
L000 L000 L000
Depreciation.......................................... 1,842 1,637 1,992
Auditors' remuneration
- -- KPMG audit......................................... 75 85 90
- -- KPMG non audit..................................... -- 26 52
- -- Other auditors..................................... 5 5 5
Amortization of fixed asset investments............... -- 20 26
Amounts written off current asset investments......... 10 6 6
Income from current asset investments................. (3) (1) (3)
----- ----- -----
----- ----- -----
</TABLE>
The total amount charged to revenue for the hire of plant and machinery
amounted to L98,000 (1994: L79,000; 1993: L68,000). This comprises depreciation
on plant and machinery held under finance leases together with the related
finance charges.
The profit on ordinary activities before taxation for the nine months ended
31 March 1994, as previously reported, amounted to L2,833,000. This has been
revised downwards by L24,000 as a result of the introduction of Urgent Issues
Task Force Abstract 6 -- Accounting for Post-Retirement Benefits other than
Pensions.
Other operating income includes L407,000 (1994:LNIL) of management charges
receivable from Rheochem Manufacturing Co Inc, an associated undertaking.
4. INTEREST RECEIVABLE AND SIMILAR INCOME
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
30 JUNE 31 MARCH 31 MARCH
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
L000 L000 L000
Receivable on:
Short term bank deposits............................ -- 19 16
----- ----- -----
----- ----- -----
</TABLE>
F-32
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
NOTES (CONTINUED)
5. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
30 JUNE 31 MARCH 31 MARCH
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
L000 L000 L000
Payable on:
Bank loans, overdrafts and other loans wholly
repayable within five years........................ 727 532 617
Finance charges payable in respect of finance leases
and hire purchase contracts........................ 27 25 27
----- ----- -----
754 557 644
----- ----- -----
----- ----- -----
</TABLE>
6. TAXATION
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
30 JUNE 31 MARCH YEAR ENDED 31
1993 1994 MARCH 1995
------------- ------------- -------------
<S> <C> <C> <C>
L000 L000 L000
UK corporation tax at 33% (1994 AND 1993: 33%)........ 260 148 465
Overseas taxation..................................... 398 924 1,309
Share of tax in associated undertaking................ -- -- 69
Deferred taxation..................................... 176 64 (33)
Adjustment relating to an earlier year................ (4) 2 (21)
----- ----- -----
830 1,138 1,789
----- ----- -----
----- ----- -----
</TABLE>
As at 31 March 1995 the Company was a close company within the meaning of
the Income & Corporation Taxes Act, 1988. In the opinion of the directors no
liability to apportionment arises.
7. PENSIONS
The Group operates a pension scheme for eligible UK employees providing
benefits based upon final pensionable salary. The assets of the Scheme are held
in separate trustee administered funds.
Contributions to the Scheme are charged to the profit and loss account so as
to spread the cost of pensions over the remaining service lives of employees in
the Scheme. The contributions are determined by a qualified actuary on the basis
of valuations which take place at least once every three years using the
attained age method. The valuation used in compiling these financial statements
was that as at 30 June 1994. The assumptions which have the most significant
effect on the results of the valuation are those relating to the rate of return
on investments and the rates of increase in salaries and pensions. It was
assumed that the investment returns would be 10% per annum, that salary
increases would average 8% per annum and that present and future pensions would
increase at the rate of 5% per annum.
The valuation as at 30 June 1994 valued the assets of the Scheme at
L6,560,000 which was sufficient to cover 111% of past service liabilities. This
represents a past service actuarial surplus of L661,000. The actuary recommended
that the past service actuarial surplus be used to take a Group pension
contribution holiday until October 1999 with the Group's contributions returning
to a regular cost of 9.7% of pensionable salaries thereafter. For financial
statements purposes the past service actuarial surplus is being spread over the
remaining service lives of the employees in the Scheme in accordance with
Standard Statement of Accounting Practice No. 24.
F-33
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
NOTES (CONTINUED)
7. PENSIONS (CONTINUED)
The Group has chosen to recognize, for the first time, liabilities to
post-retirement medical benefits, following the introduction of Urgent Issues
Task Force Abstract 6 -- Accounting for Post-Retirement Benefits other than
Pensions. These liabilities have been estimated as at 31 March 1995 to be
L284,000 (31 MARCH 1994 (RESTATED): L290,000). The cumulative adjustment has
been charged directly against reserves as a prior year adjustment. The principal
assumptions were a discount rate of 8% and health care trend rates of 8% in
1996-97, 7% in 1998-2000, 6% in 2001-04 and 5% after this date.
8.(I)RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
31 MARCH
30 JUNE 1994 31 MARCH
1993 (RESTATED) 1995
----------- ----------- -----------
<S> <C> <C> <C>
L000 L000 L000
Operating profit........................................................ 3,075 3,420 4,968
Depreciation and amortisation charge.................................... 1,852 1,657 2,018
Loss/(profit) on sale of tangible fixed assets.......................... (33) (12) 103
Increase/Decrease in stocks............................................. (883) 418 318
(Increase) in debtors................................................... (1,059) (645) (388)
Decrease in current asset investments................................... 21 11 6
Increase/(decrease) in creditors........................................ 1,164 (589) 964
(Decrease)/increase in provisions for liabilities and charges........... (17) 79 (65)
----------- ----- -----
Net cash inflow from operating activities............................... 4,120 4,339 7,924
----------- ----- -----
----------- ----- -----
</TABLE>
(II) ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS DURING THE YEAR UNDER
REVIEW
<TABLE>
<CAPTION>
L000
<S> <C>
Balance at 30 June 1992........................................................................ (4,973)
Net cash inflow before adjustments for the effect of foreign exchange note changes............. 168
Effect of foreign exchange rate changes........................................................ (290)
---------
Balance at 30 June 1993........................................................................ (5,095)
Net cash inflow before adjustments for the effect of foreign exchange rate changes............. 201
Effect of foreign exchange rate changes........................................................ (40)
---------
Balance at 31 March 1994....................................................................... (4,934)
Net cash inflow before adjustments for the effect of foreign exchange rate changes............. 2,490
Effect of foreign exchange rate changes........................................................ (65)
---------
Balance at 31 March 1995....................................................................... (2,509)
---------
---------
</TABLE>
(III) ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS AS SHOWN IN THE
BALANCE SHEET
<TABLE>
<CAPTION>
31 MARCH 31 MARCH CHANGE IN
1994 1995 YEAR
----------- ----------- -----------
<S> <C> <C> <C>
L000 L000 L000
Cash at bank and in hand.............................................. 694 674 (20)
Bank overdrafts....................................................... (5,628) (3,183) 2,445
----------- ----------- -----
(4,934) (2,509) 2,425
----------- ----------- -----
----------- ----------- -----
</TABLE>
F-34
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
NOTES (CONTINUED)
8.(IV)ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
<TABLE>
<CAPTION>
SHARE CAPITAL LOANS AND
(INCLUDING FINANCE LEASE
PREMIUM) OBLIGATIONS
--------------- -------------
<S> <C> <C>
L000 L000
Balance at 30 June 1992.............................................................. 3,501 2,916
Cash inflow from financing........................................................... -- 121
Shares issued for non-cash consideration............................................. 6 --
Inception of finance lease contracts................................................. -- 107
----- -----
Balance at 30 June 1993.............................................................. 3,507 3,144
----- -----
Cash outflow from financing before adjustments for the effect of foreign exchange
rate changes........................................................................ -- (520)
Effect of foreign exchange rate changes.............................................. -- 50
Shares issued for non-cash consideration............................................. 6 --
----- -----
Balance at 31 March 1994............................................................. 3,513 2,674
Cash in/(out) flow from financing before adjustments for the effect of foreign
exchange rate changes............................................................... 20 (451)
Effect of foreign exchange rate changes.............................................. -- (106)
Shares issued for non-cash consideration............................................. 47 --
----- -----
Balance at 31 March 1995............................................................. 3,580 2,117
----- -----
----- -----
</TABLE>
Financing comprises share capital, share premium and borrowings due after
more than one year together with finance lease obligations of L189,000 (1994:
L256,000; 1993: L302,000) and borrowings due within one year being a loan
L368,000 (1994: L400,000; 1993: L393,000).
9. SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The Group's financial statements are prepared in accordance with generally
accepted accounting principles in the United Kingdom ("UK GAAP"), which differ
in certain respects from generally accepted accounting principles in the United
States ("US GAAP"). Differences which have a significant effect on the Group's
net income are set out below. While this is not a comprehensive summary of all
differences between UK and US GAAP, other differences would not have a
significant effect on the Group's net income.
GOODWILL
In the Group's financial statements, goodwill arising on the acquisition of
a subsidiary is written off against reserves in the consolidated balance sheet
in the year in which the acquisition is made. Under US GAAP such goodwill is
capitalized and amortized through the consolidated income statement for a period
of up to 40 years. For the purpose of compliance with US GAAP goodwill has been
amortized over a period of 25 years.
REVALUATION OF PROPERTIES
Under UK GAAP properties may be restated in the basis of appraised values in
financial statements prepared in all other respects in accordance with the
historical cost convention. Increases in value are credited directly to the
revaluation reserve and depreciation is calculated on the revalued basis. Under
US GAAP such revaluations of property would not be reflected in the financial
statements and depreciation would be based on historical cost.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING POLICY
Under UK GAAP the cumulative effect of a change in an accounting policy is
charged/credited to reserves. However, under US GAAP, the general rule is that
such an amount should be charged/credited to the profit and loss account for the
year of the change.
F-35
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
NOTES (CONTINUED)
9. SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
In the Group's financial statements revenues, expenses and assets and
liabilities relating to overseas subsidiaries are translated at the year-end
rate. Under US GAAP revenues and expenses are translated at average rates for
the period.
Details of the estimated effect on the Group's net income of differences
between UK GAAP and US GAAP are as follows:
ESTIMATED EFFECT ON NET INCOME OF DIFFERENCES BETWEEN UK AND US GAAP
<TABLE>
<CAPTION>
NINE MONTHS ENDED 31 YEAR ENDED
MARCH 1994 31 MARCH 1995
--------------------- ---------------
<S> <C> <C>
L'000 L'000
Net income in accordance with UK GAAP......................................... 1,671 2,993
US GAAP adjustments (net of tax):
Goodwill amortization....................................................... (21) (82)
Revaluation of properties................................................... 138 201
Deferred tax relating to adjustment for revaluation of properties........... (46) (66)
Cumulative effect of change in accounting policy relating to post-retirement
medical benefits (note 7).................................................. -- (191)
Foreign currency translation................................................ (5) 49
----- -----
Net income in accordance with US GAAP......................................... 1,737 2,904
----- -----
----- -----
</TABLE>
DIVIDENDS
Under UK GAAP, proposed dividends are shown as a deduction from net income
in the year to which they relate even though they are not declared until after
the year end. Under U.S. GAAP such dividends would be shown as a charge to
retained earnings in the year in which they are declared. This difference in
treatment would affect the reporting of shareholders' equity but has no effect
on the above reconciliation of net income from UK GAAP to US GAAP.
US SUBSIDIARIES, ACCOUNTING PERIOD
As explained in note 1, "Change of year end", the financial statements for
the period to 31 March 1994 contain the results of the Company and its European
subsidiaries for the nine months to that date and those of its US subsidiaries
for the year to that date. The results of the US subsidiaries for the three
months from 1 April 1993 to 30 June 1993:
<TABLE>
<CAPTION>
L'000
<S> <C>
Turnover.......................................................................................... 4,809
Profit before taxation............................................................................ 553
Profit after taxation............................................................................. 382
</TABLE>
10. CONSOLIDATED STATEMENTS OF CASH FLOWS: BASIS OF PREPARATION
The Group's Consolidated Cash Flow Statements are prepared in accordance
with UK Financial Reporting Standard No. I (FRS 1), the objective and principles
of which are similar to those set out in SFAS No. 95, "Statement of Cash Flows".
The principal difference between the standards relates to classification. Under
FRS 1, the Group presents its cash flows for (a) operating activities; (b)
returns on investments and servicing of finance; (c) tax paid; (d) investing
activities; and (e) financing. SFAS No. 95 requires only three categories of
cash flow activity being (a) operating; (b) investing; and (c) financing.
F-36
<PAGE>
ASSOCIATED BRITISH INDUSTRIES LIMITED
NOTES (CONTINUED)
10. CONSOLIDATED STATEMENTS OF CASH FLOWS: BASIS OF PREPARATION (CONTINUED)
Cash flows from operations for US GAAP purposes reconciles net income to
cash provided by operating activities while a statement of cash flows under UK
GAAP begins with operating profit. As a result, equity income from interests in
associated undertakings would be reflected as an adjustment of operating cash
flows under US GAAP, but not under UK GAAP.
Cash flows from returns on investments and servicing of finance and taxation
under FRS 1 would, with the exception of dividends paid, be included as
operating activities under SFAS No. 95; such dividends paid, whether of the
Company or of subsidiaries, would be included as a financing activity under SFAS
No. 95. Under FRS 1, cash and cash equivalents comprise cash, investments and
short-term deposits which were within 3 months of maturity when acquired and
short-term borrowings repayable within 3 months from the date of their advance.
Under SFAS No. 95 short-term borrowings repayable within 3 months of their
advance would not be included within cash and cash equivalents but movements on
those borrowings would be included in financing activities.
11. SUBSEQUENT EVENT
On 19 June 1995, a recommended offer for the whole of the issued share
capital of the Company was made by Chemical Bank on behalf of ABI Acquisition 2
plc, a wholly owned subsidiary of Astor Holdings, Inc. The offer became wholly
unconditional on 28 June 1995. On 31 August 1995, Associated British Industries
plc re-registered as a private company.
F-37
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Adco Technologies Inc.
We have audited the accompanying consolidated balance sheets of Adco
Technologies Inc. and subsidiary as of December 31, 1994 and 1995, and the
related consolidated statements of income, redeemable preferred stock of
subsidiary and stockholders' equity, and cash flows for the years ended December
31, 1994 and 1995 and the period May 14, 1993 (date of acquisition of Adco
Products, Inc.) to December 31, 1993. 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 Adco
Technologies Inc. and subsidiary at December 31, 1994 and 1995, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1994 and 1995 and the period May 14, 1993 (date of
acquisition of Adco Products, Inc.) to December 31, 1993 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Detroit, Michigan
February 1, 1996
F-38
<PAGE>
ADCO TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (NOTE 1)............................................... $ 336,981 $ 3,797,650
Trade accounts receivable, less allowances ($150,000 and $140,000 at December 31,
1994 and 1995, respectively).................................................... 4,590,553 4,672,127
Inventories (NOTE 1):
Raw materials and packaging.................................................... 1,635,810 2,332,430
Finished goods................................................................. 2,596,855 2,735,782
------------- -------------
4,232,665 5,068,212
Refundable income taxes.......................................................... 128,314 176,969
Deferred income taxes (NOTE 4)................................................... 170,233 319,374
Other current assets............................................................. 89,025 139,358
------------- -------------
Total current assets......................................................... 9,547,771 14,173,690
Property, plant and equipment (NOTE 1):
Land and improvements............................................................ 307,456 351,512
Buildings........................................................................ 4,048,015 4,164,238
Machinery and equipment.......................................................... 5,059,746 5,547,493
Construction in process.......................................................... 137,664 965,584
------------- -------------
9,552,881 11,028,827
Less: Allowances for depreciation and amortization............................... (1,245,299) (2,132,976)
------------- -------------
8,307,582 8,895,851
Intangibles (NOTE 1)............................................................... 8,316,843 8,034,994
Other assets....................................................................... 11,850 13,350
------------- -------------
Total assets................................................................. $ 26,184,046 $ 31,117,885
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-39
<PAGE>
ADCO TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable........................................................... $ 1,501,438 $ 940,530
Compensation and amounts withheld................................................ 746,538 1,014,730
State taxes payable.............................................................. 62,622 130,982
Other accrued expenses........................................................... 1,077,470 977,878
Current portion of long-term notes payable (NOTE 2).............................. 1,106,462 --
------------- -------------
Total current liabilities.................................................... 4,494,530 3,064,120
Long-term notes payable (NOTE 2)................................................... 4,901,614 --
Deferred income taxes (NOTE 4)..................................................... 858,215 1,006,570
Redeemable preferred stock of subsidiary (NOTE 5).................................. 3,710,000 3,850,000
Stockholders' equity (NOTES 1 AND 6):
Preferred stock, par value $.01 per share -- Authorized 100,000; no shares issued
and outstanding................................................................. -- --
Common stock, par value $.01 per share -- Authorized 9,000,000; issued and
outstanding 4,000,000 and 5,150,000 shares at December 31, 1994 and 1995,
respectively.................................................................... 40,000 51,500
Additional paid-in capital -- common............................................. 8,275,000 15,140,750
Less receivable from management stockholders..................................... (210,000) (150,000)
Retained earnings................................................................ 4,114,687 8,154,945
------------- -------------
Total stockholders' equity................................................... 12,219,687 23,197,195
------------- -------------
Total liabilities and stockholders' equity................................. $ 26,184,046 $ 31,117,885
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-40
<PAGE>
ADCO TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PERIOD MAY 14, 1993
(DATE OF ACQUISITION
OF
ADCO PRODUCTS, INC.)
TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1993 1994 1995
-------------------- ------------- -------------
<S> <C> <C> <C>
Net sales.................................................... $ 20,325,449 $ 38,749,168 $ 47,411,421
Cost of products sold........................................ 14,447,812 27,056,887 33,317,969
-------------------- ------------- -------------
Gross profit................................................. 5,877,637 11,692,281 14,093,452
Operating expenses:
Selling, general and administrative (NOTE 7)............... 2,749,201 4,845,815 5,720,330
Research and development................................... 631,431 1,265,046 1,350,589
-------------------- ------------- -------------
Total operating expenses..................................... 3,380,632 6,110,861 7,070,919
-------------------- ------------- -------------
Operating income............................................. 2,497,005 5,581,420 7,022,533
Interest expense............................................. 404,790 596,297 105,020
Dividends on preferred stock of subsidiary................... 140,000 280,000 280,000
Other expense (income) -- net................................ (123,632) 115,683 (104,495)
-------------------- ------------- -------------
Income before taxes.......................................... 2,075,847 4,589,440 6,742,008
Income taxes (NOTE 4)........................................ 810,600 1,740,000 2,470,000
-------------------- ------------- -------------
Net income................................................... $ 1,265,247 $ 2,849,440 $ 4,272,008
-------------------- ------------- -------------
-------------------- ------------- -------------
Net income per common and common equivalent share............ $ .33 $ .72 $ .84
-------------------- ------------- -------------
-------------------- ------------- -------------
Weighted average shares outstanding (NOTE 1)................. 3,819,603 3,937,825 5,065,847
</TABLE>
See accompanying notes.
F-41
<PAGE>
ADCO TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK OF
SUBSIDIARY AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
REDEEMABLE PREFERED STOCK OF SUBSIDIARY STOCKHOLDERS' EQUITY
-------------------------------------------------- -----------------------
ADDITIONAL ADDITIONAL
SERIES A SERIES B PAID-IN TOTAL PAID-IN
PREFERRED PREFERRED CAPITAL PREFERRED COMMON CAPITAL
STOCK STOCK PREFERRED STOCK STOCK COMMON
------------- ----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at May 14, 1993 (date of
acquisition)................................. $ 35 -- $3,499,965 $3,500,000 $ 38,196 $7,901,804
Net income for the period ended December 31,
1993......................................... -- -- -- -- -- --
Collection of receivable...................... -- -- -- -- -- --
Dividends on preferred stock.................. -- $ 70,000 -- 70,000 -- --
--- ----------- ----------- --------- ----------- ----------
Balance at December 31, 1993.................. 35 70,000 3,499,965 3,570,000 38,196 7,901,804
Net income for the year ended December 31,
1994......................................... -- -- -- -- -- --
Issuance of stock............................. -- -- -- -- 1,804 373,196
Dividends on preferred stock.................. -- 140,000 -- 140,000 -- --
--- ----------- ----------- --------- ----------- ----------
Balance at December 31, 1994.................. 35 210,000 3,499,965 3,710,000 40,000 8,275,000
Net income for the year ended December 31,
1995......................................... -- -- -- -- -- --
Collection of receivable...................... -- -- -- -- -- --
Issuance of stock............................. 11,500 6,865,750
Dividends on common stock at $0.045 per
share........................................ -- -- -- -- -- --
Dividends on preferred stock.................. -- 140,000 -- 140,000 -- --
--- ----------- ----------- --------- ----------- ----------
Balance at December 31, 1995.................. $ 35 $ 350,000 $3,499,965 $3,850,000 $ 51,500 $15,140,750
--- ----------- ----------- --------- ----------- ----------
--- ----------- ----------- --------- ----------- ----------
<CAPTION>
RECEIVABLE
FROM TOTAL
MANAGEMENT RETAINED STOCKHOLDERS'
STOCKHOLDERS EARNINGS EQUITY
------------ --------- ------------
<S> <C> <C> <C>
Balance at May 14, 1993 (date of
acquisition)................................. $ (249,000) $7,691,000
Net income for the period ended December 31,
1993......................................... -- $1,265,247 1,265,247
Collection of receivable...................... 39,000 39,000
Dividends on preferred stock.................. --
------------ --------- ------------
Balance at December 31, 1993.................. (210,000) 1,265,247 8,995,247
Net income for the year ended December 31,
1994......................................... -- 2,849,440 2,849,440
Issuance of stock............................. -- -- 375,000
Dividends on preferred stock.................. -- -- --
------------ --------- ------------
Balance at December 31, 1994.................. (210,000) 4,114,687 12,219,687
Net income for the year ended December 31,
1995......................................... -- 4,272,008 4,272,008
Collection of receivable...................... 60,000 -- 60,000
Issuance of stock............................. 6,877,250
Dividends on common stock at $0.045 per
share........................................ -- (231,750) (231,750)
Dividends on preferred stock.................. -- -- --
------------ --------- ------------
Balance at December 31, 1995.................. $ (150,000) $8,154,945 $23,197,195
------------ --------- ------------
------------ --------- ------------
</TABLE>
See accompanying notes.
F-42
<PAGE>
ADCO TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD
PERIOD
MAY 14, 1993
MAY 14, 1993
(DATE OF
(DATE OF
ACQUISITION OF
ACQUISITION OF
ADCO PRODUCTS,
ADCO PRODUCTS,
INC.) TO
INC.) TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1993 1994 1995
--------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................................................ $ 1,265,247 $ 2,849,440 $ 4,272,008
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 552,472 1,143,350 1,169,526
Provision for dividends on preferred stock of subsidiary........ 140,000 280,000 280,000
Deferred income taxes........................................... 34,200 202,480 (786)
Changes in current assets and liabilities:
Trade accounts receivable..................................... 556,764 (783,029) (81,574)
Inventories................................................... 1,705,964 (1,204,017) (835,547)
Other current assets.......................................... (109,120) 30,258 (50,333)
Other assets.................................................. (1,567) 3,600 (1,500)
Trade accounts payable........................................ (723,417) 585,605 (560,908)
Taxes payable................................................. 36,663 (173,677) 19,705
Accrued salaries, wages and other expenses.................... 193,936 265,246 168,600
Due to Nalco Chemical Company................................. (46,819) -- --
--------------- ------------- -------------
Net cash provided by operating activities......................... 3,604,323 3,199,256 4,379,191
INVESTING ACTIVITIES
Purchases of property, plant and equipment........................ (2,417,081) (1,131,458) (1,475,946)
Purchase of patents............................................... (472,500) -- --
Other............................................................. (39,170) -- --
--------------- ------------- -------------
Net cash used in investing activities............................. (2,928,751) (1,131,458) (1,475,946)
FINANCING ACTIVITIES
Proceeds from notes payable....................................... 1,500,000 -- --
Payments of debt.................................................. (1,958,804) (2,463,120) (6,008,076)
Issuance of capital stock......................................... 39,000 375,000 6,877,250
Decrease in receivable from management stockholders............... -- -- 60,000
Cash dividends paid on preferred stock of subsidiary.............. (70,000) (140,000) (140,000)
Cash dividends paid on common stock............................... (231,750)
--------------- ------------- -------------
Net cash provided by (used in) financing activities............... (489,804) (2,228,120) 557,424
--------------- ------------- -------------
Increase (decrease) in cash and cash equivalents.................. 185,768 (160,322) 3,460,669
Cash and cash equivalents at beginning of period.................. 311,535 497,303 336,981
--------------- ------------- -------------
Cash and cash equivalents at end of period........................ $ 497,303 $ 336,981 $ 3,797,650
--------------- ------------- -------------
--------------- ------------- -------------
</TABLE>
See accompanying notes.
F-43
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
Adco Technologies Inc. ("ADCO") was incorporated May 7, 1993. Adco Products,
Inc. was a wholly owned subsidiary of Nalco Chemical Company ("Nalco") through
May 13, 1993. Effective May 14, 1993, Nalco sold all of the outstanding common
stock of Adco Products, Inc. to ADCO for $16,000,000 in cash and $3,500,000 in
preferred stock of Adco Products, Inc. (the "Acquisition"). Concurrently, Adco
Products, Inc. borrowed $8,930,000 under a bank term note and revolving line of
credit to fund the purchase. The purchase price was allocated to assets and
liabilities based upon their respective fair market values. There was no
activity of ADCO for the period from May 7, 1993 to May 13, 1993. Following is
the summarized balance sheet at date of acquisition:
<TABLE>
<S> <C>
Assets
Accounts receivable.................................................. $4,364,000
Inventories.......................................................... 4,735,000
Equipment and other assets........................................... 6,330,000
Intangibles.......................................................... 8,132,000
----------
$23,561,000
----------
----------
Liabilities
Accounts payable and other liabilities............................... $3,440,000
Acquisition debt..................................................... 8,930,000
Redeemable preferred stock of subsidiary............................. 3,500,000
Stockholders' equity................................................. 7,691,000
----------
$23,561,000
----------
----------
</TABLE>
In February 1995 ADCO registered 2,300,000 shares of common stock on Form
S-1. ADCO sold 1,150,000 shares in an initial public offering, with an
additional 1,150,000 shares sold by existing shareholders, the net proceeds to
ADCO of approximately $7,000,000 were used to payoff all outstanding long-term
debt. If this transaction had occurred as of May 14, 1993, the net earnings per
share for the year ended December 31, 1994 and the period May 14, 1993 to
December 31, 1993, would have been $.63 and $.30 per share, respectively.
ADCO produces adhesives and sealants primarily for the roofing, automotive
original equipment manufacturing, windshield replacement, window manufacturing,
and concrete pipe and vault markets and is considered to operate in one business
segment.
ADCO had sales to two customers during the year ended December 31, 1995 that
exceeded 10% of total net sales. Net sales to the first customer, with which
ADCO has a long-standing relationship, amounted to 22%, 20%, and 14% for the
years ended December 31, 1995 and 1994, and the period May 14, 1993 to December
31, 1993, respectively. The second customer had net sales at 11% and 9% for the
years ended December 31, 1995 and 1994, respectively. ADCO generally does not
require collateral from its customers. Credit losses, which have been minimal,
have been within management's expectations.
REVENUE RECOGNITION
Revenue is recognized when products are shipped.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of ADCO and its
wholly-owned subsidiary, Adco Products, Inc. Significant intercompany accounts
have been eliminated in consolidation.
F-44
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NET INCOME PER SHARE
Net Income per common and common equivalent share is based upon the weighted
average of common and common equivalent shares outstanding during the year.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of highly liquid money market
funds and government securities invested with quality financial institutions and
have an original maturity of three months or less. These investments are carried
at cost, which approximates fair value, due to the short period of time to
maturity.
INVENTORY
Inventories are stated at the lower of cost or market. Cost is determined
using the last in, first out (LIFO) method.
Current costs, based on the first-in, first out (FIFO) method would have
resulted in reported amounts approximately the same at December 31, 1995 and
1994.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the assets. The estimated useful lives of buildings are 40 years and the useful
lives of machinery and equipment are generally 10 years.
INTANGIBLE ASSETS
Intangible assets are amortized by the straight-line method over periods
ranging from 5 to 40 years and consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1994 1995
------------ ------------
<S> <C> <C>
Goodwill.......................................................... $ 8,052,582 $ 8,052,582
Deferred organization costs....................................... 242,284 242,284
Deferred patent costs............................................. 472,500 472,500
------------ ------------
8,767,366 8,767,366
Less accumulated amortization..................................... (450,523) (732,372)
------------ ------------
$ 8,316,843 $ 8,034,994
------------ ------------
------------ ------------
</TABLE>
Amortization expense was $281,852, $287,982 and $162,541 for the years ended
December 31, 1995 and 1994 and the period May 14, 1993 to December 31, 1993,
respectively.
Goodwill generally is amortized on a straight-line basis over 40 years,
organizational costs over 5 years and patent costs over 15 years. The carrying
value of goodwill will be reviewed if the facts and circumstances suggest that
it may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, ADCO's carrying value of the
goodwill will be reduced by the estimated shortfall of cash flows.
F-45
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK OPTIONS
ADCO has elected to follow Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employers" (APB 25) and related interpretations
in accounting for its employee stock options. Under APB 25, compensation expense
is recognized when the exercise price of employee stock options is less than the
market price of the underlying stock on the date of the grant. See Note 6,
"Stockholders' Equity" for information regarding ADCO's stock options plans.
2. NOTES PAYABLE
A summary of the ADCO notes payable as of December 31, 1994 is as follows:
<TABLE>
<S> <C>
7.20% note to First Fidelity, NA, payable in varying monthly amounts of $33,331
to $51,997 excluding interest through April, 2000, with remaining balance plus
accrued interest to be paid in full May 2000................................... $3,320,042
Prime plus 1/2% (9.00% and 7.25% at December 31, 1994 and 1993, respectively)
note to First Fidelity, NA, payable in varying monthly amounts of $26,169 to
$45,503 excluding interest through April 2000 with remaining balance plus
accrued interest to be paid in full May 2000................................... 1,422,817
7.22% note to First Fidelity, NA, payable in varying monthly amounts of $13,044
to $19,672 excluding interest through April 2000 with remaining balance plus
accrued interest to be paid in full May 2000................................... 1,265,217
----------
Total notes payable............................................................. 6,008,076
Less current portion............................................................ (1,106,462)
----------
$4,901,614
----------
----------
</TABLE>
ADCO repaid all of the notes payable outstanding at December 31, 1994 with
proceeds from the issuance of common stock during 1995.
At December 31, 1995, ADCO had an annually reveiwed unused $3,000,000
discretionary line of credit at First Union National Bank for general corporate
purposes. Advances under this line of credit were unsecured and priced at either
one month LIBOR plus 1.50% or prime rate minus 0.75%.
For the years ended December 31, 1995 and 1994, and the period May 14, 1993
to December 31, 1993, ADCO made interest payments of approximately $105,020,
$601,000 and $405,000, respectively.
3. EMPLOYEE BENEFIT PLANS
ADCO has a noncontributory, defined-benefit pension plan covering union
employees. Benefits are based on length of service and a negotiated benefit
rate.
ADCO's policy is to fund the plan between the minimum and maximum amounts
deductible for tax purposes under the Internal Revenue Code. ADCO made
contributions of $34,596 to the plan for the year ended December 31, 1995 and no
contributions for the other periods presented.
Plan assets are invested in mutual funds and money market accounts.
F-46
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the funded status and amounts recognized in
the balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations
Vested...................................................................... $ 302,249 $ 423,600
Non-vested.................................................................. 35,863 9,755
----------- -----------
Accumulated benefit obligation................................................ $ 338,112 $ 433,355
----------- -----------
----------- -----------
Projected benefit obligation.................................................. $ (338,112) $ (433,355)
Plan assets at fair value..................................................... 313,625 313,581
----------- -----------
Projected benefit obligation in excess of plan assets......................... (24,487) (119,774)
Unrecognized net asset at transition.......................................... (8,552) (7,775)
Unrecognized prior service cost............................................... 28,657 172,837
Additional minimum liability.................................................. (158,596) --
Unrecognized net loss......................................................... 138,491 57,248
----------- -----------
Net pension asset (liability)................................................. $ (24,487) $ 102,536
----------- -----------
----------- -----------
</TABLE>
Net pension expense was comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Service cost........................................................ $ 13,517 $ 29,358 $ 34,145
Interest cost on projected benefit obligation....................... 13,669 27,517 36,640
Actual return on plan assets........................................ (14,170) (31,711) (28,016)
Net amortizations and deferrals..................................... 2,276 6,409 2,004
---------- ---------- ----------
Net pension expense................................................. $ 15,292 $ 31,573 $ 44,773
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The following assumptions were used in calculating the plan's funded status
and the net pension expense:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Weighted average discount rates................................................. 8.50% 7.50% 8.50%
Rates of return on plan assets.................................................. 10.00 10.00 8.50
</TABLE>
During January 1993, Adco Products, Inc. terminated the pension plan
covering its salaried employees. This termination, which was approved and
completed in 1994, resulted in a gain to ADCO of approximately $100,000 in 1994.
ADCO also sponsors a retirement savings plan which includes a
defined-contribution 401(k) plan and a discretionary profit sharing plan, which
covers substantially all nonunion employees. ADCO's contribution to the 401(k)
plan is based on each participant's pretax contribution. For the years ended
December 31, 1995 and 1994 and the period May 14, 1993 to December 31, 1993,
ADCO contributed approximately $39,000, $35,900 and $19,800 to the 401(k) plan,
respectively. The profit sharing amount is determined annually by the Board of
Directors and was $250,000, $165,000 and $62,000, for the years ended December
31, 1995 and 1994 and the period May 14, 1993 to December 31, 1993,
respectively.
4. INCOME TAXES
ADCO accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), ACCOUNTING FOR INCOME TAXES. Deferred
income taxes reflect the net tax effects of
F-47
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of ADCO's deferred tax assets (liabilities) are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Warranty and other expenses................................................... $ 160,400 $ 176,865
Tax over book depreciation.................................................... (854,900) (945,266)
Reserve for doubtful accounts................................................. 51,100 47,712
Employee benefits............................................................. (25,900) 51,533
Other......................................................................... (18,682) (18,040)
----------- -----------
$ (687,982) $ (687,196)
----------- -----------
----------- -----------
</TABLE>
Components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------
1993 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
Current income taxes............................................ $ 776,400 $ 1,537,520 $ 2,470,786
Deferred income taxes (credit).................................. 34,200 202,480 (786)
---------- ------------ ------------
$ 810,600 $ 1,740,000 $ 2,470,000
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
A reconciliation of the total federal income tax provision and the amount
computed by applying the statutory federal income tax rate to earnings before
income taxes for the periods ended are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------
1993 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
Taxes at U. S. statutory rates.................................. $ 705,800 $ 1,560,400 $ 2,291,400
Impact of nondeductible intangible amortization................. 57,200 68,400 68,400
Impact of nondeductible preferred stock dividend................ 47,600 95,200 95,200
Other........................................................... -- 16,000 15,000
---------- ------------ ------------
$ 810,600 $ 1,740,000 $ 2,470,000
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
The difference between ADCO's effective income tax rate and the federal
statutory rate is primarily attributable to the effect of the amortization of
intangible assets (see NOTE 1) and the preferred stock dividend of subsidiary.
Income taxes paid by ADCO approximated $2,520,000, $1,639,000 and $803,000
for the years ended December 31, 1995 and 1994 and the period May 14, 1993 to
December 31, 1993, respectively.
5. REDEEMABLE PREFERRED STOCK OF SUBSIDIARY
The articles of incorporation of Adco Products, Inc. authorize 4,856 shares
of Series A Cumulative Redeemable Preferred Stock, non-voting, par value $.01
per share ("Series A") and 1,356 shares of Series B
F-48
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REDEEMABLE PREFERRED STOCK OF SUBSIDIARY (CONTINUED)
Redeemable Preferred Stock, non-voting, par value $.01 per share ("Series B").
Nalco owned 3,500 shares of Series A and 350 shares of Series B at December 31,
1995, and 3,500 shares of Series A and 210 shares of Series B at December 31,
1994. The designated terms and conditions of the preferred stock are as follows:
<TABLE>
<CAPTION>
SERIES A SERIES B
--------- -----------
<S> <C> <C>
Shares outstanding at December 31, 1995............................................ 3,500 350
Dividend rate per annum............................................................ $ 80 *
Redemption price................................................................... $ 1,000 $ 1,000
Liquidation preference............................................................. $ 1,000 $ 1,000
</TABLE>
*Dividends are not payable on Series B
The mandatory obligation to redeem both Series A and Series B begins
November 15, 2000 and ends May 15, 2003, with a specified fraction of the
outstanding shares redeemed each November and May.
A summary of the Series A and Series B Preferred stock and additional paid
in capital for Adco Products, Inc. is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1994 1995
------------ ------------
<S> <C> <C>
Series A Preferred stock.................................................... $ 35 $ 35
Series B Preferred stock.................................................... 210,000 350,000
Additional paid-in capital -- preferred..................................... 3,499,965 3,499,965
</TABLE>
The Series A dividend is paid one-half in cash and one-half in shares of
Series B, bi-annually on May 15 and November 15. In each November and May of
1995 and 1994 and November 1993, 70 shares of Series B were issued as part of
the dividend to the Series A holders. These Series B shares were recorded at
their liquidation value of $1,000 per share.
6. STOCKHOLDERS' EQUITY
The articles of incorporation of ADCO authorize 100,000 shares of preferred
stock with a par value of $.01 per share. No preferred shares are outstanding as
of December 31, 1995 and 1994.
Effective May 14, 1993, ADCO adopted the Adco Technologies Inc. 1993 Stock
Option Plan, pursuant to which ADCO has granted options to certain officers of
ADCO to purchase an aggregate of 144,326 shares of common stock of ADCO with an
exercise price of $2.08. Under the plan these options become exercisable on
October 29, 2008 or at a sooner date if certain performance and cash return
targets are met. At December 31, 1994, 25,414 of the options were exercisable.
An additional 48,112 shares became exercisable in 1995 bringing the total
options exercisable at December 31, 1995 to 73,526. Associated with the shares
issued in 1995 additional compensation expense of $257,500 was recorded. In
February 1995, ADCO amended this option plan. In connection with the plan
amendment the remaining 70,800 shares become exercisable over the next 3 to 5
years. Prior to the amendment in February 1995, ADCO had the option to
repurchase shares purchased upon exercise of the options upon termination of
employment for reasons other than for death, disability, or retirement at a
price calculated based on the book value of ADCO. The amendment removed ADCO's
option to repurchase the shares.
The Adco Technologies Inc. 1994 Non-Employee Director Stock Option Plan
("Director Plan") was adopted by ADCO in December 1994, and provides for the
grant of options covering up to 100,000 shares of common stock to non-employee
directors. Upon completion of the initial public offering and subsequently on
each date he or she is elected or re-elected, each non-employee director shall
receive options to purchase 4,000 shares of common stock. The exercise price per
share shall be the fair market value of the common
F-49
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
stock as determined in accordance with the Director Plan. The options are
exercisable immediately and for ten years from the date of grant. At December
31, 1995, 24,000 options were outstanding as a result of the initial public
offering in February 1995 at a price of $7.00 per share.
The Adco Technologies Inc. 1994 Stock Option Plan was adopted by ADCO in
December 1994, which provides for the grant of options covering up to 150,000
shares of common stock to certain members of management, employees and outside
consultants. This plan provides for the issuance of both incentive stock options
and non-qualified stock options. During 1995 and 1994, 50,000 and 45,000 options
were issued at an exercise price of $7.62 and $7.00 per share, respectively. At
December 31, 1995, a total of 95,000 options were issued and exercisable.
7. RELATED PARTY TRANSACTIONS
ADCO has a consulting agreement with Bradford Ventures Limited ("BVL"), a
related party to certain shareholders, including ADCO's two largest shareholders
and its chairman, whereby, BVL provides financial and advisory services to ADCO
for a 10 year period, commencing May 14, 1993, at an initial annual fee of
$135,000, which increases annually by 7.5%. This consulting fee is included in
selling, general and administrative expenses and approximated $151,500, $140,800
and $78,750 for the years ended December 31, 1995 and 1994 and the period May
14, 1993 to December 31, 1993, respectively.
In May 1993, in connection with the Acquisition, ADCO's executive officers
entered into separate agreements to purchase shares of the common stock of ADCO.
The purchase price for the common stock was paid for by the delivery of cash and
promissory notes of the respective purchasers in favor of ADCO ranging in
amounts from $50,000 to $60,000. Each note is payable in full in May 1998,
bearing interest at a rate of five percent per annum. The purchaser's
obligations under their respective notes are secured by pledges of the common
stock purchased with the notes. In September 1995, one officer repaid the
balance of a promissory note in the amount of $60,000.
8. LITIGATION AND REGULATION
There are judicial and administrative claims pending or contemplated against
ADCO. Management believes that the resolution of these matters should not have a
material effect upon ADCO's financial condition, results of operations and cash
flows.
The U.S. Environmental Protection Agency (EPA) has notified ADCO that it is
a potentially responsible party at, and requested that ADCO provide information
with respect to, two hazardous waste disposal sites. Regarding the first site,
ADCO has responded that it is not responsible for any materials at the site and
that ADCO believes that the previous owners of the property upon which ADCO's
facility is located may be responsible for the materials in question located at
this site. Clean-up of this site is underway, ADCO has not made and has not been
requested to make any expenditures toward the clean up of this site, and has not
been contacted further by the EPA. At the second site, ADCO believes it is the
source of a de minimis quantity of waste materials.
The Michigan Department of Natural Resources has identified the property on
which ADCO's plant is located as a site of environmental contamination.
Management has recorded a reserve of $148,478 at December 31, 1995, included in
other accrued expenses, as an estimate of the amount of loss that is reasonably
possible to be incurred for this site. Management of ADCO does not believe it is
reasonably possible that an adverse outcome on the issue, greater than the
amount recorded, would have a material effect on Astor Corporation's financial
condition, operations or liquidity.
Regarding each of the above mentioned environmental matters, ADCO has
notified Nalco that Nalco may be responsible for indemnifying ADCO for
expenditures made for the above matters. Pursuant to the terms of an agreement
entered into in connection with ADCO's acquisition of Adco Products, Inc., ADCO
is
F-50
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LITIGATION AND REGULATION (CONTINUED)
indemnified to a limited extent against certain environmental liabilities by
Nalco. In certain instances, the indemnification is limited by a $100,000
deductible and a limitation on the amount of indemnification's ranging from
$341,600 to $3.5 million depending upon the type of claim made, with an
aggregate limitation of $3.5 million for all such claims made.
9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
MAR. 31 JUN. 31 SEPT. 30 DEC. 31
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1994
Sales............................................... $ 7,690,773 $ 9,814,333 $ 11,414,955 $ 9,829,107
Gross profit........................................ 2,071,925 3,017,791 3,805,104 2,797,461
Net income.......................................... 180,909 769,707 1,265,288 633,536
Net income per common share......................... .05 .20 .32 .16
1995
Sales............................................... $ 11,387,715 $ 12,709,679 $ 12,833,654 $ 10,480,373
Gross profit........................................ 3,378,311 3,990,230 3,934,356 2,790,555
Net income.......................................... 883,494 1,346,961 1,336,998 704,555
Net income per common share......................... .19 .26 .26 .14
</TABLE>
F-51
<PAGE>
ADCO TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 786,447 $ 5,810,134
Trade accounts receivable, less allowances ($158,000 and $146,000 at September
30, 1995 and September 30, 1996, respectively).................................. 6,940,910 7,294,701
Inventories:
Finished goods................................................................. 3,235,692 2,922,950
Raw materials and packaging.................................................... 3,100,755 3,574,517
------------- -------------
6,336,447 6,497,467
Deferred income taxes............................................................ 331,980 256,597
Other current assets............................................................. 193,552 148,411
------------- -------------
Total current assets......................................................... 14,589,336 20,007,310
Property, plant and equipment, net................................................. 8,688,456 9,410,734
Intangibles........................................................................ 8,105,310 7,824,043
Other assets....................................................................... 13,350 12,850
------------- -------------
Total assets................................................................. $ 31,396,452 $ 37,254,937
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable........................................................... $ 1,737,330 $ 2,918,083
Accrued compensation and other expenses.......................................... 2,196,594 2,554,136
Federal income and state taxes................................................... 144,504 267,706
------------- -------------
Total current liabilities.................................................... 4,078,428 5,739,925
Deferred income taxes.............................................................. 968,133 1,023,876
Redeemable preferred stock of subsidiary........................................... 3,780,000 3,920,000
Stockholders' equity:
Preferred stock, par value $.01 per share --
Authorized 100,000; no shares issued and outstanding........................... -- --
Common stock, par value $.01 per share --
Authorized 9,000,000; issued and outstanding 5,150,000 shares at September 30,
1995 and September 30, 1996................................................... 51,500 51,500
Additional paid-in-capital -- common............................................. 15,140,750 15,140,750
Less receivable from management stockholders..................................... (150,000) (50,000)
Retained earnings................................................................ 7,527,641 11,428,886
------------- -------------
Total stockholders' equity................................................... 22,569,891 26,571,136
------------- -------------
Total liabilities and stockholders' equity................................. $ 31,396,452 $ 37,254,937
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-52
<PAGE>
ADCO TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
-----------------------------
1995 1996
------------- --------------
<S> <C> <C>
Net sales......................................................................... $ 36,931,048 $ 40,337,131
Cost of products sold............................................................. 25,628,152 29,020,031
------------- --------------
Gross profit.................................................................... 11,302,896 11,317,100
Operating expenses:
Selling, general and administrative............................................. 4,367,818 4,708,327
Research and development........................................................ 1,001,538 1,129,371
------------- --------------
Total operating expenses.......................................................... 5,369,356 5,837,698
------------- --------------
Operating income.................................................................. 5,933,540 5,479,402
Interest expense.................................................................. 105,020 --
Dividends on preferred stock of subsidiary........................................ 210,000 251,848
Other expense (income) - net...................................................... (34,934) (429,187)
------------- --------------
Income before taxes............................................................... 5,653,454 5,656,741
Income taxes...................................................................... 2,086,000 2,073,800
------------- --------------
Net income........................................................................ $ 3,567,454 $ 3,582,941
------------- --------------
------------- --------------
Net income per common and common equivalent share................................. $ 0.71 $ 0.68
------------- --------------
------------- --------------
Weighted average shares outstanding............................................... 5,000,031 5,264,350
</TABLE>
See accompanying notes.
F-53
<PAGE>
ADCO TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................................... $ 3,567,454 $ 3,582,941
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization..................................................... 896,433 935,853
Provision for dividends on preferred stock of subsidiary.......................... -- 140,000
Deferred income taxes............................................................. (8,288) 80,083
Changes in current assets and liabilities:
Trade accounts receivable....................................................... (2,350,357) (2,622,574)
Inventories..................................................................... (2,103,782) (1,429,256)
Other current assets............................................................ (104,527) (9,053)
Other assets.................................................................... (1,500) 500
Trade accounts payable.......................................................... 235,892 1,977,553
Taxes payable................................................................... 166,655 313,693
Accrued salaries, wages and other expenses...................................... 372,586 561,528
------------- -------------
Net cash provided by operating activities........................................... 670,566 3,531,268
INVESTING ACTIVITIES
Purchases of property, plant and equipment.......................................... (1,065,774) (1,239,784)
------------- -------------
Net cash used in investing activities............................................... (1,065,774) (1,239,784)
FINANCING ACTIVITIES
Repayment of management loan........................................................ 60,000 100,000
Payments of debt.................................................................... (6,008,076) --
Issuance of preferred stock......................................................... 70,000 --
Issuance of capital stock........................................................... 6,877,250 --
Cash dividends paid on preferred stock of subsidiary................................ -- (70,000)
Cash dividend paid on common stock.................................................. (154,500) (309,000)
------------- -------------
Net cash (used in) provided by financing activities................................. 844,674 (279,000)
------------- -------------
Increase in cash and cash equivalents............................................... 449,466 2,012,484
Cash and cash equivalents at beginning of period.................................... 336,981 3,797,650
------------- -------------
Cash and cash equivalents at end of period.......................................... $ 786,447 $ 5,810,134
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-54
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended September 30, 1996 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1996. For further information, refer
to the consolidated financial statements and footnotes thereto of Adco
Technologies, Inc. ("ADCO") for the year ended December 31, 1995.
ADCO has adopted Statement of Financial Accounting Standards No. 121 ("SFAS
121"), ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS effective January 1,
1996. Based on current circumstances this adoption has no effect on the
Company's income statement.
2. INVENTORIES
Inventories are stated at the lower cost or market. Cost is determined using
the last in, first out (LIFO) method. Current costs, based on the first in,
first out (FIFO) method would have resulted in reported amounts approximately
$109,000 higher at September 30, 1996.
3. INCOME TAXES
ADCO accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), ACCOUNTING FOR INCOME TAXES. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
4. LITIGATION AND REGULATION
There are judicial and administrative claims pending or contemplated against
ADCO. Management believes that the resolution of these matters should not have a
material effect upon ADCO's financial condition, results of operations and cash
flows.
The Environmental Protection Agency ("EPA") has notified ADCO that it is a
Potential Responsible Party ("PRP") at, and requested that ADCO provide
information with respect to, two Superfund sites. Regarding the first site, ADCO
has informed the EPA that it believes that it is not responsible for any
materials at the site and ADCO believes that the previous owners of the property
upon which ADCO's facility is located may be responsible for the materials in
question located at this site. ADCO has not made and has not been requested to
make any expenditures toward the clean-up of this site, and has not been
contacted further by the EPA. At the second site, ADCO has been notified by the
EPA that it is the source of a de minimis quantity of waste materials. ADCO
spent approximately $6,000 in clean-up costs at this site and ADCO does not
expect that its clean-up costs will exceed $10,000.
The Michigan Department of Natural Resources ("MDNR") has identified the
property on which ADCO's plant is located as a site of environmental
contamination. ADCO has recorded a reserve of $148,000 at September 30, 1996, as
an estimate of the amount of loss that is reasonably possible to be incurred for
this site. While management of ADCO does not believe that ADCO's exposure in
these matters will have a material adverse effect on the business and financial
condition of ADCO, there can be no assurance that ADCO will not incur additional
significant liabilities in connection with these matters or that such
liabilities will not have a material adverse effect on ADCO's business and
financial condition.
F-55
<PAGE>
ADCO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LITIGATION AND REGULATION (CONTINUED)
Regarding each of the above-mentioned environmental matters, ADCO has
notified Nalco Chemical Company ("Nalco") that Nalco may be responsible for
indemnifying ADCO for expenditures made for the above matters. Pursuant to the
terms of an agreement entered into in connection with ADCO's acquisition of Adco
Products, Inc., ADCO is indemnified to a limited extent against certain
environmental liabilities by Nalco. In certain instances, the indemnification is
limited by a $100,000 deductible and a limitation on the amount of
indemnification's ranging from $341,600 to $3.5 million depending upon the type
of claim made, with an aggregate limitation of $3.5 million for all such claims
made.
5. MERGER AGREEMENT
On July 12, 1996, ADCO, Astor Corporation, a Delaware corporation (the
"Buyer"), and AAC Acquisition Corporation, a Delaware corporation and wholly
owned subsidiary of the Buyer (the "Acquisition Company"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") providing for the
Acquisition Company to merge with and into ADCO (the "Merger") with the
Acquisition Company continuing as the surviving corporation. In the Merger, each
outstanding share of common stock ("Common Stock") of ADCO will be converted
into the right to receive $10.25 in cash (the "Merger Consideration") and each
option to purchase shares of Common Stock shall be converted into the right to
receive a net amount in cash equal to the Merger Consideration allocable to the
shares of Common Stock then subject to the option (the "Option Shares") less the
aggregate exercise price for the purchase of the Option Shares. The merger
occurred on October 8, 1996.
Simultaneously with the execution and delivery of the Merger Agreement,
Bradford Venture Partners, LP, Overseas Equity Investor Partners, LP, Bradford
Mills, Robert Simon, Barbara Henagan, James McCowan, Phillip Beery, David Fuchs,
Charles Sax and Brian Briddell (each a "Stockholder" and collectively the
"Stockholders"), each of whom is a stockholder of ADCO and certain of whom are
directors and executive officers of ADCO, holding an aggregate of 2,559,308
shares of Common Stock (equal to 49.75% of the outstanding voting Common Stock
as of July 12, 1996) entered into agreements, dated as of July 12, 1996 (the
"Voting Agreements"), with the Buyer, which provide, among other things, that
each of the Stockholders will vote or will cause to be voted, the shares of
Common Stock owned by the Stockholder (i) in favor of the adoption of the Merger
Agreement and the approval of the Merger, (ii) against the approval of any
proposal relating to a competing merger or business combination involving an
acquisition of all or a substantial portion of the capital stock, the assets of
ADCO or the assets or stock of any subsidiary of ADCO by any person or entity
other than the Buyer or Acquisition Company or an affiliate of the Buyer or
Acquisition Company, and (iii) against any transaction which is inconsistent
with the obligation of ADCO to consummate the Merger in accordance with the
Merger Agreement. The Voting Agreements also provide that such Stockholder will
not, except as contemplated by the terms of the Voting Agreements, sell or
otherwise voluntarily dispose of any of the shares of Common Stock owned by such
Stockholder or take any voluntary action which would have the effect of removing
such Stockholder's power to vote his shares or which would be inconsistent with
the Voting Agreements.
F-56
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Adco Products, Inc.
We have audited the accompanying statements of income, stockholders' equity,
and cash flows of Adco Products, Inc. for the period from January 1, 1993 to May
13, 1993 (date of sale). 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Adco
Products, Inc. for the period from January 1, 1993 to May 13, 1993 (date of
sale), in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Detroit, Michigan
March 18, 1994
F-57
<PAGE>
ADCO PRODUCTS, INC.
STATEMENT OF INCOME
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1993
TO MAY 13, 1993
(DATE OF SALE)
---------------
<S> <C>
Net sales........................................................................................ $ 11,020,070
Cost of products sold............................................................................ 8,063,587
---------------
Gross profit..................................................................................... 2,956,483
Operating expenses:
Selling, general and administrative.............................................................. 1,698,123
Research and development......................................................................... 387,485
---------------
Total operating expenses......................................................................... 2,085,608
---------------
Operating income................................................................................. 870,875
Other expense -- net............................................................................. 36,935
---------------
Income before taxes.............................................................................. 833,940
Income taxes (NOTE 3)............................................................................ 201,470
---------------
Net income....................................................................................... $ 632,470
---------------
---------------
Net income per share............................................................................. $ 5.44
---------------
---------------
Weighed average shares outstanding............................................................... 116,189
</TABLE>
See accompanying notes.
F-58
<PAGE>
ADCO PRODUCTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
---------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1993............................... $ 116,189 $ 21,696,952 $ 1,801,269 $ 23,614,410
Net income for period from January 1, 1993 to May 13,
1993 (date of sale)..................................... -- -- 632,470 632,470
Cash dividends -- $6.89 per share........................ -- -- (800,000) (800,000)
---------- ------------- ------------ -------------
Balance at May 13, 1993.................................. $ 116,189 $ 21,696,952 $ 1,633,739 $ 23,446,880
---------- ------------- ------------ -------------
---------- ------------- ------------ -------------
</TABLE>
See accompanying notes.
F-59
<PAGE>
ADCO PRODUCTS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1993
TO MAY 13, 1993
(DATE OF SALE)
---------------
<S> <C>
OPERATING ACTIVITIES
Net income....................................................................................... $ 632,470
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization................................................................ 401,985
Loss on sale of property, plant and equipment................................................ 92,696
Deferred income taxes........................................................................ (116,546)
Changes in current assets and liabilities:
Advances to Nalco Chemical Company......................................................... 77,458
Trade accounts receivable.................................................................. (1,489,288)
Inventories................................................................................ (646,606)
Other current assets....................................................................... 46,914
Trade accounts payable..................................................................... (75,679)
Income taxes payable....................................................................... (315,688)
Accrued salaries, wages, and other expenses................................................ (277,732)
Due to Nalco Chemical Company.............................................................. 1,733
---------------
Net cash used in operating activities............................................................ (1,668,283)
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net.................................................. (323,393)
---------------
Net cash used in investing activities............................................................ (323,393)
FINANCING ACTIVITIES
Cash dividends paid.............................................................................. (800,000)
---------------
Net cash used in financing activities............................................................ (800,000)
---------------
Decrease in cash................................................................................. (2,791,676)
Cash at beginning of period...................................................................... 3,081,541
---------------
Cash at end of period............................................................................ $ 289,865
---------------
---------------
</TABLE>
See accompanying notes.
F-60
<PAGE>
ADCO PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM JANUARY 1, 1993 TO MAY 13, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
Adco Products, Inc. ("API") was a wholly owned subsidiary of Nalco Chemical
Company ("Nalco") through May 13, 1993. Effective May 14, 1993 Nalco sold all of
the outstanding common stock of API to Adco Technologies Inc. for $16,000,000 in
cash and $3,500,000 of preferred stock. Concurrently, API borrowed $8,930,000
under a bank term note and revolving line of credit to fund the purchase. The
purchase price was allocated to assets and liabilities based upon their
respective fair market values. These financial statements reflect activity of
API through date of sale and do not reflect the effect of any purchase price
adjustments. Following is the summarized balance sheet at date of acquisition:
<TABLE>
<S> <C>
Assets
Accounts receivable.................................................. $4,364,000
Inventories.......................................................... 4,735,000
Equipment and other assets........................................... 6,330,000
Intangibles.......................................................... 8,132,000
----------
$23,561,000
----------
----------
Liabilities and stockholders' equity
Accounts payable and other liabilities............................... $3,440,000
Acquisition debt..................................................... 8,930,000
Redeemable preferred stock of subsidiary............................. 3,500,000
Stockholders' equity................................................. 7,691,000
----------
$23,561,000
----------
----------
</TABLE>
API produces adhesives and sealants primarily for the roofing, automotive
original equipment manufacturing, windshield replacement, window manufacturing,
and concrete pipe and vault markets and is considered to operate in one business
segment.
Net sales to one customer, with which API has a long-standing relationship
amounted to 10% for the period from January 1, 1993 to May 13, 1993. API
generally does not require collateral from its customers. Credit losses, which
have been minimal, have been within management's expectations.
INVENTORY
Inventories are stated at the lower of cost or market. Cost is determined
using the last in, first out (LIFO) method.
Current costs, based on the first-in, first out (FIFO) method would have
resulted in reported amounts approximately $746,000 higher at May 13, 1993.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the assets.
GOODWILL
Goodwill is amortized by the straight-line method over 40 years.
Amortization expense was $140,500 for the period January 1, 1993 to May 13,
1993.
2. EMPLOYEE BENEFIT PLANS
API has a noncontributory, defined-benefit pension plan covering union
employees. Benefits are based on length of service and a negotiated benefit
rate.
F-61
<PAGE>
ADCO PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM JANUARY 1, 1993 TO MAY 13, 1993
2. EMPLOYEE BENEFIT PLANS (CONTINUED)
API's policy is to fund the plans between the minimum and maximum amounts
deductible for tax purposes under the Internal Revenue Code. API made
contributions to the plans of approximately $78,000 for the period January 1,
1993 to May 13, 1993.
Plan assets are invested in mutual funds and money market accounts.
Net pension expense was comprised of the following:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1993
TO
MAY 13, 1993
-----------------
<S> <C>
Service cost......................................................................... $ 8,110
Interest cost on projected benefit obligation........................................ 8,201
Actual return on plan assets......................................................... (8,061)
Net amortizations and deferrals...................................................... 1,365
-------
Net pension expense.................................................................. $ 9,615
-------
-------
</TABLE>
During January 1993, API terminated the pension plan covering its salaried
employees. This termination is not expected to have a significant impact on
API's financial position or results of operations.
API also sponsors a retirement savings plan which includes a
defined-contribution 401(k) plan and, beginning January 1, 1993, a discretionary
profit sharing plan which cover substantially all nonunion employees. API's
contribution to the 401(k) plan is based on each participant's pretax
contribution. During the 1993 period, API contributed $10,600, to the plan. The
profit sharing amount is determined annually by the Board of Directors and
approximated $38,000 for the period January 1, 1993 to May 13, 1993.
3. INCOME TAXES
Effective January 1, 1993, API changed its method of accounting for income
taxes from the deferred method to the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes".
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
API's deferred tax assets (liabilities) at May 13, 1993 are as follows:
<TABLE>
<S> <C>
Warranty and other expenses.............................................. $ 120,700
Tax over book depreciation............................................... (522,185)
Reserve for doubtful accounts............................................ 20,964
Employee benefits........................................................ 43,737
Other.................................................................... 19,330
---------
$(317,454)
---------
---------
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1993
TO MAY 13, 1993
-----------------
<S> <C>
Federal:
Current............................................................................ $ 427,072
Deferred........................................................................... (116,546)
Correction of prior years over accrual............................................... (109,056)
-----------------
$ 201,470
-----------------
-----------------
</TABLE>
F-62
<PAGE>
ADCO PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM JANUARY 1, 1993 TO MAY 13, 1993
3. INCOME TAXES (CONTINUED)
A reconciliation of the total federal income tax provision and the amount
computed by applying the statutory federal income tax rate to earnings before
income taxes is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1993
TO
MAY 13, 1993
-----------------
<S> <C>
Tax at U. S. statutory rates......................................................... $ 283,500
Impact of nondeductible goodwill amortization........................................ 47,754
Correction of prior years over accrual............................................... (109,056)
Other................................................................................ (20,728)
-----------------
$ 201,470
-----------------
-----------------
</TABLE>
During the 1993 period, API made income tax payments of approximately
$444,000.
4. RELATED PARTY TRANSACTIONS
Advances to Nalco are excess funds deposited with Nalco. These funds bear
interest and are repayable to API upon demand.
The following amounts were accrued or paid to Nalco for the period ended:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1993
TO
MAY 13, 1993
-----------------
<S> <C>
Insurance............................................................................ $ 127,063
Service fee.......................................................................... 52,900
Legal................................................................................ 3,617
Purchase of inventory................................................................ 267
Salary and fringes................................................................... 65,020
--------
$ 248,867
--------
--------
</TABLE>
5. LITIGATION AND REGULATION
There are judicial and administrative claims pending or contemplated against
API, including those of an environmental nature. Management believes that the
resolution of these matters should not have a material effect upon API's
financial condition, results of operations or cash flows.
The U.S. Environmental Protection Agency has notified API that it is a
potentially responsible party at, and requested that API provided information
with respect to, two hazardous waste disposal sites. API believes that the
previous owners of the property upon which API's facility is located may be
responsible for the materials in question located at one of the sites. At the
second site, API believes it is the source of a de minimis quantity of waste
materials. The Michigan Department of Natural Resources has identified the
property on which API's plant is located as a site of environmental
contamination. An estimate of the amount of loss that is reasonably possible to
be incurred for these sites cannot be determined at this time. While management
of API does not believe that API's exposure in these matters will have a
material adverse effect on the business and financial condition of API, there
can be no assurance that API will not incur significant liabilities in
connection with these matters or that such liabilities will not have a material
adverse effect on API's business and financial condition.
F-63
<PAGE>
- ----------------------------------------------
----------------------------------------------
- ----------------------------------------------
----------------------------------------------
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE
AGENT AS FOLLOWS:
BY HAND, REGISTERED OR CERTIFIED MAIL
OR OVERNIGHT CARRIER:
STATE STREET BANK AND TRUST COMPANY
61 BROADWAY CONCOURSE LEVEL
NEW YORK, NEW YORK 10006
BY FACSIMILE:
(617) 664-5365
ATTENTION: CORPORATE TRUST DEPARTMENT
CONFIRM BY TELEPHONE: (617) 664-5344
(ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSMILIE SHOULD BE SENT PROMPTLY
BY HAND, OVERNIGHT COURIER, OR REGISTERED OR CERTIFIED MAIL)
No person dealer, salesperson or other person is authorized in connection
with any offer made hereby to give any information or to make any
representations not contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the securities offered
hereby nor does it constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby to any person in any jurisdiction in
which it is unlawful to make such an offer or solicitation to such person.
Neither the delivery of this Prospectus nor any sale made hereunder shall under
any circumstances create any implication that the information contained herein
is correct as of any time subsequent to the date hereof.
Until , 1997 (90 days from the date of this prospectus), all
dealers effecting transactions in the New Notes, whether or not participating in
this Exchange Offer, may be required to deliver a Prospectus.
[LOGO]
ASTOR CORPORATION
OFFER FOR ALL OUTSTANDING
10 1/2% SENIOR
SUBORDINATED NOTES
DUE 2006
IN EXCHANGE FOR
10 1/2% SERIES B SENIOR
SUBORDINATED NOTES DUE 2006
-----------------
PROSPECTUS
-----------------
DECEMBER , 1996
- ----------------------------------------------
----------------------------------------------
- ----------------------------------------------
----------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law (the "DGCL") makes
provision for the indemnification of officers and directors in terms
sufficiently broad to indemnify officers and directors of the Company under
certain circumstances from liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. The Company's Charter and
Bylaws provide, in effect, that, to the fullest extent and under the
circumstances permitted by Section 145 of the DGCL, the Company will 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, by reason of the fact that he is a
director or officer of the Company or is or was serving at the request of the
Company as a director or officer of another corporation or enterprise. The
Company may, in its discretion, similarly indemnify its employees and agents.
The Charter relieves its directors from monetary damages to the Company or its
stockholders for breach of such director's fiduciary duty as directors to the
fullest extent permitted by the DGCL. Under Section 102(b)(7) of the DGCL, a
corporation may relieve its directors from personal liability to such
corporation or its stockholders for monetary damages for any breach of their
fiduciary duty as directors except (i) for a breach of the duty of loyalty, (ii)
for failure to act in good faith, (iii) for intentional misconduct or knowing
violations of law, (iv) for willful or negligent violation of certain provisions
in the DGCL imposing certain requirements with respect to stock repurchases,
redemption and dividends, or (v) for any transactions from which the director
derived an improper personal benefit. Depending upon the character of the
proceeding, under Delaware law, the Company may indemnify against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any action, suit or
proceeding if the person indemnified acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interest of the
Company, and, with respect to any criminal action or proceeding, had no cause to
believe his or her conduct was unlawful. To the extent that a director or
officer of the Company has been successful in the defense of any action, suit or
proceeding referred to above, the Company will be obligated to indemnify him or
her against expenses (including attorneys' fees) actually and reasonably
incurred in connection therewith.
ITEM 21. EXHIBITS.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
*1.1 Purchase Agreement, dated October 2, 1996, among Astor Corporation, Astor
Holdings II, Inc., Donaldson, Lufkin & Jenrette Securities Corporation
and Chase Securities Inc.
*3.1 Certificate of Incorporation of Astor Corporation
*3.2 Bylaws of Astor Corporation
*3.3 Certificate of Incorporation of Astor Holdings II, Inc.
*3.4 Bylaws of Astor Holdings II, Inc.
*4.1 Indenture, dated October 8, 1996, among Astor Corporation, Astor Holdings
II, Inc. and State Street Bank and Trust Company, as trustee
*4.2 Registration Rights Agreement, dated October 9, 1996, among Astor
Corporation, Astor Holdings II, Inc., Dondalson, Lufkin & Jenrette
Securities Corporation and Chase Securities Inc.
*4.3 Form of Global Note certificate (included in Exhibit 4.1)
4.4 Form of Letter of Transmittal regarding the Offer for all Outstanding
Privately Placed 10 1/2 Senior Subordinated Notes Due 2006 in Exchange
for 10 1/2 Series B Senior Subordinated Notes Due 2006
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of the Notes
8.1 Opinion of Gibson, Dunn & Crutcher LLP as to federal income tax
consequences of the Offer
*10.1 Groundwater Processing Remediation Agreement, dated April 22, 1994,
between Petrowax PA, Inc. and Quaker State Corporation
10.2 Asset Purchase and Sale Agreement, dated as of March 30, 1990, between
Petrowax PA, Inc. and Quaker State Corporation, as amended
*10.3 Slack Wax and Petrolatum Sales Agreement, dated April 22, 1994, between
Petrowax PA, Inc. and Quaker State Corporation
*10.4 Amendment, Agreement and Joint Release, dated April 22, 1994, between
Petrowax PA, Inc. and Quaker State Corporation
10.5 Rheochem joint venture documents, dated as of June 8, 1994, between ABI
Corporation and Concorde Industries, Inc.
*10.6 Agreement, dated as of October 1, 1996, between Lube & Wax Ventures,
L.L.C. and Astor Corporation
*10.7 1995 Stock Incentive Plan of Astor Holdings, Inc.
*10.8 Astor Corporation 1997 Management Bonus Program
*10.9 Astor Corporation 1997 Incentive Bonus Program
*10.10 Agreement among Astor Corporation and Oil, Chemical and Atomic Workers
International Union and Local 8-481, dated February 1, 1996
*10.11 Agreement among Astor Corporation and Oil, Chemical and Atomic Workers
International Union and Local 8-607, dated February 1, 1996
*10.12 Agreement among Astor Corporation and Oil, Chemical and Atomic Workers
International Union and Local 8-607, dated February 14, 1996
*10.13 Employment Agreement -- Boyd D. Wainscott
*10.14 Employment Agreement -- C. Richard Spalton
10.15 Employment Agreement -- Jose C. Houssa
10.16 Employment Agreement -- John F. Gottshall
10.17 Employment Agreement -- David E. Hawkins
10.18 Credit Agreement, dated as of October 8, 1996, among Astor Corporation,
certain lenders and The Chase Manhattan Bank, as agent
10.19 Amended and Restated Agreement, dated , 1996, between Lube & Wax
Ventures, L.L.C. and Astor Corporation
12 Computation of ratio of earnings to fixed charges
*21 List of Subsidiaries of Astor Corporation
23.1 Independent Auditors' Consent from Ernst & Young LLP relating to Astor
Holdings II, Inc.
23.2 Independent Auditors' Consent from Ernst & Young LLP relating to Adco
Technologies, Inc.
23.3 Independent Auditor's Consent from KPMG relating to Associated British
Industries Limited
23.4 Consent of Gibson, Dunn & Crutcher LLP (to be included in their opinion
filed as Exhibit 5.1)
*24 Power of Attorney (included on pages II-4 through II-7)
*25 Form T-1, Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of State Street Bank and Trust Company, as trustee
</TABLE>
II-2
<PAGE>
- ------------------------
* Previously Filed.
(b) Financial Statement Schedules.
The following financial statement schedules are filed with Part II of this
Registration Statement:
<TABLE>
<CAPTION>
SCHEDULE NUMBER DESCRIPTION OF SCHEDULE
- --------------------- ---------------------------------------
<C> <S>
II Valuation and Qualifying Accounts
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
applicable instructions or are inapplicable and therefore have been omitted.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") 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 Act 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.
(b) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Raleigh, State of North Carolina, on December , 1996.
ASTOR CORPORATION
By: /s/ BOYD D. WAINSCOTT
-----------------------------------
Boyd D. Wainscott
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ --------------------------------------------- ----------------------
<C> <S> <C>
* Chairman of the Board of Directors and Chief
--------------------------------- Executive Officer (Principal Executive December , 1996
Boyd D. Wainscott Officer)
*
--------------------------------- President and Director December , 1996
C. Richard Spalton
JOHN F. GOTTSHALL
--------------------------------- Chief Financial Officer (Principal Financial December , 1996
John F. Gottshall and Accounting Officer)
*
--------------------------------- Director December , 1996
Alan J. Andreini
*
--------------------------------- Director December , 1996
Richard R. Crowell
*
--------------------------------- Director December , 1996
Mark C. Hardy
*
--------------------------------- Director December , 1996
Kurt B. Larsen
*
--------------------------------- Director December , 1996
Justin Maccarone
*
--------------------------------- Director December , 1996
Gerald L. Parsky
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ --------------------------------------------- ----------------------
<C> <S> <C>
*
--------------------------------- Director December , 1996
Richard K. Roeder
*
--------------------------------- Director December , 1996
W. Montague Yort
*By:
---------------------------------
John F. Gottshall
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Co-registrant has duly caused this Amendment No. 1 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Raleigh, State of North Carolina, on December , 1996.
ASTOR HOLDINGS II, INC.
By: /s/ BOYD D. WAINSCOTT
-----------------------------------
Boyd D. Wainscott
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ --------------------------------------------- ----------------------
<C> <S> <C>
* Chairman of the Board of Directors and Chief
--------------------------------- Executive Officer (Principal Executive December , 1996
Boyd D. Wainscott Officer)
*
--------------------------------- President and Director December , 1996
C. Richard Spalton
JOHN F. GOTTSHALL
--------------------------------- Chief Financial Officer (Principal Financial December , 1996
John F. Gottshall and Accounting Officer)
*
--------------------------------- Director December , 1996
Alan J. Andreini
*
--------------------------------- Director December , 1996
Richard R. Crowell
*
--------------------------------- Director December , 1996
Mark C. Hardy
*
--------------------------------- Director December , 1996
Kurt B. Larsen
*
--------------------------------- Director December , 1996
Justin Maccarone
*
--------------------------------- Director December , 1996
Gerald L. Parsky
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ --------------------------------------------- ----------------------
<C> <S> <C>
*
--------------------------------- Director December , 1996
Richard K. Roeder
*
--------------------------------- Director December , 1996
W. Montague Yort
*By:
---------------------------------
John F. Gottshall
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
SCHEDULE II
VALUATION & QUALIFYING ACCOUNTS
ASTOR HOLDINGS II, INC.
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO
BEGINNING OF CHARGED TO OTHER BALANCE AT
DESCRIPTION PERIOD EXPENSES ACCTS. DEDUCTIONS END OF PERIOD
- ------------------------------------------------- --------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts................ $ 208 $ 245 $ 495(1) $ 222(2) $ 726
----- ----------- ----------- ----------- -----
Total........................................ $ 208 $ 245 $ 495 $ 222 $ 726
----- ----------- ----------- ----------- -----
----- ----------- ----------- ----------- -----
Year ended March 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts................ $ -- $ 208 $ -- $ -- $ 208
----- ----------- ----------- ----------- -----
Total........................................ $ -- $ 208 $ -- $ -- $ 208
----- ----------- ----------- ----------- -----
----- ----------- ----------- ----------- -----
Year ended March 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts................ $ -- $ -- $ -- $ -- $ --
----- ----------- ----------- ----------- -----
Total........................................ $ -- $ -- $ -- $ -- $ --
----- ----------- ----------- ----------- -----
----- ----------- ----------- ----------- -----
</TABLE>
- ------------------------
(1) Relates to allowance recorded as part of accounting for the purchase of
Associated British Industries Limited.
(2) Uncollectible accounts written off, net of recoveries.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE**
- ------ -------------------------------------------------------------------------- -----------
<C> <S> <C>
*1.1 Purchase Agreement, dated October 2, 1996, among Astor Corporation, Astor
Holdings II, Inc., Donaldson, Lufkin & Jenrette Securities Corporation
and Chase Securities Inc................................................
*3.1 Certificate of Incorporation of Astor Corporation.........................
*3.2 Bylaws of Astor Corporation...............................................
*3.3 Certificate of Incorporation of Astor Holdings II, Inc....................
*3.4 Bylaws of Astor Holdings II, Inc..........................................
*4.1 Indenture, dated October 8, 1996, among Astor Corporation, Astor Holdings
II, Inc. and State Street Bank and Trust Company, as trustee............
*4.2 Registration Rights Agreement, dated October 9, 1996, among Astor
Corporation, Astor Holdings II, Inc., Dondalson, Lufkin & Jenrette
Securities Corporation and Chase Securities Inc.........................
*4.3 Form of Global Note certificate (included in Exhibit 4.1).................
4.4 Form of Letter of Transmittal regarding the Offer for all Outstanding
Privately Placed 10 1/2 Senior Subordinated Notes Due 2006 in Exchange
for 10 1/2 Series B Senior Subordinated Notes Due 2006..................
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of the Notes....
8.1 Opinion of Gibson, Dunn & Crutcher LLP as to federal income tax
consequences of the Offer...............................................
*10.1 Groundwater Processing Remediation Agreement, dated April 22, 1994,
between Petrowax PA, Inc. and Quaker State Corporation..................
10.2 Asset Purchase and Sale Agreement, dated as of March 30, 1990, between
Petrowax PA, Inc. and Quaker State Corporation, as amended..............
*10.3 Slack Wax and Petrolatum Sales Agreement, dated April 22, 1994, between
Petrowax PA, Inc. and Quaker State Corporation..........................
*10.4 Amendment, Agreement and Joint Release, dated April 22, 1994, between
Petrowax PA, Inc. and Quaker State Corporation..........................
10.5 Rheochem joint venture documents, dated as of June 8, 1994, between ABI
Corporation and Concorde Industries, Inc................................
*10.6 Agreement, dated as of October 1, 1996, between Lube & Wax Ventures,
L.L.C. and Astor Corporation............................................
*10.7 1995 Stock Incentive Plan of Astor Holdings, Inc..........................
*10.8 Astor Corporation 1997 Management Bonus Program...........................
*10.9 Astor Corporation 1997 Incentive Bonus Program............................
*10.10 Agreement among Astor Corporation and Oil, Chemical and Atomic Workers
International Union and Local 8-481, dated February 1, 1996.............
*10.11 Agreement among Astor Corporation and Oil, Chemical and Atomic Workers
International Union and Local 8-607, dated February 1, 1996.............
*10.12 Agreement among Astor Corporation and Oil, Chemical and Atomic Workers
International Union and Local 8-607, dated February 14, 1996............
*10.13 Employment Agreement -- Boyd D. Wainscott.................................
*10.14 Employment Agreement -- C. Richard Spalton................................
10.15 Employment Agreement -- Jose C. Houssa....................................
10.16 Employment Agreement -- John F. Gottshall.................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE**
- ------ -------------------------------------------------------------------------- -----------
<C> <S> <C>
10.17 Employment Agreement -- David E. Hawkins..................................
10.18 Credit Agreement, dated as of October 8, 1996, among Astor Corporation,
certain lenders and The Chase Manhattan Bank, as agent..................
10.19 Amended and Restated Agreement, dated October 24, 1996, between Lube & Wax
Ventures, L.L.C. and Astor Corporation..................................
12 Computation of ratio of earnings to fixed charges.........................
*21 List of Subsidiaries of Astor Corporation.................................
23.1 Independent Auditors' Consent from Ernst & Young LLP relating to Astor
Holdings II, Inc........................................................
23.2 Independent Auditors' Consent from Ernst & Young LLP relating to Adco
Technologies, Inc.......................................................
23.3 Independent Auditor's Consent from KPMG relating to Associated British
Industries Limited......................................................
23.4 Consent of Gibson, Dunn & Crutcher LLP (to be included in their opinion
filed as Exhibit 5.1)...................................................
*24 Power of Attorney (included on pages II-4 through II-7)...................
*25 Form T-1, Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of State Street Bank and Trust Company, as
trustee.................................................................
</TABLE>
- ------------------------
* Previously Filed.
** This item appears only in manually sequenced documents.
<PAGE>
LETTER OF TRANSMITTAL
Offer for all Outstanding
Privately Placed 10 1/2% Senior Subordinated Notes Due 2006
in Exchange for
10 1/2% Series B Senior Subordinated Notes Due 2006
of
ASTOR CORPORATION
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON______________, 1997, UNLESS EXTENDED
The Exchange Agent is State Street Bank and Trust Company, whose mailing
address, facsimile number and telephone number are as follows:
By Hand Delivery, Mail or Overnight Express
(insured or registered recommended):
State Street Bank and Trust Company
61 Broadway Concourse Level
New York, New York 10006
Attention: Corporate Trust Department
By Facsimile: By Telephone:
(617) 664-5371 (617) 664-5344
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<C> <C> <C>
Name and address of registered Principal
holder as it appears on the Certificate numbers(s) Amount of
privately placed 10 1/2% Senior Subordinated Notes of Old Notes Old Notes
Due 2006 transmitted transmitted
("Old Notes")
___________________________________________________ ____________________________________ ________________
___________________________________________________ ____________________________________ ________________
___________________________________________________ ____________________________________ ________________
___________________________________________________ ____________________________________ ________________
___________________________________________________ ____________________________________ ________________
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes
indicated below, upon the terms and subject to the conditions contained in the
Registration Statement on Form S-4 filed by Astor Corporation, a Delaware
corporation, with the Securities and Exchange Commission (the "Registration
Statement") and the accompanying Prospectus dated ___________, 1996 included
therein (the "Prospectus"), receipt of each of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<C> <C> <C>
Name and address of registered holder as
it appears on the Old Notes Certificate number(s) of Old Notes Principal Amount of
transmitted Old Notes transmitted
________________________________________ ___________________________________ _____________________
________________________________________ ___________________________________ _____________________
________________________________________ ___________________________________ _____________________
________________________________________ ___________________________________ _____________________
________________________________________ ___________________________________ _____________________
</TABLE>
2
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc, or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, which is a member of a
recognized Medallion Signature Program approved by the Securities Transfer
Association, Inc., hereby guarantees to deliver to the Exchange Agent at one
of its addresses set forth above, the Old Notes, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees, and any other documents required by
the Letter of Transmittal within five New York Stock Exchange, Inc. trading
days after the date of execution of this Notice of Guaranteed Delivery.
Name of Firm:
------------------ ------------------------------------
(Authorized Signature)
Address: Title:
------------------------ -----------------------------
- ---------------------------------
(Zip Code) Name:
-------------------------------
(Please type or print)
Area Code and Telephone Number: Date:
-------------------------------
- ---------------------------------
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
OFFER FOR ALL OUTSTANDING
PRIVATELY PLACED 10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
10 1/2% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
OF
ASTOR CORPORATION
Registered holders of privately placed 10 1/2% Senior Subordinated Notes
Due 2006 (the "Old Notes") who wish to tender their Old Notes in exchange for
a like principal amount of 10 1/2% Series B Senior Subordinated Notes Due
2006 (the "Notes") and whose Old Notes are not immediately available or who
cannot deliver their Old Notes and Letter of Transmittal or any other
documents required by the Letter of Transmittal to State Street Bank and
Trust Company (the "Exchange Agent") prior to the Expiration Date, must use
this Notice of Guaranteed Delivery or one substantially equivalent hereto.
This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission or mail to the Exchange Agent. See "THE OFFER -
Procedures for Tendering" in the Prospectus.
THE EXCHANGE AGENT FOR THE OFFER IS
STATE STREET BANK AND TRUST COMPANY
BY HAND DELIVERY, MAIL OR OVERNIGHT EXPRESS
(INSURED OR REGISTERED RECOMMENDED):
STATE STREET BANK AND TRUST COMPANY
61 BROADWAY CONCOURSE LEVEL
NEW YORK, NEW YORK 10006
ATTENTION: CORPORATE TRUST DEPARTMENT
BY FACSIMILE: BY TELEPHONE:
(617) 664-5371 (617) 664-5344
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE
TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED ON THE
LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
1
<PAGE>
Ladies and Gentlemen:
1. The undersigned hereby agrees to exchange the aggregate principal
amount of privately placed 10 1/2% Senior Subordinated Notes Due 2006 (the
"Old Notes") for a like principal amount of 10 1/2% Series B Senior
Subordinated Notes Due 2006 (the "Notes") of the Company, upon the terms and
subject to the conditions contained in the Registration Statement on Form S-4
filed by Astor Corporation, a Delaware corporation, with the Securities and
Exchange Commission (the "Registration Statement") and the accompanying
Prospectus dated ____________, 1996 included therein (the "Prospectus"),
receipt of each of which is hereby acknowledged.
2. The undersigned hereby acknowledges and agrees that the Notes will
bear interest from and including October 8, 1996, the date of issuance of the
Old Notes. Accordingly, the undersigned will forego accrued but unpaid
interest on his, her or its Old Notes that are exchanged for Notes from and
including October 8, 1996 but will receive such interest under the Notes.
3. The undersigned hereby represents and warrants that he, she or it
has full authority to tender the Old Notes described above. The undersigned
will, upon request, execute and deliver any additional documents deemed by
the Company to be necessary or desirable to complete the exchange of the Old
Notes.
4. The undersigned understands that the tender of the Old Notes
pursuant to all of the procedures set forth in the Prospectus will constitute
an agreement between the undersigned and the Company as to the terms and
conditions set forth in the Prospectus.
5. The undersigned hereby represents and warrants that the undersigned
is acquiring the Notes in the ordinary course of the business of the
undersigned and that the undersigned is not engaged in, and does not intend
to engage in, a distribution of the Notes.
6. If the undersigned is a broker-dealer, (i) it hereby represents and
warrants that it acquired the Old Notes for its own account as a result of
market-making activities or other trading activities and (ii) it hereby
acknowledges that it will deliver a prospectus meeting the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), in connection
with any resale of the Notes received hereby. The acknowledgement contained
in the foregoing sentence shall not be deemed an admission that the
undersigned is an "underwriter" within the meaning of the Securities Act.
7. Any obligation of the undersigned hereunder shall be binding upon
the successors, assigns, executors, administrators, trustees in bankruptcy
and legal and personal representatives of the undersigned.
2
<PAGE>
SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 1)
To be completed ONLY IF the Notes are to be issued in the name of
someone other than the undersigned or are to be sent to someone other than
the undersigned or to the undersigned at an address other than that provided
above.
Issue to:
Name _____________________________________
(Please Print)
Address __________________________________
__________________________________
__________________________________
(Include Zip Code)
Mail to:
Name _____________________________________
(Please Print)
Address __________________________________
__________________________________
__________________________________
(Include Zip Code)
3
<PAGE>
SIGNATURE
------------------------------------------------------
(Name of Registered Holder)
By:
--------------------------------------------------
Name:
Title:
Date:
------------------------------------------------
(Must be signed by registered holder exactly as name appears on Old Notes. If
signature is by trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 3.)
Address:
---------------------------------------------
---------------------------------------------
Telephone No.
----------------------------------------
Taxpayer Identification No.:
-------------------------------------------
Signature Guaranteed By:
-----------------------------------------------
(See Instruction 1)
Title:
----------------------------------------------
Name of Institution:
--------------------------------
Address:
--------------------------------------------
Date:
-----------------------------------------------
PLEASE READ THE INSTRUCTIONS BELOW, WHICH
FORM A PART OF THIS LETTER OF TRANSMITTAL.
4
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal
must be guaranteed by a firm that is a member of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office in
the United States which is a member of a recognized Medallion Signature
Program approved by the Securities Transfer Association, Inc. (an "Eligible
Institution") unless (i) the "Special Issuance and Delivery Instructions"
above have not been completed or (ii) the old Notes described above are
tendered for the account of an Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND OLD NOTES. This Old Notes,
together with a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof), should be mailed or delivered to the Exchange Agent
at the address set forth above.
THE METHOD OF DELIVERY OF OLD NOTES AND OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE RESPECTIVE HOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL (WITH RETURN RECEIPT), PROPERLY INSURED, IS SUGGESTED.
3. GUARANTEED DELIVERY PROCEDURES. Registered holders who wish to tender
their Old Notes and (i) whose Old Notes are not immediately available or (ii)
who cannot deliver their Old Notes, the Letter of Transmittal or any other
required documents to the Exchange Agent prior to the Expiration Date, may
effect a tender if:
(a) The Tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the registered
holder of the Old Notes, the certificate number or numbers of such
Old Note(s) and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within
five New York Stock Exchange trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof) together
with the certificate(s) representing the Old Notes and any other
documents required by the Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent; and
(c) Such Properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within five New York Stock Exchange trading days
after the Expiration Date.
Upon request of the Exchange Agent, a Notice of Guaranteed Delivery will
be sent to registered holders who wish to tender their Old Notes according to
the guaranteed delivery procedures set forth above.
4. SIGNATURES ON LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by a person other than a registered
holder of any Old Notes, such Old Notes must be endorsed or accompanied by
appropriate bond powers, in either case signed exactly as the name or names
of the registered holder or holders on the old Notes.
If this Letter of Transmittal or any Old Notes or bond power is signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or
5
<PAGE>
representative capacity, such person should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
5. EXCHANGE OF OLD NOTES ONLY. Only the above-described Old Notes
may be exchanged for Notes pursuant to the Exchange Offer.
6. MISCELLANEOUS. All question as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of
tendered Old Notes will be resolved by the Company, whose determination will
be final and binding. The Company reserves the absolute right to reject any
or all tenders that are not in proper form or the acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter
of Transmittal) will be final and binding. Unless waived, any irregularities
in connection with tenders or consents must be cured within such time as the
Company shall determine. Neither the Company nor the Exchange Agent shall be
under any duty to give notification of defects in such tenders or shall incur
liabilities for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the irregularities have not been cured or waived
will be returned by the Exchange Agent to the tendering holder thereof.
IMPORTANT TAX INFORMATION
Under current Federal income tax law, an Old Noteholder whose tendered
Old Notes are accepted for payment generally is required to provide the
Exchange Agent (as agent for the payer) with his or her correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If such Old
Noteholder is an individual, the TIN is his or her social security number. If
the Exchange Agent is not provided with the correct TIN, the Old Noteholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such Old Noteholders with respect to New
Notes exchanged pursuant to the Offer may be subject to backup withholding.
Certain Old Noteholders (including, among other, all corporations and
certain foreign individuals) may not be subject to these backup withholding
and reporting requirements. Exempt Old Noteholders should indicate their
exempt status on Substitute Form W-9. In order for a foreign individual to
qualify as an exempt recipient, that Old Noteholder must submit a properly
completed Internal Revenue Service Form W-8, signed under penalties of
perjury, attesting to his or her exempt status. Such statements can be
obtained from the Exchange Agent. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Exchange Agent is required to
withhold 31 percent of any such payments made to the Old Noteholder. Backup
withholding is not an additional tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to an Old
Noteholder with respect to Old Notes exchanged pursuant to the Offer, each
Old Noteholder is required to notify the Exchange Agent of his, her or its
correct TIN by completing the Substitute Form W-9 below certifying the TIN
provided on such form is correct (or that such Old Noteholder is awaiting a
TIN) and that (1) the Old Noteholder has not been notified by the Internal
Revenue Service that he, she or it is subject to backup withholding as a
result of a failure to report all interest or dividends or (2) the Internal
Revenue Service has notified the Old Noteholder that he, she or it is no
longer subject to backup withholding.
6
<PAGE>
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Old Noteholder is required to give the Exchange Agent the social
security number or employer identification number of the record owner of the
Old Notes. If the Old Notes are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
guidelines on which number to report.
PAYER'S NAME: STATE STREET BANK AND TRUST COMPANY AS AGENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN Social Security Number
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY or
BY SIGNING AND DATING BELOW Employer Identification Number:
-----------------------
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
DEPARTMENT OF THE TREASURY PART 2 -- Certification -- Under penalties of perjury, I certify that:
INTERNAL REVENUE SERVICE
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me) and
PAYER'S REQUEST FOR (2) I am not subject to backup withholding because: (a) I am exempt from
TAXPAYER IDENTIFICATION backup withholding, (b) I have not been notified by the Internal Revenue
NUMBER "TIN" Service (the "IRS") that I am subject to backup withholding as a result
of a failure to report all interest or dividends or (c) the IRS has notified
me that I am no longer subject to backup withholding.
Certification Instructions -- You must cross out Item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of under-reporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out such Item (2).
-----------------------------------------------------------------------------------
PART 3
SIGNATURE: __________________________________ DATE: __________ Awaiting
TIN / /
- ----------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY PAYMENTS MADE TO YOU PURSUANT
TO THE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
</TABLE>
7
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
- ------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31 percent of all reportable payments made to me thereafter
will be withheld until I provide a number.
- ------------------------------------ ----------------------------------------
Signature Date
8
<PAGE>
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER LLP]
December 17, 1996
Astor Corporation
8521 Six Forks Road
Suite 105
Raleigh, N.C. 27615
Re: ASTOR CORPORATION -- REGISTRATION STATEMENT ON FORM S-4
(REG. NO. 333-14913)
Ladies and Gentlemen:
We have acted as counsel for Astor Corporation, a Delaware corporation
(the "Company"), in connection with the registration by the Company of up to
$110,000,000 aggregate principal amount of the Company's 10-1/2% Series B
Senior Subordinated Notes due 2006 (the "Notes") on Form S-4 Registration
Statement No. 333-14913 (the "Registration Statement") under the Securities
Act of 1933, as amended. The Notes will be offered in exchange for a like
principal amount of the Company's 10-1/2% Senior Subordinated Notes due 2006
(the "Old Notes") pursuant to that certain Exchange and Registration Rights
Agreement dated as of October 8, 1996, by and among the Company, Astor
Holdings II, Inc. (the "Guarantor"), Donaldson, Lufkin & Jenrette Securities
Corporation and Chase Securities Inc. (the "Registration Rights Agreement").
The Registration Rights Agreement was executed in connection with the private
placement of the Old Notes.
We have also acted as counsel for the Guarantor in connection with the
registration of the guarantee of the Notes by the Guarantor under the
Registration Statement (the "Guarantee").
<PAGE>
Astor Corporation
December 17, 1996
Page 2
The Notes will be issued pursuant to that certain Indenture dated as of
October 8, 1996, by and among the Company, the Guarantor, and State Street
Bank and Trust Company, as Trustee (the "Indenture").
We are familiar with the actions taken and to be taken by the Company
and the Guarantor in connection with the offering of the Notes and the
issuance of the Guarantee. On the basis of such knowledge and such
investigation as we have deemed necessary, we are of the opinion that: (i)
the Notes have been duly authorized by the Company and, when issued in
exchange for the Old Notes pursuant to the terms of the exchange offer
described in the Registration Statement and the Indenture, will be validly
issued and will constitute legal and binding obligations of the Company; and
(ii) the Guarantee has been duly authorized by the Guarantor and, when issued
along with the Notes in accordance with the terms of the Indenture, will be
validly issued and will constitute the legal and binding obligation of the
Guarantor.
We hereby consent to the filing of this opinion as an exhibit to
Registration Statement No. 333-14913 and to the reference to this firm under
the heading "Legal Matters" contained in the prospectus that forms a part of
the Registration Statement.
Very truly yours,
/s/ Gibson, Dunn & Crutcher
GIBSON, DUNN & CRUTCHER
<PAGE>
[LETTERHEAD of Gibson, Dunn & Crutcher LLP]
Astor Corporation
8521 Six Forks Road, Suite 105
Raleigh, N.C. 27615
Re: REGISTRATION STATEMENT ON FORM S-4
Gentlemen:
We have acted as counsel to Astor Corporation, a Delaware corporation
(the "Company"), in connection with the registration by the Company of the
offer to exchange its 10-1/2% Series B Senior Subordinated Notes due 2006
(the "Notes") for its outstanding privately placed 10-1/2% Senior
Subordinated Notes due 2006. The Notes are the subject of a Registration
Statement on Form S-4 (the "Registration Statement"), filed by the Company
with the Securities and Exchange Commission.
On the basis of the statements and representations contained in the
foregoing materials, we hereby confirm our opinions as set forth in the
Prospectus forming a part of the Registration Statement under the caption
"The Offer - Certain Federal Income Tax Consequences."
This opinion expresses our views only as to federal income tax laws in
effect as of the date hereof, including the Internal Revenue Code of 1986, as
amended, applicable Treasury Regulations (including proposed Regulations),
published rulings and administrative practice of the Internal Revenue Service
(the "IRS") and court decisions. This opinion represents our best legal
judgment as to the matters addressed herein, but is not binding on the IRS or
the courts. Accordingly, no assurance can be given that the legal conclusions
expressed herein, if contested, would be sustained by a court. Furthermore,
the authorities upon which we rely are subject to change either prospectively
or retroactively, and any variation or difference in the facts and
representations as set forth in the Registration Statement might affect the
conclusions stated herein.
<PAGE>
[LETTERHEAD]
Astor Corporation
December 18, 1996
Page 2
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and further consent to the reference to our name in
the sections captioned "The Offer - Certain Federal Income Tax
Considerations," and "Legal Matters" in the Prospectus that forms a part of
the Registration Statement.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
---------------------------------------
GIBSON, DUNN & CRUTCHER LLP
SLT/CAH/RAS
<PAGE>
U.S. Petroleum Corp
April 26, 1990
Quaker State Corporation
255 Elm Street
Oil City, PA 16301
Attention: Mr. William C. Helsley
Petrowax PA Inc. ("Buyer") and Quaker State Corporation ("Seller") have entered
into the Asset Purchase and Sale Agreement ("Agreement") as of the 30th day of
March, 1990. Buyer and Seller further agree as follows:
As of the Closing Date, Seller shall sell to Buyer all finished paraffin
and microcrystalline wax and unfiltered microcrystalline wax inventories at
the Facilities, other than the microcrystalline wax designated by Seller
as having been sold to an overseas account (the "Overseas Micro"), at a
price which is equal to eighty percent (80%) of the price realized by Buyer
pursuant to its sale of such inventories.
Buyer shall pay Seller amounts owing hereunder within fifteen (15) days of
Buyer's receipt of payment for the sale of such inventories, but in any
event Buyer shall have sold and paid for all paraffin inventories purchased
hereunder within 90 days of the Closing Date, and all microcrystalline
inventories purchased hereunder within 180 days of the Closing Date.
On or before the Closing Date Seller shall notify Buyer if an overseas sale
can be made for 5000 barrels of microcrystalline wax. Buyer shall purchase
and arrange sale and shipment of the Overseas Micro at Seller's direction
and shall pay to Seller within fifteen (15) days of receipt of payment the
realized price for the Overseas Micro less $0.01 per pound.
The capitalized terms have the meaning defined in the Agreement.
If you agree with the foregoing please sign and return one copy of this letter,
which will constitute our agreement with respect to the subject matter of this
letter.
Very truly yours,
PETROWAX PA INC.
By: /s/ Gene R. Blendermann
----------------------------
Gene R. Blendermann
President
CONFIRMED AND AGREED
as of the date written above:
QUAKER STATE CORPORATION
By: /s/ W.C. Helsley
----------------------------
Title: Vice President
-------------------------
<PAGE>
EXECUTION COPY
----------------------------------------------
ASSET PURCHASE AND SALE AGREEMENT
----------------------------------------------
dated as of
March 30, 1990
between
PETROWAX PA INC.,
the Buyer,
and
QUAKER STATE CORPORATION,
the Seller
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS
SECTION 1.1 Compliance Costs . . . . . . . . . . . . . . . . . 1
1.2 Compliance Work. . . . . . . . . . . . . . . . . . 1
1.3 Disposal . . . . . . . . . . . . . . . . . . . . . 2
1.4 Environmental Laws . . . . . . . . . . . . . . . . 2
1.5 Facilities . . . . . . . . . . . . . . . . . . . . 2
1.6 Financial Responsibility . . . . . . . . . . . . . 2
1.7 Hazardous Materials. . . . . . . . . . . . . . . . 2
1.8 Hazardous Wastes . . . . . . . . . . . . . . . . . 3
1.9 Maintenance Costs. . . . . . . . . . . . . . . . . 3
1.10 Maintenance Work . . . . . . . . . . . . . . . . . 3
1.11 Regulatory Authorities . . . . . . . . . . . . . . 3
1.12 Remedial Costs . . . . . . . . . . . . . . . . . . 3
1.13 Remedial Work. . . . . . . . . . . . . . . . . . . 3
ARTICLE TWO
PURCHASE OF FACILITIES BY THE BUYER
SECTION 2.1 Purchase of Facilities . . . . . . . . . . . . . . 4
ARTICLE THREE
ASSETS ACQUIRED AND LIABILITIES ASSUMED
SECTION 3.1 Assets . . . . . . . . . . . . . . . . . . . . . . 4
3.2 The Coleville Station ............ . . . . . . . . 6
3.3 Excluded Assets; Other Liabilities . . . . . . . . 9
3.4 Assumption of Certain Liabilities
and Obligations. . . . . . . . . . . . . . . . . . 10
ARTICLE FOUR
PAYMENT OF PURCHASE PRICE
SECTION 4.1 Purchase Price . . . . . . . . . . . . . . . . . . 10
4.2 Method of Payment. . . . . . . . . . . . . . . . . 10
4.3 Payment in Respect of Certain Inventories . . . . 11
i
<PAGE>
ARTICLE FIVE
THE CLOSING
SECTION 5.1 Closing . . . . . . . . . . . . . . . . . . . . . 13
5.2 Effectiveness of Transactions . . . . . . . . . . 13
5.3 Deliveries by the Seller at Closing. . . . . . . . 13
5.4 Deliveries by the Buyer at Closing . . . . . . . . 15
5.5 Joint Deliveries by the Buyer and
the Seller at the Closing. . . . . . . . . . . . . 15
ARTICLE SIX
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 6.1 Organization . . . . . . . . . . . . . . . . . . . 16
6.2 Authorization of Agreement . . . . . . . . . . . . 16
6.3 Compliance with Charter and Other
Instruments. . . . . . . . . . . . . . . . . . . . 16
6.4 Compliance with Laws . . . . . . . . . . . . . . . 17
6.5 Real Property. . . . . . . . . . . . . . . . . . . 17
6.6 Personal Property. . . . . . . . . . . . . . . . . 18
6.7 Validity of Leases and Contracts . . . . . . . . . 18
6.8 Permits and Licenses . . . . . . . . . . . . . . . 18
6.9 Litigation . . . . . . . . . . . . . . . . . . . . 19
6.10 Insurance Policies . . . . . . . . . . . . . . . . 19
6.11 Labor and Employment Matters . . . . . . . . . . . 19
6.12 No Brokers . . . . . . . . . . . . . . . . . . . . 20
6.13 Disclosure . . . . . . . . . . . . . . . . . . . . 20
ARTICLE SEVEN
REPRESENTATIONS AND WARRANTIES OF THE BUYER
SECTION 7.1 Organization . . . . . . . . . . . . . . . . . . . 20
7.2 Authorization of Agreement . . . . . . . . . . . . 20
7.3 Compliance with Charter and Other Instruments. . . 21
7.4 Consents and Approvals . . . . . . . . . . . . . . 21
7.5 Disclaimer of Additional and
Implied Warranties . . . . . . . . . . . . . . . . 21
7.6 No Brokers . . . . . . . . . . . . . . . . . . . . 22
ii
<PAGE>
ARTICLE EIGHT
COVENANTS
SECTION 8.1 Conduct of Business Pending Closing. . . . . . . . 22
8.2 Access to Records. . . . . . . . . . . . . . . . . 23
8.3 Government Consents. . . . . . . . . . . . . . . . 25
8.4 Non-Government Consents. . . . . . . . . . . . . . 25
8.5 Taxes and Recording Charges. . . . . . . . . . . . 25
8.6 Non-Disclosure of
Confidential Information . . . . . . . . . . . . . 26
8.7 Further Assurances; Cooperation. . . . . . . . . . 26
8.8 Finished Goods . . . . . . . . . . . . . . . . . . 27
8.9 Terminal Arrangements. . . . . . . . . . . . . . . 27
8.10 Contacts with Customers. . . . . . . . . . . . . . 28
8.11 Satisfaction of Employee Obligations . . . . . . . 28
8.12 Distributions to Employees by the Seller . . . . . 28
8.13 Title and Survey Review. . . . . . . . . . . . . . 28
ARTICLE NINE
INDEMNIFICATION
SECTION 9.1 Survival of Representations,
Warranties and Covenants . . . . . . . . . . . . . 29
9.2 Agreement to Indemnify;
Minimum Obligation . . . . . . . . . . . . . . . . 29
9.3 Notice of Asserted Liability . . . . . . . . . . . 30
9.4 Time Limitation. . . . . . . . . . . . . . . . . . 30
9.5 Opportunity to Defend. . . . . . . . . . . . . . . 30
ARTICLE TEN
ENVIRONMENTAL MATTERS
Section 10.1 Covenants of the Seller. . . . . . . . . . . . . . 31
10.2 Covenants of the Buyer . . . . . . . . . . . . . . 33
10.3 Certain Understandings Regarding
Removal and Disposal of Hazardous
Wastes After Closing . . . . . . . . . . . . . . . 36
10.4 Indemnification for
Environmental Matters. . . . . . . . . . . . . . . 36
10.5 Sole and Exclusive Remedy. . . . . . . . . . . . . 42
10.6 Certain Understandings with
Respect to Pre-existing
Insurance Policies . . . . . . . . . . . . . . . . 43
iii
<PAGE>
ARTICLE ELEVEN
CONDITIONS OF CLOSING
SECTION 11.1 Conditions to Obligations of Buyer . . . . . . . . 44
11.2 Conditions to Obligations of the Seller. . . . . . 45
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.1 Notices . . . . . . . . . . . . . . . . . . . . . 46
12.2 Headings. . . . . . . . . . . . . . . . . . . . . 47
12.3 Entire Agreement; Amendment . . . . . . . . . . . 47
12.4 Assignment. . . . . . . . . . . . . . . . . . . . 47
12.5 No Waiver . . . . . . . . . . . . . . . . . . . . 48
12.6 Risk of Loss. . . . . . . . . . . . . . . . . . . 48
12.7 Press Releases. . . . . . . . . . . . . . . . . . 48
12.8 Bulk Sales Law. . . . . . . . . . . . . . . . . . 49
12.9 Severability . . . . . . . . . . . . . . . . . . 49
12.10 Third Party Beneficiaries . . . . . . . . . . . . 49
12.11 Governing Law . . . . . . . . . . . . . . . . . . 49
12.12 Counterparts. . . . . . . . . . . . . . . . . . . 49
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EXHIBITS
Exhibit A Form of $10,000,000 Subordinated Note
Exhibit B Form of Gas Purchase Agreement
Exhibit C Form of Slack Wax and Petrolatum Purchase
Agreement
Exhibit D Form of Crude Oil Purchase and Sale
Agreement
Exhibit E Form of Environmental Notes
Exhibit F Legal Opinion of Quaker State Corporation
Exhibit G Legal Opinion of Gibson, Dunn & Crutcher
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SCHEDULES
Schedule 1.13 Remedial Work
Schedule 3.1(a)(i) McKean Plant Real Property
Schedule 3.1(a)(ii) McKean Easements, Right of Way
and Rail Crossing Agreements
Schedule 3.1(a)(iii) McKean Contracts and Lease Agreements
Schedule 3.1(a)(vi) McKean Vehicles
Schedule 3.1(a)(vii) McKean Permits, Licenses,
Certificates of Occupancy and
Registrations
Schedule 3.1(b)(i) Emlenton Wax Plant Real Property
Schedule 3.1(b)(ii) Emlenton Easements, Rights of
Way and Rail Crossing Agreements
Schedule 3.1(b)(iii) Emlenton Contracts and Lease Agreements
Schedule 3.1(b)(vi) Emlenton Vehicles
Schedule 3.1(b)(vii) Emlenton Permits, Licenses,
Certificates of Occupancy and
Registrations
Schedule 3.2(a) Coleville Station Assets
Schedule 3.3(a)(i) Product Equivalencies and Brand
Names to be Used for One Year
Schedule 3.3(a)(ii) Product Equivalencies and Brand
Names to be Used for the Term
of the Crude Oil Purchase and
Sale Agreement
Schedule 3.3(c) Customer Assets at the Facilities
Schedule 3.3(f) Computers and Data Processing Equipment
Schedule 3.3(g) Type of Products in Inventory
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Schedule 3.4 Assumed Liabilities
Schedule 4.3(d)(i) Fully Allocated February 1990
Processing Costs
Schedule 6.3 Encumbrances
Schedule 6.4 Compliance with Laws
Schedule 6.5(a) Permitted Exceptions
Schedule 6.5(b) Title Exceptions to be Removed
Prior to Closing
Schedule 6.6(a) Encumbrances and Third Party
Rights and Interests in
Personal Property
Schedule 6.6(b) Personal Property Constituting
Processing Units and Systems at
the Facilities
Schedule 6.8 Permits, Licenses, Approvals,
Consents, Franchises and
Authorizations Associated with
the Facilities
Schedule 6.9 Litigation
Schedule 6.10 Insurance Policies
Schedule 6.11 Labor and Employment Matters
Schedule 7.3 Conflicts and Consents
Schedule 8.8 Third Party Handling Charges
4755P
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<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement (the "Agreement") is made and
entered into as of the 30th day of March, 1990, by and between PETROWAX PA INC.,
a Delaware corporation (the "Buyer"), and QUAKER STATE CORPORATION, a Delaware
corporation (the "Seller").
W I T N E S S E T H
WHEREAS, the Seller desires to sell the Seller's manufacturing
facilities known as the Emlenton Wax Plant located at Emlenton, Pennsylvania,
and the McKean Plant located at Farmer's Valley, Pennsylvania, and certain
related assets and the Buyer desires to purchase and accept the same.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual covenants and agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
The following words and phrases, as used throughout this Agreement,
shall have the respective meanings set forth below. Other terms not defined in
this Article I shall have the respective meanings given to such terms elsewhere
in this Agreement.
1.1 Compliance Costs: The term "Compliance Costs" shall mean any and
all funds or payments expended by the Buyer or the Seller in order to conduct
Compliance Work. Compliance Costs shall include any civil penalties arising
from violations of the Environmental Laws.
1.2 Compliance Work: The term "Compliance Work" shall mean any work
which is required by or conducted as a result of violations of the Environmental
Laws. Compliance Work shall consist of bringing the Facilities into compliance
with existing regulatory programs in effect on the Closing Date and permits
issued thereunder the violation of which would subject the owner/operator to
statutory civil penalties. Remedial Work shall not be considered Compliance
Work for purposes of this
<PAGE>
Agreement. Moreover, in no event shall replacement of or repair of the
Facilities' sewer systems be considered Compliance Work.
1.3 Disposal: The term "Disposal" shall mean the discharge, deposit,
injection, dumping, spilling, leaking, placing or releasing, active or passive,
of any Hazardous Material into or on any air, land or water so that such
Hazardous Material or any constituent thereof may enter the environment or be
emitted into the air or discharged into any waters, including groundwaters, and
any grammatical variation thereof shall have the correlative meaning.
1.4 Environmental Laws: The term "Environmental Laws" shall mean
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA") (42 U.S.C. Section 9601, et seq.), the Resource
Conservation and Recovery Act, as amended ("RCRA") (42 U.S.C. Section 6901, et
seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251, et
seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601, et
seq.), the Safe Drinking Water Act, as amended (42 U.S.C. Section 300f, et
seq.), the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7
U.S.C. Section 136, et seq.), the Clean Air Act, as amended (42 U.S.C. Section
7401, et seq.), all as amended or supplemented and any analogous state or local
statutes and the regulations adopted pursuant thereto.
1.5 Facilities: The term "Facilities" shall mean the land being
conveyed hereunder and structures, other appurtenances and improvements on the
land, comprising the production plants owned and operated by the Seller in
Emlenton, Pennsylvania and Farmer's Valley, Pennsylvania prior to execution of
this Agreement.
1.6 Financial Responsibility: The term "Financial Responsibility"
shall mean the requirement to establish one or more of the mechanisms for
demonstrating the availability of funds to close and/or otherwise manage any
unit or facility regulated by 25 Pa. Code 75.301 et seq. or 40 C.F.R. Parts 264
and 265 and to provide liability coverage for bodily injury and property damage
to third parties arising from the use of such unit or facility.
1.7 Hazardous Materials: The term "Hazardous Materials" shall mean
(1) Hazardous Substances as defined in Section 101 of CERCLA; (2) petroleum,
petroleum
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products and petroleum wastes; (3) Pollutants or Contaminants as defined in
Section 101 of CERCLA, and (4) Hazardous Wastes.
1.8 Hazardous Wastes: The term "Hazardous Wastes" shall mean
hazardous wastes as such term is defined in 40 C.F.R. Part 261.3, as amended.
1.9 Maintenance Costs: The term "Maintenance Costs" shall mean any
and all funds or payments expended for Maintenance Work.
1.10 Maintenance Work: The term "Maintenance Work" shall mean any
work performed to correct wear or to maintain the Facilities in operational
condition, including, but not limited to, the replacement or repair of process
equipment, structural components (e.g., plant sewer system), removal and
Disposal of asbestos, and emptying and cleaning of process, treatment and
storage containers, such as tanks and roll-off boxes.
1.11 Regulatory Authorities: The term "Regulatory Authorities" shall
mean the United States, the U.S. Environmental Protection Agency, the
Commonwealth of Pennsylvania, the Pennsylvania Department of Environmental
Resources or any political subdivision with authority to enforce the
Environmental Laws.
1.12 Remedial Costs: The term "Remedial Costs" shall mean any and
all funds or payments reasonably expended by the Buyer or the Seller in order to
conduct Remedial Work.
1.13 Remedial Work: The term "Remedial Work" shall mean any work
performed by the Buyer or the Seller pursuant to, in accordance with, and only
to the extent required by any law, statute, rule, regulation, ordinance,
directive or other similar provision established by applicable law, including,
without limitation, Environmental Laws, in order to investigate, evaluate, treat
and/or clean up any Hazardous Materials Disposed of, discharged or released at
the Facilities as of the Closing Date (as hereinafter defined). For purposes of
this Agreement, Remedial Work shall include, but not be limited to, response or
remedial actions under CERCLA, the Pennsylvania Hazardous Sites Cleanup Act and
sections 3004(u), 3008(h) and 7003 of RCRA. Remedial Work shall also include
any such work, response or remedial actions required to allow the Buyer to make
use of, modify, expand or add to the operations at the Facilities consistent
with
3
<PAGE>
their current use. Any actions taken as a result of the environmental site
conditions identified in Schedule 1.13 hereto shall also constitute Remedial
Work. In no event shall replacement of or repair of the Facilities' sewer
systems be considered Remedial Work.
ARTICLE II
PURCHASE OF FACILITIES BY THE BUYER
2.1 PURCHASE OF FACILITIES. Subject to the terms and conditions
herein contained, the Buyer agrees to purchase from the Seller and the Seller
agrees to transfer, sell, assign and convey to the Buyer the Facilities and the
property, real and personal, tangible and intangible, associated therewith as
more fully specified in Section 3.1 hereof (the "Assets").
ARTICLE III
ASSETS ACQUIRED AND LIABILITIES ASSUMED
3.1 ASSETS. The Assets to be transferred hereunder shall consist of
all items of property, plant, pipeline and equipment of the Seller used in
connection with the operation of the Facilities as the same shall exist on the
Closing Date, including without limitation:
(a) McKean Plant Assets:
i. That certain real property located in McKean County,
Pennsylvania, commonly known as the McKean Plant and more
particularly described in Schedule 3.1(a)(i), together with
all appurtenances thereto and all buildings, railroad
sidings, bridges, water wells, and other improvements
located thereon.
ii. All of the Seller's rights under all easements, rights of
way and rail crossing agreements listed on Schedule
3.1(a)(ii) hereto.
iii. All of the Seller's rights under those lease agreements and
other contracts listed on Schedule 3.1(a)(iii) hereto.
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<PAGE>
iv. All equipment and fixtures associated with and located at
the McKean Plant, including but not limited to all tanks
both above and below ground, pumps, piping, conveyors,
furnaces, process units, loading facilities, tools,
laboratory equipment and office furniture and equipment.
v. The inventory of materials and supplies and work in process
located at the McKean Plant as of the time of Closing (as
hereinafter defined).
vi. All of the vehicles set forth on Schedule 3.1(a)(vi)
hereto.
vii. All of the Seller's rights under those permits, licenses,
certificates of occupancy and registrations related to the
ownership and operation of the McKean Plant, including but
not limited to those listed on Schedule 3.1(a)(vii) hereto.
viii. All of the Seller's records pertaining to the sale of any
and all goods (excluding finished motor oils) manufactured
at or shipped from the McKean Plant, since January 1, 1985,
including without limitation customer lists, invoices,
names of carriers used and payment histories.
(b) Emlenton Wax Plant Assets:
i. That certain real property located in Venango County,
Pennsylvania, commonly known as the Emlenton Wax Plant and
more particularly described in Schedule 3.1(b)(i), together
with all appurtenances thereto and all buildings, railroad
sidings, bridges, water wells, and other improvements
located thereon.
ii. All of the Seller's rights under all easements, rights of
way and rail crossing agreements listed on Schedule
3.1(b)(ii) hereto.
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<PAGE>
iii. All of the Seller's rights under those lease agreements
and other contracts listed on Schedule 3.1(b)(iii)
hereto.
iv. All equipment and fixtures associated with and located
at the Emlenton Wax Plant, including but not limited to
all tanks both above and below ground, pumps, piping,
conveyors, furnaces, process units, loading facilities,
tools, laboratory equipment and office furniture and
equipment.
v. The inventory of materials and supplies and work in
process located at the Emlenton Wax Plant as of the
time of Closing.
vi. All of the vehicles listed on Schedule 3.1(b)(vi)
hereto.
vii. All of the Seller's rights under those permits,
licenses, certificates of occupancy and registrations
related to the ownership and operation of the Emlenton
Wax Plant, including but not limited to those listed on
Schedule 3.1(b)(vii) hereto.
viii. All of the Seller's records pertaining to the sale of
any and all goods manufactured at or shipped from the
Emlenton Wax Plant, since January 1, 1985, including
without limitation customer lists, invoices, names of
carriers used and payment histories.
(c) The right to recover Remedial Costs under any of the Seller's
current or previously existing insurance policies pursuant to the provisions of
Section 10.6 hereof.
Notwithstanding anything in this Agreement to the contrary, in no event shall
Assets include the Excluded Assets (as hereinafter defined).
3.2 THE COLEVILLE STATION.
(a) TRANSFER OF THE COLEVILLE STATION. The Assets to be transferred
hereunder shall also include the Seller's crude oil terminal and transportation
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pipeline running from the Coleville Station located at Coleville, Pennsylvania
to and including the McKean Plant, as described on Schedule 3.2(a) attached
hereto, whether or not specifically identified herein or therein, together with
all appurtenant compressor pumps, suction pumps, all of the Seller's rights
under the permits, licenses, certificates of occupancy and registration which
relate thereto and loading pumps and other associated equipment, any
right-of-way agreements and those parcels of real estate listed on Schedule
3.2(a) (collectively, the "Coleville Station").
(b) THE COLEVILLE CLOSING. The purchase and sale of the Coleville
Station, including the recording of all deeds with respect to the real property
associated therewith to be transferred pursuant to this Agreement, shall be
consummated at a closing (the "Coleville Closing") to take place at such time
and place and on such date as the Buyer and the Seller shall jointly designate.
At the Coleville Closing, each party shall deliver to the other party, in form
satisfactory to such other party and its counsel, such documents as each party
may reasonably require to effectuate the sale, conveyance and assignment of the
Coleville Station.
(c) CONDITIONS TO THE COLEVILLE CLOSING. The obligation of the Buyer to
consummate the purchase and sale of the Coleville Station is subject to the
fulfillment, or the written waiver by the Buyer, of each of the following
conditions:
(i) Each representation and warranty of the Seller contained in this
Agreement or in any certificate or document delivered to the Buyer and
applicable to the Coleville Station pursuant to Section 3.2(d) hereof shall
be deemed to have been made again on and as of the date of the Coleville
Closing and shall then be true and correct in all material respects and, on
the date of the Coleville Closing, the Seller shall have delivered to the
Buyer a certificate of an authorized officer of the Seller to such effect.
(ii) The Seller shall have delivered to the Buyer such special
warranty deeds, bills of sale, endorsements, assignments, subleases and
other good and sufficient instruments of assignment,
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<PAGE>
conveyance and transfer, sufficient to sell, assign, transfer, convey and
deliver the Coleville Station to the Buyer in accordance with the terms
hereof.
(iii) All material authorizations, consents, waivers and approvals
required under this Agreement and such other authorizations, consents,
waivers and approvals as are necessary to sell, assign, transfer, convey
and deliver the Coleville Station to the Buyer in accordance with the terms
hereof shall have been duly obtained.
(iv) Delivery to the Buyer by Ticor Title Guarantee Company (the
"Title Insurer") of an endorsement to the policy of title insurance issued
to the Buyer on the Closing Date adding to such policy the Coleville
Station, subject only to those title exceptions which are acceptable to the
Buyer in its sole discretion.
(v) That certain Crude Oil Purchase and Sale Agreement by and between
the Buyer and the Seller referred to in Section 5.5(c) hereof shall have
been terminated in accordance with its terms.
(vi) Removal and Disposal by the Seller of the 10,000 gallon
underground storage tank and fuel oil pump located at the Coleville Station
and compliance with all Environmental Laws governing the Disposal of the
tank, pump and, if applicable, any associated contaminated soil and
completion of any other Remedial Work and Compliance Work associated
therewith.
(d) EFFECT OF OTHER PROVISIONS. Prior to the consummation of the purchase
and sale of the Coleville Station at the Coleville Closing, the provisions of
Articles V, VI, VII, VIII, IX, X and XI hereof shall not apply to or be deemed
made in respect of the Coleville Station. Upon the occurrence of the Coleville
Closing, the provisions of Articles VI, VII, VIII, IX and X hereof shall apply
to and be deemed made in respect of the Coleville Station as of the date of the
Coleville Closing and the Coleville Station shall be deemed to be included among
the Facilities and the Assets for all intents and purposes under this Agreement.
The provisions of Section 8.5 hereof shall apply to the Coleville Station,
MUTATIS MUTANDIS.
8
<PAGE>
3.3 EXCLUDED ASSETS: OTHER LIABILITIES. For purposes of this
Agreement, the term "Excluded Assets" shall mean the following:
(a) any right to use, publish or otherwise exploit the name "Quaker
State Corporation" or any variation thereof, or any goodwill associated
therewith. Notwithstanding the foregoing, the Buyer shall be permitted to
make reference to those of the Seller's products listed on Schedule
3.3(a)(i) and Schedule 3.3(a)(ii) attached hereto in the manner described
thereon in connection with the packaging, sale and distribution of the
Buyer's equivalent products which are manufactured to the same
specifications, in the case of those products listed in Schedule 3.3(a)(i),
for a period of one year from the Closing Date and, in the case of those
products listed on Schedule 3.3(a)(ii), for a period equal to the lesser of
one year from the Closing Date or the term (as extended) of the Crude Oil
Purchase and Sale Agreement (as defined herein). Furthermore, the Buyer
shall have 180 days from the Closing Date to remove all proprietary marks
of the Seller that are visible to the public;
(b) rights under all insurance programs maintained by the Seller for
the Facilities except as set forth in Section 10.6;
(c) all assets located at the Facilities belonging to customers of
the Facilities as set forth in Schedule 3.3(c) hereto;
(d) all machinery and equipment related to the motor oil packaging
operation at the McKean Plant, which shall be removed from the Facilities
by the Seller prior to the Closing;
(e) all accounts receivable;
(f) all computer and data processing equipment located at the
Facilities dedicated solely to the Seller's computer operations outside of
the Facilities as set forth in Schedule 3.3(f) attached hereto;
(g) the finished motor oils, finished waxes, fuel oils, gasoline and
other finished products identified on Schedule 3.3(g) that are in inventory
at the Facilities at the time of the Closing;
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<PAGE>
(h) all original personnel records and related files at the
Facilities, other than those related to current employees as of the date of
the Closing; and
(i) general ledgers, Hazardous Waste manifests and employee x-rays.
3.4 ASSUMPTION OF CERTAIN LIABILITIES AND OBLIGATIONS.
(a) On the Closing Date, the Buyer shall assume and agree to pay,
perform and discharge all obligations and liabilities of the Seller arising
under the executory agreements set forth in Schedule 3.4 hereto
(collectively, the "Assumed Liabilities"). The Buyer agrees to indemnify,
defend and hold harmless the Seller in respect of all Assumed Liabilities
the corresponding economic benefits of which have been effectively
transferred to the Buyer, pursuant to and to the extent provided for in
Article IX hereof. The Buyer shall have no obligation to indemnify, defend
or hold harmless the Seller in respect of any other Assumed Liabilities.
(b) Except as set forth in subsection (a) above and Section 10.4(c),
the Buyer shall not assume or agree to perform any of the obligations,
contracts or liabilities of the Seller relating to the Facilities, the
Assets, the current employees at the Facilities or otherwise. The Seller
agrees to indemnify, defend and hold harmless the Buyer in respect of all
obligations, contracts or liabilities of the Seller pursuant to and to the
extent provided for in Article IX and Section 10.4(b) hereof other than in
respect of Assumed Liabilities.
ARTICLE IV
PAYMENT OF PURCHASE PRICE
4.1 PURCHASE PRICE. On the Closing Date, and in consideration of the
sale, transfer, assignment and conveyance of the Assets (except for those Assets
covered by Section 4.3 below) by the Seller to the Buyer, the Buyer shall pay to
the Seller $30,000,000 and shall assume, pay and discharge all of the Assumed
Liabilities.
4.2 METHOD OF PAYMENT. The purchase price set forth in Section 4.1
shall be paid at the Closing and shall be paid by a wire transfer of immediately
available
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funds to such bank account as the Seller shall have designated in writing to the
Buyer in the amount of $20,000,000 and by delivery of the Buyer's Subordinated
Note in the principal amount of $10,000,000 and substantially in the form of
Exhibit A hereto (the "Note").
4.3 PAYMENT IN RESPECT OF CERTAIN INVENTORIES. The purchase price
payable by the Buyer to the Seller in respect of feedstock inventories of raw
crude oil and slack wax and derived and related intermediate wet barrel
inventories shall be calculated and paid in accordance with the following
provisions:
(a) The Buyer and the Seller shall jointly cause an inventory of all
raw slack wax, raw slack petrolatum, raw crude oil, intermediate derived
and related inventories and inventories of finished products as of 7:00
a.m. on the Closing Date to be taken.
(b) The Buyer shall purchase inventories of raw. slack wax and raw
slack petrolatum at the Emlenton Wax Plant at the Seller's actual cost
therefor and shall pay for the same WITHIN 45 DAYS after the Closing Date.
(c) The Buyer shall purchase inventories of raw crude oil at the
McKean Plant at a price equal to the current price of raw crude oil then
obtaining on the day any such inventories of raw crude oil are drawn from
storage facilities for processing by the Buyer and shall pay for the same
on the 15th day of the month following the month during which such raw
crude oil was drawn from inventory. Inventories of raw crude oil shall be
deemed to be drawn from storage at the rate of 500 barrels per day. The
Buyer may prepay (in whole or in part) for inventories of raw crude oil
purchased hereunder without penalty or premium.
(d) (i) The Buyer shall purchase intermediate derived and
related inventories at the McKean Plant, other than
those products known as "Paraffin - In Splits," "450
Slack," and "Other Petrolatum," which have been treated
by the MEK processing unit, as of the Closing Date, at
prices equal to 90% of the prices of the finished
products into which such intermediate inventories will
be produced as set forth in the February, 1990 Summary
of Sales for the McKean Plant, less fully allocated
February,
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1990 processing costs for each processing unit as set
forth in Schedule 4.3(d)(i) through which such
intermediate inventories are required to pass in order
to complete the production of such inventories to their
respective final constituent forms. The Buyer shall
purchase the products known as "Paraffin - In Splits,"
"450 Slack," and "Other Petrolatum" at prices equal to
$0.47 per gallon, $0.47 per gallon and $0.50 per
gallon, respectively.
(ii) The Buyer shall purchase all intermediate derived and
related inventories, other than those described in
paragraph (d)(i) above, at a price equal to 90% of the
sum of: (x) $3.50, (y) the average posted price of New
York/Pennsylvania Grade Crude for the 30 days preceding
the Closing Date, and (z) fully allocated February,
1990 processing costs for each processing unit as set
forth in Schedule 4.3(d)(i) through which such
intermediate inventories have passed.
(iii) The Buyer SHALL PAY for all intermediate derived and
related inventories with LUBE BASE OILS meeting the
SELLER'S FEBRUARY, 1990 specifications therefor. The
price of the lube base oils will equal the gross sales
price paid to the Seller by third party buyers. THE
GROSS SALES PRICE SHALL BE ADJUSTED AS IF SOLD F.O.B.
the McKean Plant and shall be increased by the value of
any payments made directly to the Buyer by such third
party on behalf of the Seller that would otherwise be
the responsibility of the Seller pursuant to this
Section 4.3(d)(iii) in respect of such lube base oils.
ALL LUBE BASE OILS PRODUCED AT THE Facilities shall be
CREDITED TO THE SELLER'S account IN RESPECT of the
payment for INTERMEDIATE inventories until such time as
such intermediate INVENTORIES ARE PAID IN FULL. All
lube base oils so credited to the Seller's account
shall be delivered to
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designated storage tanks at the Facilities and the
Seller shall pay all applicable third party charges and
all costs for storage and handling by the Buyer as well
as all costs to remove such lube base oils from the
Facilities. Notwithstanding the foregoing, the Buyer
may fulfill its obligations under this Section
4.3(d)(iii) by partial or total payments in cash at any
time.
ARTICLE V
THE CLOSING
5.1 CLOSING. The purchase and sale of the Assets, including the
recording of all deeds with respect to the McKean and Emlenton Real Property (as
hereinafter defined) to be transferred pursuant to this Agreement, shall be
consummated at a closing (the "Closing") to take place on such date and at such
time as shall be agreed by the Buyer and the Seller (the "Closing Date"), but in
no event after April 30, 1990, at the offices of Gibson, Dunn & Crutcher, 200
Park Avenue, New York, New York 10166.
5.2 EFFECTIVENESS OF TRANSACTIONS. All transactions, deliveries and
payments to take place at the Closing shall be deemed to take place
simultaneously, and no transaction, delivery of any opinion, certificate,
consent or other document, or payment shall be deemed made until all
transactions, deliveries and payments at the Closing are completed. All such
transactions, deliveries and payments shall be given effect as of the
commencement of business on the Closing Date.
5.3 DELIVERIES BY THE SELLER AT CLOSING. At the Closing, the Seller
shall deliver to the Buyer the following, each in form satisfactory to the Buyer
and its counsel:
(a) duly executed bills of sale and/or other instruments of
assignment from the Seller to the Buyer covering the personal property to
be transferred and conveyed by the Seller to the Buyer hereunder;
(b) appropriate certificates of title to all vehicles to be conveyed
by the Seller to the Buyer, duly endorsed or otherwise executed and in
proper form pursuant to Pennsylvania law for reissuance of such
certificates in the name of the Buyer free of liens and security interests;
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(c) one or more special warranty deeds conveying the Emlenton Wax
Plant and the McKean Plant real property; and one or more assignments duly
and validly conveying the leases, license agreements, certificates of
occupancy and rights of way (if required to be separately assigned)
associated with the Facilities;
(d) possession of the Assets;
(e) all necessary consents from third parties approving the
assignment by the Seller in favor of the Buyer of all permits, licenses and
registrations associated with the Facilities;
(f) all consents from third parties necessary to approve the
assignment, sublease or the grant of an option by the Seller in favor of
the Buyer of all contracts and leases associated with the Facilities;
(g) the duly executed certificate of the Secretary or an Assistant
Secretary of the Seller, dated as of the Closing Date, certifying
resolutions duly adopted by the Seller's Board of Directors authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby on the part of the Seller;
(h) a certificate of the Seller's good standing in the State of
Delaware and a certificate of the Seller's qualification to conduct
business as a foreign corporation in the Commonwealth of Pennsylvania;
(i) such other documents as the title insurance company selected by
the Buyer may reasonably require to insure title to the real property to be
transferred to the Buyer pursuant to this Agreement;
(j) originals or true and correct copies of all leases, contracts,
licenses, books and records, and certified copies of all permits, which are
to be transferred and assigned to the Buyer pursuant to this Agreement;
(k) evidence satisfactory to the Buyer that that certain lease
agreement dated July 24, 1989 by and between the Seller and Kimes Petrotech
Associates, Inc. has been properly and validly terminated;
(l) true and correct copies of the reports and information prepared
by Duncan Lagnese & Associates (or its successors) regarding the
Facilities; and
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(m) all original records, files and reports included among the
Excluded Assets pursuant to Sections 3.3(h) and 3.3(i) that the Seller,
using its best efforts, is able to provide prior to the Closing; and
(n) such other documents as the Buyer may reasonably require to
effectuate the sale, conveyance and assignment and other transactions
herein contemplated to be consummated at or before the Closing.
5.4 DELIVERIES BY THE BUYER AT CLOSING. At the Closing, the Buyer
shall execute and deliver to the Seller the following, each in form satisfactory
to the Seller and its counsel:
(a) a wire transfer of immediately available funds in favor of Seller
in the amount specified in Section 4.2;
(b) the Note;
(c) an undertaking executed and delivered for and on behalf of the
Buyer, whereby the Buyer assumes and agrees to pay and discharge in due
course and perform in full the Assumed Liabilities;
(d) a certificate of the Buyer's good standing in the State of
Delaware and a certificate of the Buyer's qualification to conduct business
as a foreign corporation in the Commonwealth of Pennsylvania; and
(e) such other documents as the Seller may reasonably require to
effectuate the sale, conveyance and assignment and other transactions
herein contemplated to be consummated at or before the Closing.
5.5 JOINT DELIVERIES BY THE BUYER AND THE SELLER AT THE CLOSING. At
the Closing, the Buyer and the Seller shall execute and deliver to the other the
following:
(a) the Gas Purchase Agreement substantially in the form attached as
Exhibit B hereto;
(b) the Slack Wax and Petrolatum Purchase Agreement substantially in
the form attached as Exhibit C hereto; and
(c) the Crude Oil Purchase and Sale Agreement substantially in the
form attached as Exhibit D hereto.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows:
6.1 ORGANIZATION. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business, including the business of the
Facilities as now being conducted.
6.2 AUTHORIZATION OF AGREEMENT. The Seller has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by the Board of Directors of the Seller and no
other corporate proceedings on the part of the Seller are necessary to authorize
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Seller and constitutes a valid and binding
agreement of the Seller, enforceable in accordance with its terms (except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally or by the principles governing the availability of equitable
remedies).
6.3 COMPLIANCE WITH CHARTER AND OTHER INSTRUMENTS. The execution,
delivery and performance by the Seller of this Agreement and the consummation by
the Seller of the transactions contemplated hereby will not, with or without the
giving of notice or the passage of time, (a) violate, in any material respect,
any law, ordinance, rule or regulation, or any judgment, writ, injunction or
order of any court, arbitrator or governmental, administrative or
self-regulatory authority, applicable to the Seller, (b) constitute a violation
of or conflict with any provision of the Certificate of Incorporation or By-laws
of the Seller, (c) require the consent, approval, permission or other
authorization of or waiver by or filing or qualification with any court,
arbitrator or governmental, administrative or self-regulatory authority (other
than (i) any requisite filings
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with the Securities and Exchange Commission and related stock exchange filings,
and (ii) where the failure to obtain such consent, approval, permission, or to
make such notification or qualification would not have a material adverse effect
on the Facilities, the Assets or the purchase and sale thereof as contemplated
by this Agreement); the Buyer acknowledges that the Seller is relying on the
Buyer's representation and warranty set forth in Section 7.4 hereof that no
filing is required to be made by or on behalf of the Buyer (or any person or
entity that includes the Buyer) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") in connection herewith, or (d) except
as set forth in Schedule 6.3 hereto, conflict with, or result in the breach,
modification or termination of, require the consent or authorization of or
waiver by, or filing with, any other parties to, or result in the creation of
any lien, security interest, charge, or encumbrance of any nature whatsoever
(collectively, "Encumbrances") upon the Assets under, or constitute a default
under, any license, franchise, contract, lease, mortgage, indenture, agreement
or other instrument to which the Seller is a party or by which any of the assets
or properties of the Seller are bound or from which they derive benefit, the
result of which would have a material adverse effect on the Facilities or the
Assets.
6.4 COMPLIANCE WITH LAWS. Except as set forth on Schedule 6.4
hereto, the Seller is in compliance in all material respects with all applicable
statutes and regulations relating to the operations of the Facilities (including
without limitation all applicable Environmental Laws and zoning and other
similar ordinances and regulations) of all governmental authorities having
jurisdiction over the operation of the Facilities.
6.5 REAL PROPERTY. Schedule 3.2(a) hereto includes a complete list
of all real property owned by the Seller and used in connection with the
Coleville Station (the "Coleville Real Property"). Schedules 3.1(a)(i) and
3.1(b)(i) hereto set forth a true and complete description of the land owned by
the Seller at the McKean Plant and Emlenton Wax Plant (which together with all
appurtenances thereto and improvements thereon shall be referred to as the
"McKean and Emlenton Real Property"). The Seller has good and marketable fee
title to all of the Coleville Real Property and to all of the Emlenton and
McKean Real Property (together, the "Real Property"), free and clear of all
Encumbrances and rights and interests whatsoever of third parties, except (i)
the lien of current real property taxes which may be a lien but are not yet due
and
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payable, (ii) the title exceptions (the "Permitted Exceptions") set forth on
Schedule 6.5(a) hereto and the title exceptions set forth on Schedule 6.5(b)
here to be removed by the Closing Date set forth on Schedule 6.5(b) hereto.
6.6 PERSONAL PROPERTY. The Seller has good and marketable fee title
to all of the items of machinery, equipment, computer hardware and software,
motor vehicles, office furniture, fixtures and similar personal property (the
"Personal Property") owned by the Seller and used in connection with the
Facilities, free and clear of all Encumbrances and rights and interests
whatsoever of third parties, except (i) as disclosed in Schedule 6.6(a) hereto
and (ii) the lien of current personal property taxes which may be a lien but are
not yet due and payable. Schedule 6.6(b) hereto sets forth a true and complete
list of all items of Personal Property which constitute the various processing
units and systems used by or at the Facilities.
6.7 VALIDITY OF LEASES AND CONTRACTS. Schedules 3.1(a)(ii),
3.1(a)(iii), 3.1(b)(ii) and 3.1(b)(iii) hereto set forth a complete list of all
leases and subleases, contracts, easements and rights of way (whether written or
oral) of or with respect to real or personal property used in connection with
the business of the Facilities, all contracts and commitments relating to the
Assets or the Facilities assumed in the Assumed Liabilities and all licenses and
agreements with railroad companies necessary to assure rail transportation to
and from the McKean Plant. Except as disclosed in such Schedules, each lease
pursuant to which the Seller leases real or personal property included in the
Assets, and each other easement, right of way, contract or commitment of the
Seller listed in such Schedules, is to the best knowledge of the Seller valid
and enforceable against the Seller and the other parties thereto in accordance
with its terms and none of the Seller nor any other party to any such lease,
easement, right of way, contract or commitment is in default in any material
respect under any provision of any such lease, easement, right of way, contract
or commitment. Except as disclosed in such Schedules, none of the Seller nor
any other party is in default under any restrictive covenant, license agreement
or document recorded against the property which relates to any real or personal
property included in the Assets.
6.8 PERMITS AND LICENSES. Schedule 6.8 hereto sets forth a complete
list of each material permit, license, approval, consent, franchise and
authorization, including those required under any Environmental Laws, of
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administrative agencies and other governmental authorities that has been granted
to or obtained by the Seller in connection with the conduct of the business of
the Facilities and that is in effect on the date hereof. All permits, licenses,
approvals, consents, franchises and authorizations required by administrative
agencies and the governmental authorities to be obtained by the Seller in
connection with the ownership of the Assets and the conduct of the business,
including those required under any Environmental Laws, of the Facilities have
been obtained and are in effect.
6.9 LITIGATION. Except as set forth on Schedule 6.9 hereto, there
are no actions, notices of violation, suits, proceedings or, to the best
knowledge of the Seller, investigations (civil or criminal) pending or
threatened against the Seller at law or in equity (including pursuant to any
Environmental Law), by or before any court or federal, state, municipal or other
governmental department, commission, board, agency or instrumentality, domestic
or foreign involving any of the Assets; the Seller is not operating the
Facilities under or subject to, or in default with respect to, any order, writ,
injunction or decree of any court or federal, state, municipal or governmental
department, commission, board, agency or instrumentality, domestic or foreign.
6.10 INSURANCE POLICIES. Schedule 6.10 attached hereto is a list of
all of the insurance policies of the Seller currently in force covering (i)
property damage to any Asset and loss of income of the Seller relative to the
Facilities by fire or other casualty or (ii) product and other liabilities of
the Seller relative to the Facilities against which the Seller is insured.
6.11 LABOR AND EMPLOYMENT MATTERS. Except as set forth in Schedule
6.11 attached hereto, there is no (i) collective bargaining agreement or other
labor agreement to which the Seller is a party or by which it is bound and
affecting any employee of the Facilities; or (ii) employment, profit sharing,
deferred compensation, bonus, stock option or purchase, retainer, consulting,
retirement, welfare or incentive plan, "employee benefit plan" as defined in
Section 3(3) of ERISA or contract to which the Seller is a party or by which it
is bound and affecting any employee of the Facilities. The Seller acknowledges
that the Buyer is assuming no liability or obligation with respect to any of the
foregoing agreements, plans or arrangements.
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6.12 NO BROKERS. The Seller has not entered into and will not enter into
an agreement, arrangement or understanding with any person or firm which will
result in the obligation of the Buyer to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
6.13 DISCLOSURE. No representation or warranty made by the Seller in this
Agreement and no statement contained in any document, certificate or other
writing furnished or to be furnished by the Seller pursuant to the provisions
hereof or in connection with the transactions contemplated hereby, including
without limitation the Exhibits and Schedules attached hereto, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary to make the statements herein or therein not
misleading.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
7.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted.
7.2 AUTHORIZATION OF AGREEMENT. The Buyer has full power and authority to
execute and deliver this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Buyer and no other proceedings on
the part of the Buyer are necessary to authorize the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Buyer and
constitutes a valid and binding agreement of the Buyer, enforceable in
accordance with its terms (except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally or by the principles governing the
availability of equitable remedies).
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7.3 COMPLIANCE WITH CHARTER AND OTHER INSTRUMENTS. The execution,
delivery and performance by the Buyer of this Agreement and the consummation by
the Buyer of the transactions contemplated hereby will not, with or without the
giving of notice or the passage of time, (a) violate, in any material respect,
any law, ordinance, rule or regulation, or any judgment, writ, injunction or
order of any court, arbitrator or governmental, administrative or
self-regulatory authority, applicable to the Buyer, (b) constitute a violation
of or conflict with any provision of the Certificate of Incorporation or By-laws
of the Buyer, (c) require the consent, approval, permission or other
authorization of or waiver by or filing or qualification with any court,
arbitrator or governmental, administrative or self-regulatory authority (other
than where the failure to obtain such consent, approval, permission, or to make
such notification or qualification would not have a material adverse effect on
the Buyer or the purchase and sale of the Assets as contemplated by this
Agreement), or (d) except as set forth in Schedule 7.3 hereto, conflict with, or
result in the breach, modification or termination of, require the consent or
authorization of or waiver by, or filing with, any other parties to, any
license, franchise, contract, lease, mortgage, indenture, agreement or other
instrument to which the Buyer is a party or by which any of the assets or
properties of the Buyer are bound or from which they derive benefit, the result
of which would have a material adverse effect on the Buyer.
7.4 CONSENTS AND APPROVALS. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority or other person or entity which is required to be made or obtained by
the Buyer in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby has not been so made or
obtained. No filing under the HSR Act is required to be made by or on behalf of
the Buyer (or any person or entity that includes the Buyer) in connection with
the acquisition of the Assets by the Buyer contemplated hereby.
7.5 DISCLAIMER OF ADDITIONAL AND IMPLIED WARRANTIES. The Buyer
acknowledges that the Assets are used and that the Buyer has had the opportunity
to inspect the Assets to the extent deemed necessary by the Buyer. The Assets,
except as provided in Articles VI and X, are sold AS IS and without any warranty
or representation by the Seller as to their condition, operability, efficiency
of operation, or suitability for the Buyer's intended
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use. The Seller specifically DISCLAIMS AND EXCLUDES FROM THIS AGREEMENT THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.
7.6 NO BROKERS. The Buyer has not entered into and will not enter into an
agreement, arrangement or understanding with any person or firm which will
result in the obligation of the Seller to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
ARTICLE VIII
COVENANTS
8.1 CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof and the
Closing Date, except as otherwise approved in advance in writing by the Buyer,
the Seller shall:
(a) operate the business of the Facilities only in the ordinary
course, consistent with past practice;
(b) maintain all of the Assets in their present repair, order and
condition and maintain insurance upon all of the Assets and with respect to
the conduct of the business of the Facilities, in amounts and kinds
comparable to that in effect on the date hereof;
(c) not sell or transfer any of the Assets except for sales or
transfers made in the ordinary course of business and consistent with past
practice;
(d) maintain the accounts and records related to the Facilities in
the ordinary course, consistent with past practice;
(e) comply with all material laws applicable to the Facilities and to
the conduct of the business of the Facilities;
(f) perform all its material obligations related to the Facilities
without fault;
(g) not transfer or grant any rights under any concessions, leases,
licenses, agreements, patents, inventions, trademarks, trade names,
servicemarks, brandmarks, brandnames or copyrights or with respect to any
know-how included in the Assets;
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(h) refrain from doing any act or from omitting to do any act that
will cause a material breach of any lease, contract or commitment listed in
Schedules 3.1(a)(ii), 3.1(a)(iii), 3.1(b)(ii) and 3.1(b)(iii) hereto or
entering into any agreement to amend, modify, renew or terminate any such
lease, contract or commitment except for termination of the lease agreement
with Kimes Petrotech Associates, Inc., as provided in Section 5.3(k)
hereof;
(i) not otherwise incur any obligation or liability (fixed or
contingent) in respect of the Facilities, except normal trade or business
obligations incurred in the ordinary course of business and consistent with
past practice and except in connection with this Agreement and the
transactions contemplated hereby; and
(j) notwithstanding clause (c) of this Section 8.1, not enter into
any contract or commitment in any way affecting the Assets and involving
either a term of more than 30 days or a sum in excess of $100,000.
8.2 ACCESS TO RECORDS.
(a) Prior to the Closing Date, designated representatives of the
Buyer shall have reasonable access, during normal business hours, to the
books and records relating to the business of the Facilities, with the
reasonable right to make reproductions of same, and the Seller shall give
reasonable cooperation to such representatives of the Buyer with respect
thereto, subject to the Seller's right to have a designated officer
notified in advance of any prospective access to the Seller's premises;
PROVIDED, HOWEVER, that if such access would be disruptive as determined by
the Seller to the business of the Facilities or otherwise, it is agreed
that the notified designated officer of the Seller may designate an
alternative time, which shall be within 48 hours subsequent to the Buyer's
requested time, for such access to take place.
(b) The Buyer agrees, upon reasonable prior written notice and during
normal business hours, that it will permit authorized representatives of
the Seller to examine, make copies and extracts of, review and, if
necessary, obtain originals of the accounts, books and records and other
documents transferred to the Buyer and relating to the Assets which cover
the period prior to the Closing Date. The Buyer hereby
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agrees to retain and preserve, and make available to the Seller, all books
and records transferred to the Buyer pursuant to this Agreement until the
seventh anniversary of the date of this Agreement. Should the Seller
temporarily require original records retained by the Buyer during such
seven-year period, the same will be made available upon reasonable request.
Commencing seven years after the date of this Agreement and until nine
years after the date of this Agreement, the Buyer shall give the Seller
written notice of intention to dispose of any part of the files and records
of the Facilities, specifying the items to be disposed of in reasonable
detail. The Seller may, within a period of sixty calendar days from
receipt of any such notice, notify the Buyer of the Seller's desire to
retain one or more of the items to be disposed of. The Buyer shall, upon
receipt of such a notice from the Seller, deliver to the Seller at the
Seller's expense the items specified therein.
(c) The Seller agrees, upon reasonable prior written notice and
during normal business hours, that it will permit authorized
representatives of the Buyer to examine, make copies and extracts of,
review and, if necessary, obtain originals of the accounts, books and
records and other documents maintained by the Seller pursuant to Sections
3.3(h) and 3.3(i) hereof and relating to the Assets which cover the period
prior to the Closing Date. The Seller hereby agrees to retain and
preserve, and make available to the Buyer, all books and records maintained
by the Seller pursuant to this Agreement until the seventh anniversary of
the date of this Agreement. Should the Buyer temporarily require original
records retained by the Seller during such seven-year period, the same will
be made available upon reasonable request. Commencing seven years after the
date of this Agreement and until nine years after the date of this
Agreement, the Seller shall give the Buyer written notice of intention to
dispose of any part of the files and records of the Facilities, specifying
the items to be disposed of in reasonable detail. The Buyer may, within a
period of sixty calendar days from receipt of any such notice, notify the
Seller of the Buyer's desire to retain one or more of the items to be
disposed of. The Seller shall, upon receipt of such a notice from the
Buyer, deliver to the Buyer at the Buyer's expense the items specified
therein.
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(d) Within 90 days after the Closing Date, the Seller shall provide
the Buyer with true copies of all original records, files and reports
included among the Excluded Assets pursuant to Sections 3.3(h) and 3.3(i)
that the Seller has not already provided to the Buyer pursuant to Section
5.3(m).
8.3 GOVERNMENT CONSENTS. The Buyer shall use its best efforts to obtain
all licenses, permits and other authorizations from all governmental agencies
having jurisdiction over the Facilities that are necessary for the Buyer's
operation and occupancy thereof, on or before the Closing Date.
8.4 NON-GOVERNMENT CONSENTS. Each of the Buyer and the Seller shall use
its respective best efforts to obtain, to the extent necessary under any
agreements or instruments to which it is a party, appropriate consents in
writing to the transactions contemplated by this Agreement and such amendments,
assignments or modifications of such documents as may be reasonably required in
order that the transactions contemplated hereby will not result in any default
or penalty thereunder or termination or adverse modification thereof. Neither
the Buyer nor the Seller shall be in default under this Agreement for failure to
obtain such consents after using its best efforts to do so.
8.5 TAXES, RECORDING CHARGES AND PRE-CLOSING EXPENSES. The Buyer and the
Seller shall share equally all sales, use, transfer or other taxes due or
imposed upon or in connection with the sale of the Assets (other than income
taxes) under this Agreement at the time such taxes shall become due and payable;
PROVIDED, HOWEVER, that any such taxes due and payable in respect of any
vehicles to be conveyed by the Seller to the Buyer pursuant to Sections
3.1(a)(vi) and 3.1(b)(vi) shall be paid by the Buyer. The Buyer shall pay all
recording charges and fees with respect to the transfer of the Assets from the
Seller to the Buyer. The Seller assumes any and all liabilities for taxes and
deficiencies (including without limitation real property taxes) that accrue with
respect to the Assets prior to the Closing Date and the Buyer assumes any and
all liabilities for taxes and deficiencies (including without limitation real
property taxes) that accrue with respect to the Assets from and after the
Closing Date. The Buyer and the Seller shall pro rate all real property taxes,
rents, license fees, contract charges, utilities and other customarily adjusted
expenses incurred in the ordinary course of business at the Facilities that have
accrued as of the
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Closing Date. The Buyer and the Seller shall reimburse each other for such
expenses as soon as practicable after the Closing Date. Notwithstanding the
foregoing, neither the Seller nor the Buyer shall receive reimbursement for any
fees, charges or expenses incurred in obtaining any registrations, permits or
licenses required pursuant to any Environmental Laws.
8.6 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The Seller shall not at
any time after the date hereof divulge, furnish or make accessible to anyone any
knowledge or information with respect to confidential or secret processes,
inventions, discoveries, improvements, formulae, plans, material, devices or
ideas or know-how, whether patentable or not, with respect to any confidential
or secret aspects of the Facilities' business (including, without limitation,
customer lists, supplier lists and pricing arrangements with customers or
suppliers) and the Seller shall cooperate with the Buyer in preserving such
confidential or secret aspects of the Facilities' business; PROVIDED, HOWEVER,
that nothing herein shall prohibit the Seller from complying with any order or
decree of any court of competent jurisdiction or governmental authority, but the
Seller shall give the Buyer timely notice of the receipt of any such order or
decree and the foregoing provision shall not apply to any information which is
or becomes generally available to the public through no breach of this
Agreement.
8.7 FURTHER ASSURANCES; COOPERATION. Subject to the provision of Article
X hereof:
(a) From time to time at the Buyer's request and without further
consideration, the Seller shall (and shall cause its officers, directors,
employees, affiliates and agents to) execute and deliver such other
instruments of conveyance, transfer and assignment or take such other
action as the Buyer may reasonably request more effectively to convey,
transfer to and vest in the Buyer and to put the Buyer in possession and
operating control of all or any part of the Assets, including, without
limitation, cooperating with and assisting the Buyer in the prosecution of
any claims and in the implementation of various administrative systems in
connection with the operation of the Facilities.
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(b) For a period of three years after the Closing Date, the Seller
and the Buyer shall fully cooperate and assist each other in connection
with the investigation, prosecution, defense, conduct and settlement of all
claims, suits and proceedings, whether arising before or after the Closing
Date, involving the Buyer or the Seller, relating to the Assets. Such
cooperation and assistance shall include, without limitation, making
available for reasonable periods of time during normal business hours the
time of those employees whose assistance is reasonably necessary or
required in connection with the investigation, prosecution, defense,
conduct or settlement of such claims, suits and proceedings; PROVIDED,
HOWEVER, that the party requesting such assistance shall reimburse the
other for reasonable costs to compensate for time spent by such employees
and reasonable out-of-pocket costs and expenses (including without
limitation, transportation, meals and lodging expenses incurred by such
employees).
8.8 FINISHED GOODS. All inventories of finished waxes, lube base oils,
motor oil, gasoline, diesel fuel, kerosene and mineral seal oil at the
Facilities as of the opening of business on the Closing Date shall be and remain
the property of the Seller; PROVIDED, HOWEVER, that the Seller may leave such
finished goods at the Facilities for a period not to exceed 180 days after the
Closing Date. The Seller shall bear the risk of loss of these inventories and
shall pay all applicable third party charges, all costs for storage and handling
incurred by the Buyer and all costs to remove such goods from the Facilities,
all as set forth on Schedule 8.8 hereto. The Buyer shall exercise reasonable
care over the Seller's goods stored at the Facilities.
8.9 TERMINAL ARRANGEMENTS. The Seller agrees that the Buyer may take
delivery of orders for raw slack wax and raw slack petrolatum purchased from
third party suppliers at the Seller's Congo, West Virginia Refinery (the "Congo
Refinery"). The Buyer may store each such delivered order of raw slack wax and
raw slack petrolatum at the Seller's Congo Refinery for a period of 90 days from
the Closing. The Buyer may not store an aggregate total of more than 10,000
barrels of raw slack wax and raw slack petrolatum at the Congo Refinery at any
one time. The Buyer shall bear the risk of loss of such goods and shall pay all
applicable third party charges, all costs for storage and handling incurred by
the Seller and all costs to remove such goods from the Congo Refinery, all as
set forth in Schedule 8.8 attached hereto. The Seller shall exercise reasonable
care over the Buyer's goods stored at the Congo Refinery.
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8.10 CONTACTS WITH CUSTOMERS. The Seller agrees to use its reasonable
efforts to introduce the Buyer to the lube base oil customers of the Seller and
shall, for a period of one month following the Closing Date and at no additional
cost to the Buyer, use its best efforts to assist the Buyer in selling all of
the lube base oils produced at the Facilities. Notwithstanding the foregoing,
the Seller shall be under no obligation hereunder to ensure that the Buyer has
an adequate customer base in connection with the Buyer's operation of the
Facilities. For a period of one year commencing 31 days after the Closing Date,
the Seller shall act as the Buyer's agent for the sale of the Buyer's "125 vis
neutral" lube base oil for a fee of $.005 per gallon and shall use its best
efforts to assist the Buyer in selling such product so long as the Buyer
continues to manufacture such product in accordance with the Seller's February,
1990 specifications therefor.
8.11 SATISFACTION OF EMPLOYEE OBLIGATIONS. As of the Closing Date, the
Seller shall have discharged, paid or satisfied, to the extent due and payable
prior to the Closing Date, all obligations through and including the date
immediately preceding the Closing Date to the employees of the Seller in
connection with the business associated with the Facilities for salaries, wages,
accrued vacation pay and all employee benefits, including but not limited to
benefits or rights under any pension plan covering such employees. The Buyer
shall not assume any liability with respect to such amounts notwithstanding the
fact that it may employ after the Closing Date all or substantially all of such
employees.
8.12 DISTRIBUTIONS TO EMPLOYEES BY THE SELLER. The Seller shall not
distribute to any employee of the Seller employed at the Facilities amounts
attributable to contributions made to the Quaker State Thrift and Stock Purchase
Plan if such distribution would adversely affect the qualified status of such
plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") or the exempt status of the trust forming part of such plan under
Section 501(a) of the Code.
8.13 TITLE AND SURVEY REVIEW. The Buyer has ordered from the Title
Insurer title reports (the "Title Reports") and surveys (the "Surveys") for the
McKean and Emlenton Real Property. If there are any title exceptions with
respect to the McKean and Emlenton Real Property other than the Permitted
Exceptions set forth on Schedule 6.5(a) hereto which the Seller has not removed
by the Closing Date (and the Seller hereby agrees to cure and
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remove any monetary encumbrances which the Seller has caused or permitted to be
placed on the Real Property), then the Buyer shall have the right to terminate
this Agreement and neither party shall have any further rights or obligations
hereunder. The Buyer shall be conclusively deemed to have waived any title
exceptions with respect to the McKean and Emlenton Real Property (including, but
not limited to, Permitted Exceptions which remain as of the Closing Date) by
consummating the transactions contemplated by this Agreement to occur on the
Closing Date.
ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as set
forth in Article X hereof, all representations, warranties and covenants
(including obligations to indemnify hereunder) of the parties made in this
Agreement or as provided herein shall survive the Closing Date for a period of
four years from the Closing Date; PROVIDED, HOWEVER, that if a valid claim
arises hereunder in respect of a representation, warranty or covenant and a
notice of such claim is given prior to the expiration of such four-year period,
then such representation, warranty or covenant shall not terminate with respect
to such claim until indemnification with respect thereto (if any is owing) shall
have been made in accordance with the provisions of this Agreement or shall have
been judicially determined not to be owing and such determination is final and
not appealable; PROVIDED, FURTHER, that a general notice of a reservation of
rights shall not be sufficient for purposes of tolling such four-year period.
Notwithstanding anything to the contrary herein, the representations and
warranties set forth in Section 6.5 hereof shall not survive the Closing Date.
9.2 AGREEMENT TO INDEMNIFY; MINIMUM OBLIGATION. Except as set forth in
Article X hereof, each party (an "Indemnifying Party") shall indemnify, defend
and hold harmless the other party and its directors, officers, employees,
affiliates, lenders and other assigns (an "Indemnified Party") from and against
and in respect of any and all losses, liabilities, damages, deficiencies, costs
or expenses (including, but not limited to, interest, penalties and attorneys'
fees and disbursements) (each, a "Loss" and collectively, the "Losses") based
upon, arising out of or otherwise in respect of any inaccuracy in or breach of
any representation, warranty,
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covenant or agreement of the Indemnifying Party contained in this Agreement;
PROVIDED, HOWEVER, that in the case of any such breach of representation,
warranty, covenant or agreement, no such indemnification right shall give rise
to a liability of the Indemnifying Party for any individual Loss which is less
than $10,000; and PROVIDED, FURTHER, that the Indemnifying Party shall have no
obligation to indemnify the Indemnified Party until the aggregate amount of all
Losses asserted by the Indemnified Party against the Indemnifying Party shall
exceed $100,000.
9.3 NOTICE OF ASSERTED LIABILITY. Promptly after receipt of notice of any
demand, claim or circumstance which, with or without the lapse of time, would
give rise to a claim or the commencement of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnified Party shall give notice thereof (the "Claims Notice") to the
Indemnifying Party. The Claims Notice shall describe the Asserted Liability in
reasonable detail and shall indicate the amount (estimated, if necessary) of the
Loss that has been or may be suffered by the Indemnified Party.
9.4 TIME LIMITATION. The Indemnifying Party shall have no obligation to
indemnify the Indemnified Party with respect to any Loss or Asserted Liability
unless the Indemnified Party delivers to the Indemnifying Party a Claims Notice
with respect thereto within four years following the Closing Date. No general
or generic Claims Notice shall be sufficient to toll the above time limitation.
9.5 OPPORTUNITY TO DEFEND. The Indemnifying Party may elect to compromise
or defend, at its own expense and by its own counsel if approved by the
Indemnified Party (such approval not to be unreasonably withheld), any Asserted
Liability. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within 30 days of the Claims Notice (or sooner, if
the nature of the Asserted Liability so requires) notify the Indemnified Party
of its intent to do so, and. the Indemnified Party shall cooperate, as requested
by and at the expense of the Indemnifying Party, in the compromise of, or
defense against, such Asserted Liability and the parties agree to give each
other full access to all information relevant thereto and reasonable access to
each other's employees during normal business hours, upon reasonable notice. If
the Indemnifying Party elects not to compromise or defend the Asserted
Liability, fails to notify the Indemnified Party of its election as herein
provided or contests its obligation to indemnify
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under this Agreement, the Indemnified Party may pay, compromise or defend such
Asserted Liability. Notwithstanding the foregoing, neither the Indemnifying
Party nor the Indemnified Party may settle or compromise any claim over the
objection of the other; PROVIDED, HOWEVER, that consent to settlement or
compromise shall not be unreasonably withheld. In any event, the Indemnified
Party and the Indemnifying Party may participate, at their own expense, in the
defense of such Asserted Liabilities.
ARTICLE X
ENVIRONMENTAL MATTERS
10.1 COVENANTS OF THE SELLER.
(a) The Seller shall cooperate with and assist the Buyer, as
required, in the transfer or issuance of all permits and licenses required by
the Environmental Laws for the operation of the Facilities.
(b) The Seller shall provide the Buyer with copies of all notices and
information relating to the Facilities provided to federal, state or local
governmental agencies pursuant to Title III of the Superfund Amendments and
Reauthorization Act (42 U.S.C. SECTION 11101, ET SEQ.).
(c) The Seller shall initiate prior to Closing and thereafter
complete as soon as practicable closure of all current "Interim Status"
Hazardous Waste treatment, storage and Disposal facilities which are part of the
Assets, including but not limited to,
(i) withdrawal of all RCRA Part B permit applications,
(ii) removal from the Facilities and Disposal of any Hazardous
Wastes being stored at the time of Closing,
(iii) closure of all drum storage facilities, and
(iv) obtaining and maintaining all related Financial
Responsibility associated with closure and post-closure of the foregoing.
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(d) The Seller agrees to undertake all Remedial Work as requested by
Buyer subject to the provisions of Section 10.4 hereof.
(e) The Seller agrees to provide reasonable notice to the Buyer
of:
(i) its intention to undertake any Remedial Work;
(ii) any Remedial Work which might result in any
interference to or disturbance of the Buyer's
business;
(iii) any meetings with Regulatory Authorities concerning
Remedial Work at the Facilities; and
(iv) any information that a Regulatory Authority or other
third party is considering or intends to bring any
claim or cause of action against the Buyer and/or the
Seller including, but not limited to, administrative
or judicial enforcement actions pursuant to any
Environmental Law, any citizen suit pursuant to any
Environmental Law or any common law claim alleging a
violation of Environmental Laws or Disposal of
Hazardous Materials before the Closing Date.
(f) The Seller agrees to provide the Buyer with copies of all
reports, data, writings or other communications which directly concern the
Remedial Work, except any document which is covered by the attorney-client
privilege or constitutes attorney work product protected by the federal or
state rules of civil procedure, the disclosure of which would materially
adversely affect the Seller's interests solely with respect to third
parties.
(g) The Seller agrees that the Buyer shall have the opportunity to
observe all Remedial Work at the Facilities and, at its own expense, to
obtain splits of any samples taken by the Seller during the conduct of the
Remedial Work, provided, however, that the performance of Remedial Work by
the Seller shall not be delayed due to the Buyer's unavailability.
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(h) The Seller agrees to use only those engineering and consulting
firms to perform Remedial Work that have been approved by the Buyer, such
approval not to be unreasonably withheld. The Seller agrees that all
engineering and consulting firms engaged by the Seller to perform Remedial
Work shall have in full force and effect policies of insurance insuring
against such damages, losses and costs and in such amounts as are standard
in the industry.
(i) The Seller shall use its best efforts to minimize disruption of
the Buyer's operations while performing any Remedial Work at the
Facilities.
(j) The Seller shall comply with all applicable Environmental Laws in
conducting any Remedial Work at the Facilities.
(k) The Seller shall provide the Buyer with true copies of all
documents relating to the Policies (as that term is defined in Section 10.6
hereof) within 10 days after the Seller first gives or receives any notice
from the Buyer pursuant to the terms of this Article X.
10.2 COVENANTS OF THE BUYER.
(a) The Buyer shall use its best efforts to effectuate the transfer
or reissuance, as the case may be, of all permits and licenses required by
the Environmental Laws for the operation of the Facilities.
(b) The Buyer shall provide the Seller with copies of all notices and
information relating to the Facilities provided to federal, state or local
government agencies pursuant to Title III of the Superfund Amendments and
Reauthorization Act (42 U.S.C. Section 1101, et seq.).
(c) The Buyer shall conduct all management and Disposal of Hazardous
Materials generated by the Buyer during manufacturing and refining
processes at the Facilities after the Closing Date in accordance with
Environmental Laws.
(d) Except as set forth in Section 10.3 hereof, the Buyer shall be
responsible for all Maintenance Work after the Closing Date.
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(e) The Buyer agrees to use only those engineering and consulting
firms to perform Remedial Work that have been approved by the Seller, such
approval not to be unreasonably withheld.
(f) The Buyer agrees to provide the Seller with copies of all
reports, data, writings or other communications which directly concern the
Remedial Work except any document which is covered by the attorney-client
privilege or constitutes attorney work product protected by the federal or
state rules of civil procedure, the disclosure of which would materially
adversely affect the Buyer's interests solely with respect to third
parties.
(g) The Buyer agrees that the Seller shall have the opportunity to
observe all Remedial Work at the Facilities and, at its own expense, to
obtain splits of any samples taken by the Buyer during conduct of the
Remedial Work, provided, however, that the performance of Remedial Work by
the Buyer shall not be delayed due to the Seller's unavailability.
(h) The Buyer agrees to provide reasonable notice to the Seller of:
(i) its intention to undertake any Remedial Work;
(ii) any meetings with Regulatory Authorities concerning
Remedial Work at the Facilities;
(iii) any information that a Regulatory Authority or other third
party is considering or intends to bring any claim or cause
of action against the Buyer and/or the Seller including,
but not limited to, administrative or judicial enforcement
actions pursuant to any Environmental Law, any citizen suit
pursuant to any Environmental Law or any common law claim
alleging a violation of Environmental Laws or disposal of
Hazardous Materials before the Closing Date;
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(iv) the release of a Hazardous Material which must be reported
by the Buyer, its employees or agents to federal, state or
local authorities pursuant to any Environmental Laws and the
release of petroleum or petroleum products in excess of 100
gallons which is not required to be reported to federal,
state or local authorities, such notices to be given
verbally to a person designated in advance by the Seller to
be followed by written notice within 10 days thereafter; and
(v) its intention to sell or transfer either or both of the
Facilities and the identity of the prospective Buyer, such
notice shall be given at least 90 days prior to consummation
of a sale or transfer.
(i) The Buyer shall notify Regulatory Authorities of all releases of
Hazardous Materials at the Facilities as required by any Environmental Law.
(j) The Buyer shall make available to the Seller any records of
spills that are prepared by the Buyer.
(k) The Buyer shall be responsible for all violations by the Buyer of
Environmental Laws which occur after the Closing Date, including, but not
limited to, all civil penalties and modifications arising thereunder not
otherwise the responsibility of the Seller pursuant to Section 10.4(b)(i)
hereof.
(l) The Buyer shall not communicate directly or indirectly with
Regulatory Authorities, including submitting test results to Regulatory
Authorities, for the purpose of accelerating the Seller's or the Buyer's
responsibility to perform Remedial Work. Notwithstanding the foregoing
sentence, the Buyer shall not be precluded from making any communication or
taking any action required by law.
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(m) The Buyer shall comply with all applicable federal, state and
local laws and regulations pertaining to the conduct of Remedial Work in
conducting any Remedial Work at the Facilities.
(n) The Buyer shall:
(i) allow the Seller and all engineering and consulting firms
selected by the Seller and approved by the Buyer to conduct
Remedial Work free from unreasonable interference, demands,
eviction, or disturbances by the Buyer;
(ii) cooperate and assist the Seller and any engineering and
consulting firms selected by the Seller and approved by the
Buyer if the Seller is conducting Remedial Work; and
(iii) not use any portion of the Facilities in any manner that
would adversely affect any remedial measure (including any
monitoring system) installed pursuant to this Agreement.
10.3 CERTAIN UNDERSTANDINGS REGARDING REMOVAL AND DISPOSAL OF HAZARDOUS
WASTES AFTER CLOSING. In the case where Hazardous Wastes are accumulating in
active units and continue to accumulate in such units following the Closing, at
such time subsequent to Closing as such accumulation is removed and Disposed of,
the Buyer and the Seller shall equally divide responsibility for the cost of the
first such removal and Disposal. The Buyer shall be responsible for the cost of
any subsequent removal and Disposal of Hazardous Wastes from such units.
10.4 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS.
(a) SURVIVAL OF COVENANTS AND
INDEMNIFICATIONS.
(i) All covenants contained in this Article X shall survive for
20 years after the Closing Date;
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(ii) all indemnifications for Remedial Work shall survive for 20
years after the Closing Date;
PROVIDED, HOWEVER, that if a valid claim arises hereunder in respect of a
covenant and a notice of such claim is given prior to the expiration of
such 20-year period, then such covenant shall not terminate with respect to
such claim until indemnification with respect thereto (if any is owing)
shall have been made in accordance with the provisions of this Agreement or
shall have been judicially determined not to be owing and such
determination is final and not appealable; PROVIDED, FURTHER, that a
general notice of a reservation of rights shall not be sufficient for
purposes of tolling such 20-year period.
(b) THE SELLER'S INDEMNIFICATION OBLIGATIONS. The Seller shall
indemnify, defend and hold harmless the Buyer, its officers, directors,
employees, affiliates and agents, for
(i) COMPLIANCE COSTS. All Compliance Costs, which include:
[x] civil penalties for violations of Environmental Laws which
occurred before the Closing Date and civil penalties for
violations of Environmental Laws which existed on the
Closing Date and continue thereafter, but only for the
period up to 180 days after Closing; and
[y] the cost of all modifications necessary to achieve
compliance with all Environmental Laws as of the Closing
Date including, but not limited to, repairs or renovation of
existing equipment or purchase and installation of new
equipment necessary to achieve compliance with applicable
Environmental Laws effective on the Closing Date.
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(ii) OFF-SITE DISPOSAL COSTS. Any costs expended or liabilities
associated with any Disposal of wastes at locations other than
the Facilities by the Seller, whether such wastes were generated
from the Facilities or from elsewhere. Such costs and liabilities
shall include, but not be limited to, liabilities under any
Environmental Law and any state analogue.
(iii) REMEDIAL COSTS.
[x] Fifty percent (50%) of the first $10,000,000 of Remedial
Costs incurred, and
[y] one hundred percent (100%) of all Remedial Costs incurred
thereafter prior to the twentieth anniversary of the Closing
Date, and
[z] Remedial Costs incurred subsequent to the twentieth
anniversary of the Closing Date shall be borne by the Buyer
and the Seller in a manner to be determined in accordance
with the law in effect at such time.
PROVIDED, HOWEVER, that the Seller shall have no obligation with respect to
Remedial Costs incurred as a result of the negligent performance of
Remedial Work by or on behalf of the Buyer; and PROVIDED, FURTHER, that the
Seller shall have no obligation to indemnify the Buyer for reasonable
disruptions or interferences with the operations of the Buyer's business
reasonably incurred as a result of the performance of Remedial Work by the
Seller in accordance with the provisions of this Agreement.
(iv) GENERAL INDEMNITY. Any costs associated with any claims, causes
of action, damages, liabilities or expenses including reasonable
attorneys' fees, to the extent such claims, causes of action,
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damages, liabilities and expenses result from the Seller's
operation of the Facilities prior to the Closing Date.
(c) THE BUYER'S INDEMNIFICATION OBLIGATIONS. The Buyer shall indemnify,
defend and hold harmless the Seller, its officers, directors, employees,
affiliates and agents, for:
(i) REMEDIAL COSTS.
[x] Fifty percent (50%) of the first $10,000,000 of the
Remedial Costs incurred prior to the twentieth
anniversary of the Closing Date, and
[y] Remedial Costs incurred subsequent to the twentieth
anniversary of the Closing Date shall be borne by the
Buyer and Seller in a manner to be determined in
accordance with the law in effect at such time.
PROVIDED, HOWEVER, that the Buyer shall have no obligation with respect to
Remedial Costs incurred as a result of the negligent performance of Remedial
Work by or on behalf of the Seller.
(ii) GENERAL INDEMNITY. Any costs associated with any claims,
causes of action, damages, liabilities or expenses,
including reasonable attorneys' fees, which result from the
Buyer's operation of the Facilities subsequent to the
Closing Date.
(d) INDEMNIFICATION PROCEDURES.
(i) If it is determined that Remedial Work is required at the Facilities,
the Buyer may either perform such Remedial Work itself or else notify
the Seller to do so. If the Buyer so notifies the Seller, then the
Seller shall acknowledge the receipt of such
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notice within 15 days, initiate Remedial Work within 45 days or within
such other time as required by any Regulatory Authority with
jurisdiction over such Remedial Work, whichever time is less, and
cause such Remedial Work to be completed with reasonable diligence.
(ii) If the Seller initiates and completes the Remedial Work in compliance
with the requirements of Section 10.4(d)(i) hereof and the total cost
of Remedial Work has not yet exceeded $10,000,000, the Seller shall
notify the Buyer of the Buyer's obligation to indemnify the Seller for
fifty percent (50%) of the Remedial Costs incurred.
(iii) In the event any obligation to indemnify the Seller pursuant to
Section 10.4(c)(i) hereof arises, the Buyer shall have the right to
satisfy any such obligation to indemnify the Seller pursuant to
Section 10.4(c)(i) hereof by the issuance of one or more subordinated
promissory notes of the Buyer (the "Environmental Notes"),
substantially in the form of Exhibit E attached hereto.
If the Seller defaults on its obligation under this Agreement to
undertake Remedial Work when requested by the Buyer to do so, the
Buyer shall have the right to perform such Remedial Work and the Buyer
shall have the further right to redeem any of the Buyer's promissory
notes held by the Seller at face value to the full extent of Seller's
share of such Remedial Costs; PROVIDED, HOWEVER, the Seller shall
remain liable to the Buyer for any shortfall between the Seller's
share of such Remedial Costs and the face value of such redeemed
promissory notes.
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If the Buyer elects to perform Remedial Work without requesting the
Seller to do so and the Buyer initiates and completes the Remedial
Work, it shall notify the Seller of the Seller's obligation to
indemnify the Buyer for the Seller's share of the Remedial Costs as
set forth in Section 10.4(b)(iii).
(vi) The Buyer and the Seller shall be required to maintain such records
and documents as are reasonably required to substantiate the amount of
any claim which any party may have against the other party for
indemnification pursuant to this Section 10.4, including, without
limitation, contractors' invoices with appropriate documentary
support.
(vii) Remedial Costs shall be deemed incurred when the Remedial Work
giving rise to such Remedial Costs is performed and invoiced. In
the event Remedial Work is commenced prior to the twentieth
anniversary of the Closing Date, but would not be completed until
after the twentieth anniversary of the Closing Date, then the
Remedial Costs incurred in connection with such Remedial Work
shall, for purposes of this Section 10.4, be deemed to have been
incurred prior to the twentieth anniversary of the Closing Date.
(e) NOTICE OF ENVIRONMENTAL CLAIM. Promptly after receipt of notice
of any demand, claim or circumstance which, with or without the lapse of
time, would give rise to a claim or the commencement of any action,
proceeding or investigation (an "Environmental Claim") that may result in a
loss, liability, damages, deficiencies, costs or expenses for which
indemnification is provided under Section 10.4(b) or (c) hereof (an
"Environmental Loss"), the party to be indemnified (the "Indemnitee") shall
give notice thereof (the "Environmental Notice")
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to the party which is required to indemnify the Indemnitee (the
"Indemnitor"). The Environmental Notice shall describe the Environmental
Claim in reasonable detail and shall indicate the amount (estimated, if
necessary) of the Environmental Loss that has been or may be suffered by
the Indemnitee.
(f) OPPORTUNITY TO DEFEND. The Indemnitor may elect to compromise,
or defend at its own expense and by its own counsel, if approved by the
Indemnitee pursuant to this Section 10.4 (such approval not to be
unreasonably withheld), any Environmental Claim. If the Indemnitor elects
to compromise or defend any such Environmental Claim, it shall, within 30
days of the Environmental Notice (or sooner, if the nature of such
Environmental Claim so requires), notify the Indemnitee of its intent to do
so, and the Indemnitee shall cooperate, as requested by and at the expense
of the Indemnitor, in the compromise of, or defense against, such
Environmental Claim and the parties agree to give each other full access to
all information relevant thereto and reasonable access to each other's
employees during normal business hours, upon reasonable notice. If the
Indemnitor elects not to compromise or defend the Environmental Claim,
fails to notify the Indemnitee of its election as herein provided or
contests its obligation to indemnify under this Section 10.4(f), the
Indemnitee may pay, compromise or defend such Environmental Claim.
Notwithstanding the foregoing, neither the Indemnitor nor the Indemnitee
may settle or compromise any claim over the objection of the other;
PROVIDED, HOWEVER, that consent to settlement or compromise shall not be
unreasonably withheld. In any event, the Indemnitee may participate, at
its own expense, in the defense of such Environmental Claims.
10.5 SOLE AND EXCLUSIVE REMEDY. This Agreement sets forth the sole and
exclusive remedies of the Buyer and the Seller with respect to liability
relating to the Environmental Laws. Except as specified in this Agreement, the
Buyer and Seller agree to waive and release with respect to Environmental Laws
any other remedies, claims or causes of action which each may have against the
other, including, but not limited to, statutory remedies, claims or causes of
action, such as those created by CERCLA or similar state laws and any remedies,
claims or causes of action pursuant to common law, including, but not limited
to, contribution, strict liability, negligence, trespass or nuisance.
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10.6 CERTAIN UNDERSTANDINGS WITH RESPECT TO PRE-EXISTING INSURANCE
POLICIES.
(a) Each of the Seller and the Buyer shall promptly notify the other party
hereto if it determines that there is any possibility of recovering any Remedial
Costs under any comprehensive general insurance policies (the "Policies") of the
Seller that were at any time applicable to the Facilities. If the Seller elects
to seek recovery of any Remedial Costs pursuant to a Policy, the Seller shall
promptly notify the Buyer. Within 30 days of receipt of such notice, the Buyer
shall notify the Seller whether it elects to participate in seeking such
recovery. If the Buyer elects to participate in seeking such recovery, the
Buyer and the Seller shall share equally (i) in all reasonable costs or expenses
(including without limitation attorneys' fees and disbursements) (the "Insurance
Litigation Expenses") and (ii) in all amounts recovered under the Policies,
provided that the amount of the recovery allocated to the Buyer shall not exceed
the sum of (x) its share of the Insurance Litigation Expenses, and (y) the
difference between (A) the aggregate amount of all Remedial Costs and Compliance
Costs and (B) all payments actually made by the Seller as of the date of such
recovery pursuant to this Article X. Any amounts so allocated to the Buyer
shall be credited against its obligation to indemnify the Seller for Remedial
Costs pursuant to Section 10.4(c)(i).
(b) If the Seller elects not to seek recovery under the Policies for a
claim which the Buyer wishes to pursue, the parties will submit to a mutually
acceptable arbitrator the question of whether a claim for recovery under the
applicable Policies is well grounded in fact and in the Policies and is
warranted by existing law or by a good faith argument for the extension,
modification, or reversal of existing law. The arbitrator's decision shall be
final and binding on the parties and may be confirmed in any court of competent
jurisdiction. If the arbitrator determines that the claim for recovery
satisfies this standard, the Seller shall assign all of its rights under the
applicable Policies to the Buyer; PROVIDED, HOWEVER, that if such rights are
unassignable, the Seller shall do all things necessary to perfect the claims
that the Buyer elects to pursue under the Policies, including without limitation
the prosecution of any lawsuits. The Seller shall not consent to the entry of
any judgment or enter into any settlement of such lawsuits without the consent
of the Buyer. The Seller and the Buyer shall divide all arbitration expenses
equally. The Buyer shall bear all Insurance Litigation Expenses arising from
the Buyer's
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subsequent pursuit of claims under the Policies; provided, however, that if the
Seller elects at any time to participate in the pursuit of such claims, the
Insurance Litigation Expenses in their entirety will be allocated pursuant to
the provisions of Section 10.6(a).
ARTICLE XI
CONDITIONS OF CLOSING
11.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of the Buyer to
consummate the transactions contemplated by this Agreement on the Closing Date
are expressly subject to the fulfillment, or the written waiver by the Buyer, on
or prior to the Closing Date, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT THE CLOSING DATE. Each
representation and warranty of the Seller contained in this Agreement or in
any certificate or document delivered to the Buyer pursuant hereto shall be
deemed to have been made again on and as of the Closing Date and shall then
be true and correct in all material respects and, on the Closing Date,
the Seller shall have delivered to the Buyer a certificate of an authorized
officer of the Seller to such effect.
(b) SELLER'S PERFORMANCE. Each of the obligations of the Seller to
be performed on or before the Closing Date, pursuant to the terms of this
Agreement, shall have been duly performed in all material respects by the
Closing Date, and on the Closing Date the Seller shall have delivered to
the Buyer a certificate of an authorized officer of the Seller to such
effect.
(c) OPINION OF SELLER'S COUNSEL. The Seller shall have delivered to
the Buyer an opinion, dated the Closing Date and addressed to the Buyer, of
Richard Winkler, Senior Corporate Counsel to the Seller, in the form set
forth as Exhibit F hereto.
(d) INSTRUMENTS OF CONVEYANCE AND TRANSFER. The Seller shall have
delivered to the Buyer such deeds, bills of sale, endorsements,
assignments, leases, subleases, options and other good and sufficient
instruments of assignment, conveyance and transfer, sufficient to sell,
assign, transfer, convey and deliver the Assets to the Buyer in accordance
with the terms and conditions of this Agreement.
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(e) CONSENTS AND APPROVALS. All material authorizations, consents,
waivers and approvals required under this Agreement and such other
authorizations, consents, waivers and approvals as are set forth in the
Schedules and Exhibits attached hereto shall have been duly obtained;
PROVIDED, HOWEVER, that in the event the Seller is unable to obtain any
consent to the assignment of a lease, contract, easement, right of way, or
rail crossing agreement, the Seller may in lieu thereof deliver a sublease
between the Seller and the Buyer conveying substantially the same rights
and benefits to the Buyer.
(f) NO LITIGATION. On the Closing Date, there shall not be pending
or threatened any proceeding seeking to enjoin or to recover damages in
connection with the transactions contemplated by this Agreement, or any
proceeding which could reasonably be expected to have a material adverse
effect on the business of the Facilities.
(g) TITLE INSURANCE. The Title Insurer shall have issued to the
Buyer an owner's policy of title insurance to it as the fee owner of the
McKean and Emlenton Real Property, in an amount equal to $62,250,000 and
showing no exceptions to title other than the Permitted Exceptions.
(h) FINANCING. The Buyer shall have arranged for adequate financing
to purchase the Assets on terms and conditions reasonably satisfactory to
the Buyer.
(i) RECORDS. The Seller shall have delivered to the Buyer true and
correct copies of all records and documents to the extent required by
Section 5.3(m).
11.2 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of the Seller
to consummate the transactions contemplated by this Agreement on the Closing
Date is expressly subject to the fulfillment, or the written waiver by the
Seller, on or prior to the Closing Date, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT THE CLOSING DATE. Each
representation and warranty of the Buyer contained in this Agreement or in
any certificate or document delivered to the Seller
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pursuant hereto shall be deemed to have been made again at and as of the
Closing Date and shall then be true and correct in all material respects,
and on the Closing Date the Buyer shall have delivered to the Seller a
certificate of an authorized officer of the Buyer to such effect.
(b) BUYER'S PERFORMANCE. On or before the Closing Date, the Buyer
shall have duly performed in all material respects all obligations required
to be performed by it on or before the Closing Date, and on the Closing
Date the Buyer shall have delivered to the Seller a certificate of an
authorized officer of the Buyer to such effect.
(c) OPINION OF BUYER'S COUNSEL. The Buyer shall have delivered to
the Seller an opinion, dated the Closing Date and addressed to the Seller,
of Gibson, Dunn & Crutcher, counsel to the Buyer, in the form set forth as
Exhibit G hereto.
(d) APPROVALS. All material authorizations, consents, waivers and
approvals required under this Agreement and such other authorizations,
consents, waivers and approvals as are set forth in the Schedules and
Exhibits attached hereto shall have been duly obtained.
(e) NO LITIGATION. On the Closing Date, there shall not be pending
or threatened any proceeding seeking to enjoin or to recover damages in
connection with the transactions contemplated by this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES. Any notice or other communication required by, or which may
be given pursuant to, this Agreement shall be in writing and either personally
delivered or mailed, certified or registered mail, postage prepaid, return
receipt requested, or transmitted by facsimile, and shall be deemed given when
received. Any such notice or communication shall be sent to the address set
forth below:
If to the Buyer, to: Petrowax PA Inc.
230 Park Avenue Suite 610
New York, New York 10169
Facsimile: (212) 818-1988
Attn: Mr. Gene R. Blendermann
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with a copy to: Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attn: Conor D. Reilly, Esq.
If to the Seller, to: Quaker State Corporation
255 Elm Street
Oil City, Pennsylvania 16301
Facsimile: (814) 676-7030
Attn: Mr. William C. Helsley
Any party may change the persons and addresses to which notices or other
communications are to be sent to it by giving written notice of any such change
to the other party hereto.
12.2 HEADINGS. The headings contained in this Agreement are inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
12.3 ENTIRE AGREEMENT: AMENDMENTS. This Agreement, together with the
Exhibits and Schedules attached hereto (which are made a part of this
Agreement), (i) constitutes the entire agreement among the parties hereto with
respect to the purchase and sale of the Assets and supersedes all prior oral and
written and all contemporaneous oral agreements and understandings; and (ii) may
not be amended, modified or discharged, nor may any of its terms be waived,
except by an instrument in writing, signed by the parties hereto.
12.4 ASSIGNMENT. The Buyer shall have the right to assign this Agreement
as security to a lender, a group of lenders or any other person or entity which
provides financing with respect to the acquisition of the Assets. The Buyer and
the Seller each acknowledge and agree that their respective obligations under
Article X hereof shall survive any sale of the Facilities and further agree that
the Buyer may assign the benefit of this Agreement, including the rights under
Article X hereof, to any purchaser, transferee or assignee of one or both of the
Facilities. In the event this Agreement is assigned by the Buyer while any
amount is outstanding under the Note or any Environmental Note, then the Buyer
shall remain obligated to the Seller under the Note or any such Environmental
Note. Any such assignment by the Buyer shall not affect the rights and
obligations of the Seller under this Agreement. At such time, if any, that an
assignee seeks to enforce this Agreement, the assignee
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<PAGE>
shall accept all of the obligations of the Buyer (except the Note or any
Environmental Note issued prior to such assignment) pursuant to this Agreement.
Except as provided in this Section 12.4, this Agreement, or any part or interest
therein, may not be assigned by any party hereto without the prior written
consent of the other party, such consent not to be unreasonably withheld.
Subject to the foregoing, all of the provisions hereof shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties.
12.5 NO WAIVER. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
party at a later time to enforce the same. No waiver of any nature, whether by
conduct or otherwise, in any one or more instances, shall be deemed to be or
construed as a further or continuing waiver of any such condition or of any
breach or a waiver of any other condition.
12.6 RISK OF LOSS. The risk of loss of, and damage or injury to, the
Assets prior to the Closing hereunder by reason of any insured or uninsured
casualty shall be borne by the Seller. In the event that during the period from
the date hereof to the Closing all or any portion of the Assets are damaged or
destroyed by fire or other casualty, the Seller shall immediately notify the
Buyer in writing of such occurrence, and, upon receipt of such notice, the Buyer
may elect (a) to terminate this Agreement, in which event neither party shall
have any further rights or obligations hereunder; or (b) to consummate this
transaction, in which event (i) if the casualty is insured, the Seller shall
assign to the Buyer all insurance proceeds payable as a result of such damage or
destruction, and the Buyer shall receive a credit against the purchase price set
forth in Section 4.1 hereof in the amount of the deductible provided for in the
Seller's insurance policy or (ii) if the casualty is not insured, the Buyer
shall receive a credit against such purchase price in the amount of 125% of the
estimated cost to repair the damage. The Buyer shall have 15 days from the date
of receipt of notice of such damage or destruction within which to make the
election set forth in this Section 12.6, and a failure to make an election shall
be deemed an election to terminate this Agreement.
12.7 PRESS RELEASES. Neither the Seller nor the Buyer will issue any
press releases or public announcements regarding any of the transactions
contemplated by this Agreement except as may be approved in writing by the
parties (such approvals not to be
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unreasonably withheld), or as the Seller or the Buyer may be required to make
under applicable law.
12.8 BULK SALES LAW. The Buyer and the Seller hereby waive compliance by
the Seller with the terms and conditions of any applicable bulk sales laws and
the Seller hereby agrees to indemnify the Buyer and hold it harmless against any
claims or demands (including counsel fees in contesting the same) asserted by
any creditor of the Seller against the Buyer, with respect to liabilities and
obligations not specifically assumed by the Buyer under this Agreement, for
non-compliance by the Seller or the Buyer with bulk sales laws or similar laws
that may be applicable to the sale or transfer of the Assets hereunder.
12.9 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
12.10 THIRD PARTY BENEFICIARIES. Except as provided in Section 12.4
hereof or as otherwise expressly provided in this Agreement, nothing in this
Agreement is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties hereto and to their
respective successors and permitted assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third party
to any party hereto.
12.11 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
12.12 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written by their respective duly authorized officers.
PETROWAX PA INC.
By
/s/ Gene R. Blendermann
----------------------
Gene R. Blendermann,
President and Chief
Executive Officer
QUAKER STATE CORPORATION
By
/s/ Jack W. Corn
----------------------
Jack W. Corn,
Vice Chairman and
Chief Executive Officer
NY:4354E
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EXHIBIT A
<PAGE>
EXHIBIT A
FORM OF
SUBORDINATED PROMISSORY NOTE
New York, New York
U.S. $10,000,000 Dated: April __, 1990
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to pay,
in lawful money of the United States of America, Quaker State Corporation, a
Delaware corporation ("Payee"), the principal sum of Ten Million Dollars
($10,000,000), together with interest thereon from the date of this Note at the
rate of thirteen and one-half percent (13.5%) per annum until paid. Interest
shall be calculated on a year of 360 days of twelve (12) 30-day months.
Upon the expiration of the Interest Only Term (as defined herein),
one half of all accrued interest shall be paid to Payee and one half of all
accrued interest shall be capitalized and added to the principal amount owing
hereunder. During the Amortizing Term (as defined herein), Maker shall repay
the principal amount owing hereunder (as adjusted pursuant to the foregoing
sentence) and interest accrued thereon in twenty-eight (28) equal (as near as
possible) consecutive quarterly installments commencing on the first day of
the fourth month following the month in which the Amortizing Term commences
and thereafter on the first day of each succeeding third month. Any payment
received by Payee shall be credited first to the interest then due and the
remainder to principal. Maker shall, subject to the provisions of this Note
set forth below, have the right to prepay in whole or in part the amount
owing to Payee hereunder, at any time and without penalty.
In the event payment is not timely made under this Note pursuant to
the terms set forth in the preceding paragraph for any reason (other than as a
result of an election by Maker to set-off in accordance with the terms of this
Note), interest shall accrue on the principal amount then outstanding from the
date of any such missed scheduled
<PAGE>
payment until the date payment therefor is made, at the rate of fifteen and
one-half percent (15.5%) per annum.
The terms "Amortizing Term" and "Interest Only Term" shall have the
meanings ascribed to such terms in that certain Senior Secured Loan Agreement
(the "Senior Loan Agreement") dated as of the date hereof by and between Maker,
a wholly-owned subsidiary of U.S. Petroleum Corp., a Delaware corporation
("Guarantor"), and Sanwa Business Credit Corporation, a Delaware corporation,
as a Lender thereunder and on behalf of other Lenders to whom it may assign its
rights thereunder.
Maker shall be deemed in default hereunder if: (i) Maker fails to
make any payment to Payee of principal and/or interest when due on the
Subordinated Debt in accordance with the provisions hereof and such failure
is not cured within ten (10) days after receipt of written notice of such
nonpayment; (ii) Maker is in material default under any other obligation owed
by Maker to Payee and such default is not cured within ten (10) days after
receipt of written notice of such default; (iii) Maker is in material default
under the Senior Loan Agreement and such default is not cured within any
applicable cure period provided thereunder; and (iv) Maker files a petition
or makes a general arrangement or assignment for the benefit of creditors
under the bankruptcy laws of any applicable jurisdiction or is adjudicated
bankrupt or insolvent. Upon any occurrence and continuation of any default
this Note and all other obligations shall, subject to the provisions of this
Note set forth below, become absolute, due and payable, without demand or
notice.
Maker shall deliver to Payee: (i) as soon as available and in any
event within 90 days after the end of each fiscal year of Maker, a balance sheet
of Maker as a separate entity as of the end of such fiscal year and the related
statements of income and statements of cash flows as a separate entity for such
fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year (where applicable), all reported on by the Maker's then
currently engaged firm of independent certified public accountants; and (ii) as
soon as available and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of Maker, a balance sheet of Maker as a
separate entity for such quarter and the related statements of income and
statements of cash flows as a separate entity for such quarter and for the
portion of Maker's fiscal year ended at the end of such quarter, setting forth
in each case in comparative form the figures for the corresponding quarter and
the corresponding portion of Maker's previous fiscal year, all certified
(subject to
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normal year-end adjustments) as to fairness of presentation, generally accepted
accounting principles and consistency by the Chief Executive Officer of Maker.
This Note is being executed by Maker to Payee pursuant to the terms of
the Asset Purchase and Sale Agreement (the "Agreement") dated as of March 30,
1990 by and between Maker and Payee and represents a portion of the purchase
price paid by Maker to Payee for certain assets of Payee, as more fully
described therein. Pursuant to Section 10.4(b) of the Agreement, Payee has
agreed to indemnify Maker against certain claims as more fully described
therein. Payee hereby agrees that Maker shall in accordance with Section
10.4(d) of the Agreement have the full and absolute right, but not the
obligation, to set-off against any amount due or with which the passage of time
will become due hereunder (including both principal and interest), any amounts
which Payee may from time to time owe Maker under Section 10.4(b) of the
Agreement; PROVIDED, HOWEVER, in the event Maker elects to set-off and Payee
gives notice in writing to Maker that Payee contests Maker's determination that
Maker is entitled to indemnification pursuant to Section 10.4(d) of the
Agreement with respect to any individual case giving rise to such set-off, then
Maker and Payee agree to submit to binding arbitration the issue of whether such
indemnification was owed by Payee to Maker in such case, and pending the outcome
of such arbitration, the amounts which Payee has elected to set-off hereunder
shall be held in escrow. Such right of set-off is in addition to any other
remedies Maker may have under the Agreement or otherwise and shall be deemed
exercised only upon Maker giving Payee written notice of Maker's election to
set-off.
The indebtedness ("Subordinated Debt") evidenced by this Note is
subordinated and junior in right of payment to all Superior Debt (as defined
herein).
For the purpose of this Note the term "Superior Debt" shall mean all
"Obligations" as defined in the Senior Loan Agreement, including the funding
obligations of Maker with respect to the "Debt Service Reserve Account" as
described in Section 5.9 of the Senior Loan Agreement, as well as all other
"Debt" permitted under the terms of the Senior Loan Agreement. The Superior
Debt shall continue to be Superior Debt and be entitled to the benefits of these
subordination provisions irrespective of any amendment, modification or waiver
of any term of the Superior Debt or extension or renewal of the Superior Debt.
No direct or indirect payment (in cash, property or securities or by
set-off or otherwise) shall be made or
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agreed to be made on account of the principal of, or premium, if any, or
interest on any Subordinated Debt, or in respect of any redemption, retirement,
purchase or other acquisition of any of the Subordinated Debt so long as any
amounts shall remain due or payable under the Senior Loan Agreement; PROVIDED,
HOWEVER, that Maker may make payments on the Subordinated Debt pursuant to the
terms hereof, and PROVIDED FURTHER that making any such payment will not
contravene any provision of the subordination provisions set forth in this Note
or the Senior Loan Agreement.
Notwithstanding any provisions to the contrary, upon the occurrence of
any condition or event which would constitute an "Event of Default" as defined
in the Senior Loan Agreement or which would constitute any default or event of
default with respect to any other Superior Debt, as defined therein or in any
instrument under which the same is outstanding, which permits the holder or
holders of any of the Superior Debt to accelerate the maturity thereof then,
unless and until such condition or event shall have been cured or waived or
shall have ceased to exist, no direct or indirect payment (in cash, property or
securities or by set-off or otherwise) shall be made or agreed or attempted to
be made on account of the principal of, or premium, if any, or interest or
otherwise on any Subordinated Debt, or as a sinking fund for the Subordinated
Debt, or in respect of any redemption, retirement, purchase or other acquisition
of any of the Subordinated Debt.
In the event of:
(i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to Maker or Guarantor or to the property of either of them,
(ii) any proceeding, voluntary or involuntary, for the
liquidation, dissolution or other winding-up of Maker or Guarantor, whether or
not involving insolvency or bankruptcy proceedings,
(iii) any general assignment, other than as security, for the
benefit of creditors by Maker or Guarantor, or
(iv) any other marshalling of the assets of Maker or Guarantor,
then all Superior Debt (including any interest thereon accruing at the legal
rate after the commencement of any such proceedings and any additional interest
that would have
4
<PAGE>
accrued thereon but for the commencement of such proceedings) shall first be
paid in full before any payment or distribution, whether in cash, securities or
other property, shall be made to Payee. Any payment or distribution, whether in
cash, securities or other property, which would otherwise (but for these
subordination provisions) be payable or deliverable in respect of Subordinated
Debt shall be paid or delivered directly to the holders of the Superior Debt and
then in accordance with the priorities then existing among such holders until
all Superior Debt (including any interest thereon accruing at the legal rate
after the commencement of any such proceedings and any additional interest that
would have accrued thereon but for the commencement of such proceedings) shall
have been paid in full.
The Subordinated Debt shall not be declared in default or due and
payable as the result of the occurrence of any event in respect thereof and no
payment shall be made in respect of any Subordinated Debt (except as otherwise
expressly provided herein) unless and until all Superior Debt shall have been
paid in full.
If any payment or distribution, whether in cash, securities, or other
property, shall be received by Payee in contravention of any of the terms
hereof, such payment or distribution shall be received in trust for the benefit
of, and shall be paid over or delivered and transferred to, the holders of the
Superior Debt at the time outstanding in accordance with the priorities then
existing among such holders for application to the payment of all such debt
remaining unpaid, to the extent necessary to pay all such debt in full. In the
event of the failure of Payee to endorse or assign any such payment or
distribution, each holder of Superior Debt is hereby irrevocably authorized to
endorse or assign the same.
No present or future holder of any Superior Debt shall be prejudiced
in the right to enforce subordination of Subordinated Debt by any act or failure
to act on the part of Maker. The foregoing provisions as to subordination are
solely for the purpose of defining the relative rights of the holders of the
Superior Debt, on the one hand, and Payee, on the other hand. Nothing contained
herein shall impair, as between Maker and Payee, the obligation of Maker, which
is unconditional and absolute, to pay to Payee hereof the principal hereof and
interest hereon as and when the same shall become due and payable in accordance
with the terms hereof, or prevent Payee from exercising all rights, powers and
remedies otherwise permitted by applicable law or hereunder upon the occurrence
of any condition or event which constitutes a default or event of default
hereunder, all
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<PAGE>
subject to the rights of the holders of the Superior Debt to receive cash,
securities or other property otherwise payable or deliverable to Payee.
When the aggregate amount received by the holders of the Superior Debt
equals all amounts owed to the holders of the Superior Debt, Payee shall be
subrogated to all rights of any holders of such Superior Debt to receive any
further payments or distributions applicable to the Superior Debt until the
Subordinated Debt shall have been paid in full, and such payments or
distributions received by Payee by reason of such subrogation, whether in cash,
securities or other property which otherwise would be paid or distributed to the
holders of Superior Debt, shall, as between Maker and its creditors other than
the holders of other Superior Debt, on the one hand, and Payee on the other
hand, be deemed to be a payment by Maker on account of Superior Debt and not on
account of Subordinated Debt. Nothing contained in the foregoing shall reduce
the amounts owed by Maker to Payee hereunder and Maker agrees, subject to the
terms of this Note, that it is obligated to make payment in full to Payee
hereunder.
Payee will take such action (including, without limitation, the
delivery of this instrument to an agent for the holders of Superior Debt or the
filing of a financing statement with respect thereto) as may, in the opinion of
counsel designated by the holders of a majority in principal amount of the
obligations under the Senior Loan Agreement at the time outstanding, be
necessary or appropriate to assure the effectiveness of the subordination
effected by these provisions.
Payee acknowledges that the Subordinated Debt evidenced hereby and the
Obligations constitute a portion of the financing arrangements made by Maker in
connection with the transactions contemplated by the Agreement and that, in the
event it becomes necessary to modify, amend, change, restructure or otherwise
adjust the terms of the financing arrangements made by Maker with Lender under
the Senior Loan Agreement, Payee shall and hereby agrees to make any and all
corresponding modifications, amendments, changes, restructurings and other
adjustments to the terms of the Subordinated Debt evidenced hereby; PROVIDED,
HOWEVER, that Payee shall not be so obligated in the event any such
modification, amendment, change, restructuring or other adjustment does not
result from the performance (or inability to perform) by Maker of its
obligations under the Senior Loan Agreement to Lender. All determinations to be
made in connection with the foregoing shall be made by Lender in its reasonable
judgment and Payee hereby authorizes Lender to give notice thereof to any and
all third parties.
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<PAGE>
This Note shall be governed by and construed in accordance with, the
laws of the State of New York.
Maker hereby waives demand, presentment for payment, notice of
dishonor, protest, notice of protest and notice of non-payment of this Note.
No single or partial exercise of any power hereunder or under any
other agreement referred to herein shall preclude other or further exercise
thereof or the exercise of any other power. No delay or omission on the part of
the holder hereof in exercising any right hereunder or under any other agreement
referred to herein shall operate as a waiver of such right or of any other right
under this Note. Any waiver or modification of any provision of this Note must
be in writing and signed by Maker and no waiver on one occasion shall be
construed as a waiver on any other occasion.
This Note may be sold, assigned or transferred by Payee to any other
party, upon written notice to Maker, provided that such purchaser, assignee or
transferee shall have assumed the indemnification obligations of Payee under
Section 10.4(b) the Agreement. This Note may not otherwise be sold, assigned or
transferred to any other party without the express written consent of the Maker.
This Note shall be binding upon Maker and Payee, and any of their permitted
successors and/or assigns.
In the event an action is commenced to enforce the provisions of this
Note, the prevailing party shall be entitled to recover from the other party all
reasonable costs and expenses incurred in connection with such action including,
without limitation, reasonable attorneys' fees.
IN WITNESS WHEREOF, Maker has caused this Note to be executed by its
duly authorized officer as of the date first above written.
PETROWAX PA INC.
By:_________________________
Gene R. Blendermann,
President and
Chief Executive Officer
7
<PAGE>
EXHIBIT B
<PAGE>
GAS PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this ______ day of _________, 1990
between PETROWAX PA INC. (BUYER), a Delaware Corporation, whose address is 230
Park Avenue, New York, New York 10169; and QUAKER STATE CORPORATION (SELLER), a
Delaware Corporation, whose address is 1226 Putnam Howe Drive, P.O. Box 189,
Belpre, Ohio 45714.
SECTION 1. PURCHASE AND SALE
Seller shall use its best efforts to sell and deliver to Buyer and Buyer
shall use its best efforts to accept and purchase an average of 95 Dth per day
of natural gas, but not more than 160 Dth in any day, from various meters
dedicated to the QUAKER STATE APPALACHIAN POOL (POOL) located on the Columbia
Gas of Pennsylvania, Inc. (together with Columbia Gas Transmission Corporation,
the "Gas Transportation Company") pipeline system. Buyer shall provide a copy
of the Gas Transportation Company nomination form to the Seller by the first day
of the month for gas deliveries from the Pool for the month. The Seller will
allocate these volumes from the Pool after calendarized statements are received
from the Gas Transportation Company for the month.
SECTION 2. TERM
This Agreement shall be effective for a primary term of one year from the
date hereof, and shall continue month-to-month thereafter until terminated by
either party by giving written notice to the other at least thirty (30) days in
advance of the date such termination is to become effective.
SECTION 3. PURCHASE PRICE
Buyer shall pay the Seller $2.50 per Dth for deliveries allocated from the
Pool, plus gathering charges or any additional charges imposed by the Gas
Transportation Company which affect the wellhead price received by Seller.
SECTION 4. PAYMENT
The volumes of gas delivered pursuant hereto shall be determined by the
measurement of the Gas Transportation Company at the Seller's receipt points.
Seller will invoice Buyer for the quantity allocated from the Pool. Buyer
will pay the invoice within five (5) days of receipt of the calendarized
allocation statement from Seller to the Gas Transportation Company for the
month in which the gas was nominated from the Pool.
<PAGE>
SECTION 5. DELIVERY POINT
Seller shall deliver the gas covered by this Agreement to the Meter(s)
provided for the wells by the Gas Transportation Company. The delivery point
shall be the inlet side of the various metering stations dedicated to the Pool.
SECTION 6. TITLE AND OWNERSHIP
Seller warrants that it has good and marketable title to the gas being sold
hereunder as and when delivered. Seller agrees to indemnify and save Buyer
harmless from all suits, claims, actions, accounts, debts, damages, costs,
losses, expenses and other liabilities of any kind arising from or out of claims
of any person or party regarding the ownership of the gas sold hereunder or
Seller's authority to sell such gas. Title to and ownership of the gas
delivered hereunder shall pass to Buyer at the delivery point referred to in
Section 5.
SECTION 7. NO ASSIGNMENT
The buyer shall have the right to assign this Agreement as security to a
lender, a group of lenders or any other person or entity which provides
financing with respect to the acquisition of the Assets as defined in the Asset
Purchase and Sale Agreement between Seller and Buyer. Neither party to this
Agreement shall assign this Agreement in whole or in part by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that Buyer may assign this Agreement to any entity which is controlled by,
controls or is under common control with Buyer. In the event of any such
assignment, Buyer shall remain fully liable hereunder and shall guarantee to
Seller full payment and performance of all obligations hereunder by such
assignee.
SECTION 8. FORCE MAJEURE
Neither party shall be liable for any failure to perform hereunder due to
any cause beyond its reasonable control, including, but not limited to, acts of
God, fires, floods, wars, sabotage, accidents, strikes, lockouts, or other labor
disputes, shortages of labor, materials, or natural gas, governmental law,
ordinances, rules and regulations, whether valid or invalid (including, but not
limited to, priorities, requisitions, allocations and price adjustment
restrictions), inability to obtain material, equipment or transportation, and
any other circumstance or circumstances of a similar or different nature. The
party whose performance is prevented by any such contingency shall have the
right during the period of such contingency to exclude such portion of the
quantity deliverable during such period as is prevented by such contingency from
being delivered, whereupon the total quantity deliverable under this Agreement
shall be reduced by the quantity so excluded. In the event a party's ability to
perform hereunder is affected only in part by force majeure as defined above,
such party shall continue to perform its obligations hereunder to the extent not
affected by such force majeure.
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A party affected by force majeure shall promptly notify the other party of
the existence thereof and the anticipated duration and effect upon its ability
to perform hereunder. Such party shall thereafter exercise its reasonable best
efforts to eliminate the force majeure as quickly as possible; provided that,
neither party shall be required to resolve labor disputes or disputes with
suppliers of raw materials except in such party's sole discretion in accordance
with its judgment as to its best interest. The party declaring force majeure
shall promptly notify the other party when such force majeure no longer affects
its ability to perform hereunder.
If at some future date there is a change in any law, rule or regulation,
and by such change either party is prevented, prohibited or frustrated from
carrying out the terms of this Agreement in the manner contemplated hereunder,
then this Agreement, at the sole discretion of either party, may be cancelled.
It is agreed that this Agreement shall be subject to all valid applicable
state, federal and local laws, rules and regulations.
SECTION 9. INDEMNITY
Seller represents and warrants to Buyer that the natural gas shall be
commercially free from oil, water, air, salt, dust, gum, gum-forming
constituents, harmful or noxious vapors, or other solid or liquid matter which
might adversely affect its merchantability or cause injury to or interfere with
the proper operation of the lines, regulators, meters and other equipment of
Buyer or the Gas Transportation Company or its customers or affiliates.
The natural gas delivered to the Gas Transportation Company shall have a
heat content equal to or greater than 1,000 BTU per cubic foot and a Utilization
Factor (as that term is defined in the Agreement for Gas Transportation Service
between Columbia Gas of Pennsylvania, Inc. and Buyer hereunder, to be effective
as of the date hereof) of 1,300 plus or minus 6%. Such natural gas shall not
contain in excess of:
(a) Five pounds of water per million cubic feet of gas at the base
pressure and temperature of 14.73 psi and 60 degrees Fahrenheit.
(b) Three percent by volume of a combined total of carbon dioxide and
nitrogen components;
(c) 0.25 grains of hydrogen sulfide per 100 cubic feet of gas.
The Gas Transportation Company's final determination of natural gas quality
shall be binding on both the Buyer and the Seller. Seller shall be liable for,
indemnify the Buyer with respect to, hold the Buyer harmless from, and reimburse
the Buyer for all losses, costs, expenses (including attorneys' fees and
expenses), fees, liabilities and damages sustained by Buyer arising from any
breach of the above representation and warranties.
3
<PAGE>
SECTION 10. COMPLETE AGREEMENT
This document contains the entire agreement between the parties and
supersedes all prior or contemporaneous discussions, negotiations,
representations, or agreements relating to the subject matter of this Agreement.
No changes to this Agreement shall be made or be binding on any party unless
made in writing and signed by each party to this Agreement.
BUYER: PETROWAX PA INC.
- ----------------------------------
By:
-------------------------------
Its:
-------------------------------
SELLER: QUAKER STATE CORPORATION
- ----------------------------------
By:
-------------------------------
Its:
-------------------------------
4
<PAGE>
EXHIBIT C
<PAGE>
SLACK WAX AND PETROLATUM SALES AGREEMENT
This Agreement is made this ____ day of _______________, 1990, by and
between Quaker State Corporation, a Delaware corporation, hereinafter
referred to as "Seller", and Petrowax PA Inc., a Delaware corporation,
hereinafter referred to as "Buyer".
WHEREAS, Buyer desires to purchase and Seller desires to sell Seller's
entire output of slack wax and petrolatum (the "Products") produced at
Sellers's Congo Refinery at Newell, West Virginia (hereinafter called the
"Facility").
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the parties agree as follows:
1. TERM. Unless earlier terminated as provided herein, the term of
this Agreement shall be a period of five years commencing the date hereof. At
the end of the term of this Agreement, the parties agree to meet and
negotiate in good faith toward an extension of this Agreement, on such terms
and conditions as may be mutually agreeable.
2. QUANTITY. During the term of this Agreement, Seller agrees to sell
and Buyer agrees to purchase the Products produced at the Facility.
Seller shall, at least 30 days prior to the first day of each month,
provide to Buyer an estimate of Seller's output of Products for such month
and a proposed delivery schedule. Buyer shall within 10 days of receipt of
Seller's notification, confirm that the delivery schedule is acceptable to
Buyer or propose an alternate schedule. Seller shall reply within 10 days of
receipt of any alternate schedule proposed by Buyer whether such schedule is
<PAGE>
acceptable to Seller. Failure by party to reply within the above time periods
shall be deemed acceptance of the other party's proposed schedule.
Deliveries within each month shall be scheduled in approximately equal
weekly amounts. Should Buyer be unable to accept such quantities at any time,
Seller shall have the right to sell any quantities of Products not accepted
by Buyer to parties other than Buyer.
3. QUALITY. The Products sold hereunder shall meet the specifications
set forth on Exhibit A hereto. In the event Seller's source of crude oil to
the Facility should change, Seller and Buyer shall negotiate in good faith
revised specifications corresponding to the new crude oil source.
Upon receipt of Products, Buyer shall be responsible for any testing
deemed necessary by Buyer. Should Buyer believe that any Products delivered
fail to meet the required specifications, Buyer shall make any claim in
writing to Seller together with a copy of the results of Buyer's testing. Any
claim not made to Seller by the earlier of (a) three days after receipt of
the Product or (b) processing or mixing of the Product with other material,
shall be conclusively deemed to be waived.
4. DELIVERY. All Products sold by Seller to Buyer will be sold F.O.B.
the Facility. Title to the Products and risk of loss shall pass from Seller
to Buyer when loaded into the carriers provided by Buyer at the Facility. All
carriers for the Products sold hereunder shall be provided by the Buyer.
The amount of Products delivered to Buyer shall be determined by Seller
on the basis of Seller's measurement at the Facility at the time of loading
into the carriers provided by Buyer.
5. PRICE. Pricing for each Product sold under this Agreement in any
month shall be equal to the results of the following calculation, on a
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<PAGE>
weighted average price basis using applicable pricing data at the Facility
for the month of delivery:
(a) The price for slack wax sold under this Agreement shall be computed
as follows:
Price per gallon = .735 (0.667 x Congo rack unleaded gasoline posted
price + 0.333 x Congo posted price for number 2 fuel oil - 0.024 per
gallon)
(b) The price for petrolatum sold under this Agreement shall be computed
as follows:
Price per gallon = .778 (0.667 x Congo rack unleaded gasoline posted
price + 0.333 x Congo posted price for number 2 fuel oil - 0.024 per
gallon)
The above pricing is based upon average oil content for slack wax of
14.75 percent and for petrolatum of 18.89 percent, using ASTM test
procedure 3235, "Solvent Extractables in Petroleum Waxes."
(c) Seller shall certify to Buyer prior to each delivery of the Product
that the melting point, flash point, gravity, viscosity, congealing point and
oil content of the Product delivered meet the specifications therefor set
forth in Exhibit A hereto. Seller's certificates shall be based upon an up
and down representative sample, and sampling shall be performed only when the
entire content of the shipping tank is in a liquid state. All such samples
shall be tested by the ASTM method set forth in Exhibit A hereto. Seller
shall deliver test results to Buyer at the time of delivery of the Product.
Should Buyer dispute such results, Buyer shall so notify Seller within three
business days of receipt of Seller's analysis and in any event prior to
mixing of such Product with other material, including with the notice the
results of Buyer's testing of its sample of such delivery. In the event
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<PAGE>
Seller's and Buyer's results differ by 5% or less, the average of Buyer's
and Seller's results shall be used to determine whether any premium or
penalty pursuant to paragraph 5(d) hereof applies. Should Buyer's and
Seller's results differ by more than 5%, a sample of such delivery shall be
sent to a mutually agreed independent laboratory, whose final testing results
shall be conclusive for purposes of this Agreement. The cost of any
independent testing shall be borne equally by Seller and Buyer.
Should Buyer not provide notice to Seller of a disputed test result
within the time provided above, the results of Seller's testing on such
delivery shall be deemed conclusive.
(d) The above prices shall be subject to adjustment, upward or downward,
as follows:
(i) As a quality premium, upward by $0.007 per gallon for each 1%
below 18.89% oil content for petrolatum or below 14.75% oil content
for slack wax.
(ii) As a quality penalty, downward by $0.007 per gallon for each
1% above 18.89% oil content for petrolatum or above 14.75% oil content
for slack wax. The maximum oil content for any products acceptable to
Buyer is 25% and Buyer shall not be obligated to purchase any Products
with oil content in excess of 25%.
(iii) Penalties or premiums applicable to Products delivered in
any month shall be accumulated and netted at the end of such month.
Any net premium or penalty shall be paid by Buyer or Seller on or
before the 15th day of the month succeeding the month of delivery.
(e) Seller shall receive a payment of 1% of Buyer's realized net price
for finished waxes derived from the respective Products. The term "realized
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<PAGE>
net price" shall mean Buyer's sales price less applicable commissions for the
respective finished waxes.
6. BILLING AND PAYMENT. Buyer shall remit payment to Seller for all
products sold hereunder on the 15th day of the month following the month in
which such products were delivered. Any amount paid when due shall bear
interest at the rate of 1.25% per month until paid in full.
Seller reserves the right to require payment in advance of shipment or
other security satisfactory to Seller in the event Buyer should fail to make
timely payment for products delivered hereunder.
7. TAXES. Buyer shall reimburse Seller for any sales, use or excise
taxes imposed on Seller with respect to the sale to Buyer of the Products
delivered hereunder by any local, state or federal governmental body, whether
such tax is presently in effect or is imposed after the execution of this
Agreement.
8. WARRANTY. Seller warrants that it has and will have good and
marketable title to all Products delivered and sold hereunder and that the
Products will meet the specifications therefor set forth in Exhibit A hereto.
Other than the specifications set forth on Exhibit A, Seller makes no
representation or warranty whatsoever, express or implied with respect to the
products and Seller specifically DISCLAIMS AND EXCLUDES FROM THIS AGREEMENT
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR
PURPOSE.
9. REMEDY. Buyer's sole and exclusive remedy in the event of delivery
of Products that do not conform to oil content specifications set forth in
Exhibit A hereto shall be a price adjustment for such Products pursuant to
paragraph 5(c); provided, however, that Buyer shall have the option to reject
delivery of Products the oil content of which exceeds 25% based upon the
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<PAGE>
[COPY TO BE SUPPLIED BY CLIENT]
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<PAGE>
[COPY TO BE SUPPLIED BY CLIENT]
-7-
<PAGE>
12. DEFAULT. A party shall be in default hereunder in the event of the
occurrence of any of the following:
a) Such party should default in the performance of any of its
obligations hereunder, which default remains uncured 30 days following
receipt of notice specifying the nature of the default from the
non-defaulting party; or
b) If any decree or order is entered by a court adjudicating such
party a bankrupt or insolvent or approving as properly filed a petition seeking
reorganization of such party under the federal Bankruptcy Code, or any other
similar federal or state law, and such decree or order shall have continued
undischarged or unstayed for a period of 30 days; or a decree or order of a
court for the appointment of a receiver or liquidator or trustee or assignee
in bankruptcy or insolvency of such party or a substantial part of its
property, or for the winding up or liquidation of its affairs shall have been
entered and such decree or order shall have remained in force undischarged or
unstayed for a period of 30 days; or
c) Such party shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy petition
against it, or shall file a petition or answer or consent seeking
reorganization under the federal Bankruptcy Code or any other similar federal
or state law, or shall consent to the filing of any such petition, or shall
consent to the appointment of a receiver or liquidator or trustee or assignee
in bankruptcy or insolvency of it or a substantial part of its assets, or
shall make an assignment for the benefit of creditors (other than as
contemplated by this Agreement), or shall admit in writing its inability to
pay its debts generally as they become due, or corporate action shall be taken
by such party in furtherance of any of the foregoing actions.
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<PAGE>
In the event of any such default, the non-defaulting party may at its
option terminate this Agreement by written notice, without prejudice to any
other rights or remedies available to the non-defaulting party by reason of
such default.
13. GOVERNING LAW. This Agreement shall be deemed a contract under
and shall be construed and interpreted in accordance with the laws of the
Commonwealth of Pennsylvania.
14. INTEGRATED AGREEMENT. This Agreement together with the Asset
Purchase and Sale Agreement and the other agreements contemplated thereby
constitutes the complete and final agreement of the parties related to the
subject matter hereof, and no statements or agreements, oral or written, made
prior to or at the execution hereof shall vary or modify the terms,
conditions or provisions hereof.
15. NO WAIVER. No waiver by either party of one or more rights of
termination or defaults by the other party in the performance of this
Agreement shall operate or be construed as a waiver of any future or
continuing rights, options or defaults, whether of a like or different
character.
16. ASSIGNMENT. This Agreement shall inure to and be binding upon the
parties hereto and their respective successors and assigns; provided,
however, that neither Seller nor Buyer shall assign this Agreement or any
interest herein without the prior written consent of the other party.
Notwithstanding the foregoing, Buyer shall have the right to assign this
Agreement as security to a lender, a group of lenders or any other person or
entity which provides financing with respect to the acquisition by Buyer of
Seller's plants located at Farmer's Valley and Emlenton, PA. Buyer may also
assign this Agreement to any entity which is controlled by, controls or is
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<PAGE>
under common control with Buyer. In the event of any such assignment, Buyer
shall remain fully liable hereunder and shall guarantee to Seller full
payment and performance of all obligations hereunder by such assignee.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers the day and year first above set
forth.
ATTEST QUAKER STATE CORPORATION
______________________________ By: ___________________________________
Title: ________________________________
ATTEST PETROWAX PA INC.
______________________________ By: ___________________________________
Title: ________________________________
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<PAGE>
EXHIBIT A
Slack Wax (Typical Specifications)
- --------- ----------------------
Melting Point, AMP DEG. F 120 min.
Flash Point, COC, DEG. F 400 min.
Oil content, D-721 6 to 12%/25% MAX
IP Petrolatum
- -------------
Melting Point, DEG. F 148 145 MIN
Flash Point, DEG. F 460 min.
Color Typical 4
Oil content, D721 5 to 10%/25% MAX
TESTING METHOD: ASTM test procedure 3235, "Solvent Extractables in Petroleum
Waxes."
<PAGE>
EXHIBIT D
<PAGE>
CRUDE OIL PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made this________day of___________________, 1990, by and
between QUAKER STATE CORPORATION, a Delaware corporation with its principal
business address at 255 Elm Street, Oil City, Pennsylvania (hereinafter referred
to as "Seller");
AND
Petrowax PA Inc., a Delaware corporation with its principal place of
business at 230 Park Avenue., New York, New York (hereinafter referred to a
"Buyer");
W I T N E S S E T H:
WHEREAS, Seller is a purchaser of Appalachian crude oil in the New York,
Northern Pennsylvania, Ohio and West Virginia areas from independent producers
and is willing to purchase such crude oil and then sell such crude oil to Buyer;
and
WHEREAS, Buyer is a purchaser and refiner of crude oil and desires to
develop a source of crude oil supply for its McKean Plant (the "Plant") at
Farmer's Valley, Pennsylvania;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and intending to be legally bound, the parties agree as follows:
1. SUPPLY. Seller agrees to use its best efforts to supply Buyer with
Appalachian crude oil in quantities equivalent to not less than 3200 barrels per
day but not to exceed 5,000 barrels per day, during the term of this Agreement,
all of which crude oil will be delivered to Buyer at the Plant.
It is understood and acknowledged that Appalachian crude oil is frequently
in limited supply and that Seller must secure this supply from
<PAGE>
various independent producers and third parties and therefore cannot guarantee a
supply of crude oil to Buyer. However, Seller agrees to use its best efforts in
purchasing, procuring and delivering crude oil to Buyer under the terms set
forth herein.
2. PURCHASES. Buyer agrees to purchase, accept and pay for the crude oil
supplied by Seller pursuant to the terms of this Agreement. Buyer further
agrees at all times to furnish storage tanks and facilities at the Plant
adequate to receive the oil tendered hereunder.
3. QUANTITY AND DELIVERY. Buyer shall provide Seller written notice of
Buyer's anticipated requirements of crude oil for each month, prioritized by
geographic source (Bradford, Pennsylvania area or Ohio), at least 30 days prior
to the first day of such month.
Within 10 days after receipt of each of Buyer's notices, Seller shall
provide Buyer written notice of the amount of crude oil by source of crude oil
available for such month. The parties agree that the quantity to be purchased
in April and May, 1990 is set forth in Schedule 1 attached hereto.
a. CONTRACT VOLUME. Upon establishing the monthly volume as set
forth above, Seller shall be obligated to supply and deliver to Buyer said
volume of crude oil during the specified month and Buyer shall be obligated to
purchase and pay for said volume, subject only to the provisions set forth in
paragraph 12 (Force Majeure) below.
b. DELIVERY. Buyer shall, concurrent with its written notice of
anticipated requirements of crude oil, deliver to Seller a schedule of estimated
delivery dates and quantities.
c. NOTICES. Notices under this Agreement may be given by personal
delivery, mail or by fax. All notices to be given hereunder shall be deemed
received when received by U.S. mail, postage prepaid, registered or
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<PAGE>
certified; notices shall be deemed received when sent if sent by fax. All
notices shall be sent as follows:
Quaker State Corporation
1001 E. Spring Street
Titusville, PA 16354
Attention: A.J. Green
FAX: 814/827-9650
Petrowax PA Inc.
230 Park Avenue, Suite 610
New York, NY 10169
Attention: Gene R. Blendermann
FAX: 212/818-1988
d. QUANTITY. The quantity of crude oil delivered for billing purposes
shall be determined as follows:
i. with respect to deliveries by Seller's tank train, all rail car
shipments will be routed to tanks 8807, 3864 or 8865 at the McKean
Plant. Receipts will only be routed to an isolated still tank. All
opening and closing gauges will be taken jointly by a representative
of Seller and Buyer in accordance with API standard methods. Tank
samples of crude receipts for basic sediment and water (BS & W) will
also be taken and examined in accordance with API standard methods.
Billing volumes of crude receipts will be corrected for temperature
at 60 DEG. F and BS & W content.
ii. with respect to deliveries by Seller's crude oil pipeline
transfers from the Coleville Station, all volumes will be transferred
from the Coleville Station to tanks 8807, 8864 or 8865 located at the
McKean Plant. Receipts will only be routed to an isolated still tank.
All opening and closing gauges will be taken jointly by a
representative of Seller and Buyer in accordance with API standard
methods. Tank samples
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<PAGE>
of crude receipts for BS & W will also be taken and examined in
accordance with API standard methods. Billing volumes of crude
receipts will be corrected for temperature at 60 DEG. F and BS &
W content.
iii. Notwithstanding the foregoing, the quantity of crude oil
delivered for billing purposes shall be reduced by the amount of basic
sediment and water (BS & W) in the crude oil.
Seller shall provide to Buyer copies of all documentation and calculation
used to determine the quantity of crude oil delivered.
Seller may deliver crude oil to Buyer from Seller's tank trains or from
Seller's crude oil pipeline.
4. PRICE. The price to be charged by Seller and paid by Buyer for the
crude oil delivered hereunder up to the first 4,300 barrels delivered on any day
shall be Quaker State's posted price for Appalachian crude oil on the date of
delivery, plus a handling fee of $3.50 for each barrel of crude oil delivered.
The price to be charged by Seller and paid by Buyer for crude oil delivered
hereunder between 4,301 and 5,000 barrels on any day shall be Quaker State's
posted price for Appalachian crude oil on the date of delivery, plus a handling
fee of $4.45 for each barrel of crude oil delivered.
5. TAXES. Buyer shall reimburse Seller for any sales, use or excise taxes
imposed on Seller with respect to the sale to Buyer of the crude oil delivered
hereunder by any local, state or federal governmental body, whether such tax be
presently in effect or imposed after the execution of this Agreement.
6. TERM. This Agreement shall commence on the date hereof and continue
for ninety (90) days thereafter; provided that, Buyer may extend
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<PAGE>
this Agreement for one additional 90 day period by written notice to Seller at
least 30 days prior to the date of expiration of the initial 90 day term. Buyer
may terminate this Agreement by giving to Seller 30 days prior written notice.
The parties may extend this Agreement beyond 180 days after the date
hereof only by mutual agreement, including a mutually acceptable renegotiated
price for crude oil.
7. TITLE. Title and risk of loss with respect to all crude oil sold
hereunder shall pass to Buyer upon delivery into Buyer's storage tanks at the
Plant.
8. WARRANTY. The sole and exclusive warranty made by Seller hereunder is
that good title shall be conveyed with respect to all crude oil sold hereunder,
and that title to such crude oil shall not be subject to the rights of any
third parties.
Seller makes no other warranty, express or implied, with respect to the
crude oil to be sold hereunder, and expressly DISCLAIMS AND EXCLUDES FROM THIS
AGREEMENT THE IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A
PARTICULAR PURPOSE.
Buyer acknowledges that Seller may never have actual possession of the
crude oil to be delivered under this Agreement, and Buyer shall be solely
responsible for determining the fitness and quality of all oil delivered
hereunder.
9. DAMAGES. Neither Seller nor Buyer shall have any liability to the
other under this Agreement for incidental, consequential or special damages or
for lost profits, whether or not the likelihood of such damages is or can be
anticipated.
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<PAGE>
10. PAYMENT. Payment for the crude oil delivered hereunder shall be made
by Buyer to Seller at Quaker State Corporation, 255 Elm Street, Oil City,
Pennsylvania 16301, Attn: R.S. Taylor, or at such other address as may be
designated by Seller, seven (7) days from the date of invoice. Invoices will be
sent by Seller every fifteen (15) days. All past due invoices shall bear
interest at the rate of 1.25% per month, until paid in full.
Seller reserves the right to require payment in advance of delivery or
other security satisfactory to Seller in the event Buyer should fail to make
timely payment for crude oil delivered hereunder.
11. NO ASSIGNMENT. The Buyer shall have the right to assign this
Agreement as security to a lender, a group of lenders or any other person or
entity which provides financing with respect to the acquisition of the Assets as
defined in the Asset Purchase and Sale Agreement between Seller and Buyer.
Neither party to this Agreement shall assign this Agreement in whole or in part
by operation of law or otherwise, without the prior written consent of the
other; provided, however, that Buyer may assign this Agreement to any entity
which is controlled by, controls or is under common control with Buyer. In the
event of any such assignment, Buyer shall remain fully liable hereunder and
shall guarantee to Seller full payment and performance of all obligations
hereunder by such assignee.
12. FORCE MAJEURE. Neither party shall be liable for any failure to
perform hereunder due to any cause beyond its reasonable control, including, but
not limited to, acts of God, fires, floods, wars, sabotage, accidents, strikes,
lockouts, or other labor disputes, shortages of labor, materials, or crude oil,
governmental law, ordinances, rules and regulations, whether valid or invalid
(including, but not limited to, priorities, requisitions,
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<PAGE>
allocations and price adjustment restrictions), inability to obtain material,
equipment or transportation, and any other circumstance or circumstances of a
similar or different nature. The party whose performance is prevented by any
such contingency shall have the right during the period of such contingency to
exclude such portion of the quantity deliverable during such period as is
prevented by such contingency from being delivered, whereupon the total
quantity deliverable under this Agreement shall be reduced by the quantity so
excluded. In the event a party's ability to perform hereunder is affected only
in part by force majeure as defined above, such party shall continue to perform
its obligations hereunder to the extent not affected by such force majeure.
A party affected by force majeure shall promptly notify the other party of
the existence thereof and the anticipated duration and effect upon its ability
to perform hereunder. Such party shall thereafter exercise its reasonable best
efforts to eliminate the force majeure as quickly as possible; provided that,
neither party shall be required to resolve labor disputes or disputes with
suppliers of raw materials except in such party's sole discretion in accordance
with its judgment as to its best interest. The party declaring force majeure
shall promptly notify the other party when such force majeure no longer affects
its ability to perform hereunder.
14. INTEGRATION. This Agreement together with the Asset Purchase and Sale
Agreement and the other agreements contemplated thereby incorporates the
complete and final agreement of the parties relative to the subject matter
herein, and shall not be amended or supplemented other than in writing signed by
both parties hereto dated subsequent to the date hereof.
15. DEFAULT. A party shall be in default hereunder in the event of the
occurrence of any of the following:
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<PAGE>
a) Such party should default in the performance of any of its obligations
hereunder, which default remains uncured 30 days following receipt of notice
specifying the nature of the default from the non-defaulting party; or
b) If any decree or order is entered by a court adjudicating such party a
bankrupt or insolvent or approving as properly filed a petition seeking
reorganization of such party under the federal Bankruptcy Code, or any other
similar federal or state law, and such decree or order shall have continued
undischarged or unstayed for a period of 30 days; or a decree or order of a
court for the appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of such party or a substantial part of its property, or
for the winding up or liquidation of its affairs shall have been entered and
such decree or order shall have remained in force undischarged or unstayed for a
period of 30 days; or
c) Such party shall institute proceedings to be adjudicated a voluntary
bankrupt, or shall consent to the filing of a bankruptcy petition against it, or
shall file a petition or answer or consent seeking reorganization under the
federal Bankruptcy Code or any other similar federal or state law, or shall
consent to the filing of any such petition, or shall consent to the appointment
of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency
of it or a substantial part of its assets, or shall make an assignment for the
benefit of creditors (other than as contemplated by this Agreement), or shall
admit in writing its inability to pay its debts generally as they become due,
or corporate action shall be taken by such party in furtherance of any of the
foregoing actions.
In the event of any such default, the non-defaulting party may at its
option terminate this Agreement by written notice, without prejudice to any
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<PAGE>
other rights or remedies available to the non-defaulting party by reason of such
default.
15. NO WAIVER. No waiver by either party of one or more rights of
termination or defaults by the other party in the performance of this Agreement
shall operate or be construed as a waiver of any future or continuing rights,
options or defaults, whether of a like or different character.
16. GOVERNING LAW. This Agreement shall be deemed a contract under and
shall be construed in accordance with the laws of the Commonwealth of
Pennsylvania.
Executed in duplicate originals the day and year first above written.
WITNESS: QUAKER STATE CORPORATION
By:
- ------------------------------ -------------------------------------
Its:
------------------------------------
WITNESS: PETROWAX PA INC.
By:
- ------------------------------ -------------------------------------
Its:
------------------------------------
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<PAGE>
EXHIBIT E
<PAGE>
EXHIBIT E
FORM OF ENVIRONMENTAL NOTE
$___________ Date:____________
For value received, Petrowax PA Inc., a Delaware corporation (hereinafter
called "PPI"), hereby promises to pay, in lawful money of the United States of
America, Quaker State Corporation, a Delaware corporation (hereinafter called
"Quaker State"), at Quaker State's offices at Oil City, Pennsylvania, or at such
other place as Quaker State shall designate in writing, the principal sum of
_______ ($________), together with interest thereon from the date of this
Environmental Note until paid at the rate of 10% per annum. Interest shall be
calculated on a year of 360 days of 12, 30-day months.
Commencing ninety days from the date of this Environmental Note and
throughout the Repayment Period as hereinafter defined, principal and interest
under this Environmental Note shall be due and payable in equal quarterly
installments of principal with all accrued and unpaid interest thereon. The
amount of each quarterly installment of principal shall be calculated by
dividing the total amount of the principal sum as of the date of this
Environmental Note by the number of quarters within the Repayment Period. The
Repayment Period shall be the period commencing the date of this Environmental
Note through March of the year 2010. PPI shall, subject to the provisions of
this Environmental Note set forth below, have the right to prepay in whole or in
part the amount owing to Quaker State hereunder, at any time and without
penalty.
In the event payment is not timely made under this Environmental Note
pursuant to the terms set forth in the preceding paragraph (other than as a
result of an election by PPI to set-off in accordance with the terms of this
Environmental Note), interest shall accrue on the principal amount then
outstanding from the date of any such missed scheduled payment until the date
payment therefor is made, at the rate of twelve percent (12%) per annum.
<PAGE>
The occurrence of any of the following shall constitute an Event of Default
under this Environmental Note:
1. PPI fails to make any payment to Quaker State of the principal of
and/or interest on this Environmental Note when the same shall have become due
and payable, whether at maturity as herein expressed or by declaration, or
otherwise and such failure is not cured within ten (10) days after receipt of
written notice of such nonpayment; or
2. PPI is in material default in the due and punctual payment of any
other obligation owed by the undersigned to Quaker State and such default is not
cured within ten (10) days after receipt of written notice of such default; or
3. PPI is in material default under the Senior Loan Agreement (as defined
herein) and such default is not cured within any applicable cure period provided
thereunder; or
4. PPI is adjudicated a bankrupt, or an order is made approving a
petition seeking reorganization or readjustment of PPI under the federal
bankruptcy laws or other similar law or statute of the United States of America
or of any state, or a trustee or receiver is appointed of all or substantially
all of the property of PPI; or
5. PPI admits in writing its inability to pay its debts as they become
due, files a petition in bankruptcy or makes a general assignment for the
benefit of creditors or consents to the appointment of a receiver or trustee of
all or any part of its property; or
6. Final judgment or judgments for the payment of money is or are
rendered against PPI and such judgment or judgments remain undischarged for a
period of thirty (30) days during which execution shall not be effectively
stayed.
Upon the occurrence and continuation of an Event of Default, and subject to
the provisions of this Environmental Note set forth below, Quaker State may, by
notice in writing delivered to PPI, declare the entire principal amount and
accrued interest, if any, on this Environmental Note immediately due and
payable, and such principal and interest shall thereupon become and be
immediately due and payable.
This Environmental Note is being executed by PPI and delivered to Quaker
State pursuant to the terms of that certain Asset Purchase and Sale Agreement
(the "Agreement") dated as of March 30, 1990 by and between PPI and Quaker State
and represents PPI's apportioned share of certain Remedial Costs
2
<PAGE>
(as defined in the Agreement), as more fully described therein. Pursuant to
Section 10.4(b) of the Agreement, Quaker State has agreed to indemnify PPI
against certain claims as more fully described therein. Quaker State hereby
agrees that PPI, in accordance with Section 10.4(d) of the Agreement, has the
full and absolute right, but not the obligation, to set-off against any amount
due or which, with the passage of time, will become due hereunder (including
both principal and interest), any amounts which Quaker State may from time to
time owe PPI pursuant to Section 10.4(b) of the Agreement. Such right of
set-off is in addition to any other remedies PPI may have under the Agreement or
otherwise and shall be deemed exercised only upon PPI giving Quaker State
written notice of PPI's election to set-off.
The indebtedness ("Subordinated Debt") evidenced by this Environmental Note
is subordinated and junior in right of payment to all Superior Debt (as defined
herein).
For the purpose of this Environmental Note the term "Superior Debt" shall
mean all "Obligations" as defined in that certain Senior Secured Loan Agreement
(the "Senior Loan Agreement") dated the date hereof by and between PPI, a
wholly-owned subsidiary of U.S. Petroleum Corp., a Delaware corporation
("Guarantor"), and Sanwa Business Credit Corporation, a Delaware corporation, as
a Lender and on behalf of other Lenders to whom it may assign its rights
thereunder, as well as all other "Debt" permitted under the terms of the Senior
Loan Agreement. The Superior Debt shall continue to be Superior Debt and be
entitled to the benefits of these subordination provisions irrespective of any
amendment, modification or waiver of any term of the Superior Debt or extension
or renewal of the Superior Debt.
No direct or indirect payment (in cash, property or securities or by
set-off or otherwise) shall be made or agreed to be made on account of the
principal of, or premium, if any, or interest on any Subordinated Debt, or in
respect of any redemption, retirement, purchase or other acquisition of any of
the Subordinated Debt so long as any amounts shall remain due or payable under
the Senior Loan Agreement; PROVIDED, HOWEVER, that PPI may make payments on the
Subordinated Debt pursuant to the terms hereof, and PROVIDED FURTHER that making
any such payment will not contravene any provision of the subordination
provisions set forth in this Environmental Note or the Senior Loan Agreement.
Notwithstanding any provisions to the contrary, upon the occurrence of any
condition or event which would constitute an "Event of Default" as defined in
the Senior Loan Agreement or which would constitute any default or event of
default with
3
<PAGE>
respect to any other Superior Debt, as defined therein or in any instrument
under which the same is outstanding, which permits the holder or holders of any
of the Superior Debt to accelerate the maturity thereof then, unless and until
such condition or event shall have been cured or waived or shall have ceased to
exist, no direct or indirect payment (in cash, property or securities or by
set-off or otherwise) shall be made or agreed or attempted to be made on account
of the principal of, or premium, if any, or interest or otherwise on any
Subordinated Debt, or as a sinking fund for the Subordinated Debt, or in respect
of any redemption, retirement, purchase or other acquisition of any of the
Subordinated Debt.
In the event of:
(i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to PPI or Guarantor or to the property of either of them,
(ii) any proceeding, voluntary or involuntary, for the
liquidation, dissolution or other winding-up of PPI or Guarantor, whether or
not involving insolvency or bankruptcy proceedings,
(iii) any general assignment, other than as security, for the
benefit of creditors by PPI or Guarantor, or
(iv) any other marshalling of the assets of PPI or Guarantor,
then all Superior Debt (including any interest thereon accruing at the legal
rate after the commencement of any such proceedings and any additional interest
that would have accrued thereon but for the commencement of such proceedings)
shall first be paid in full before any payment or distribution, whether in cash,
securities or other property, shall be made to Quaker State. Any payment or
distribution, whether in cash, securities or other property, which would
otherwise (but for these subordination provisions) be payable or deliverable in
respect of Subordinated Debt shall be paid or delivered directly to the holders
of the Superior Debt and then in accordance with the priorities then existing
among such holders until all Superior Debt (including any interest thereon
accruing at the legal rate after the commencement of any such proceedings and
any additional interest that would have accrued thereon but for the commencement
of such proceedings) shall have been paid in full.
The Subordinated Debt shall not be declared in default or due and payable
as the result of the occurrence of any event
4
<PAGE>
in respect thereof and no payment shall be made in respect of any Subordinated
Debt (except as otherwise expressly provided herein) unless and until all
Superior Debt shall have been paid in full.
If any payment or distribution, whether in cash, securities, or other
property, shall be received by Quaker State in contravention of any of the terms
hereof, such payment or distribution shall be received in trust for the benefit
of, and shall be paid over or delivered and transferred to, the holders of the
Superior Debt at the time outstanding in accordance with the priorities then
existing among such holders for application to the payment of all such debt
remaining unpaid, to the extent necessary to pay all such debt in full. In the
event of the failure of Quaker State to endorse or assign any such payment or
distribution, each holder of Superior Debt is hereby irrevocably authorized to
endorse or assign the same.
No present or future holder of any Superior Debt shall be prejudiced in the
right to enforce subordination of Subordinated Debt by any act or failure to act
on the part of PPI. The foregoing provisions as to subordination are solely
for the purpose of defining the relative rights of the holders of the Superior
Debt, on the one hand, and Quaker State, on the other hand. Nothing contained
herein shall impair, as between PPI and Quaker State, the obligation of PPI,
which is unconditional and absolute, to pay to Quaker State the principal hereof
and interest hereon as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Quaker State from exercising all
rights, powers and remedies otherwise permitted by applicable law or hereunder
upon the occurrence of any condition or event which constitutes a default or
event of default hereunder, all subject to the rights of the holders of the
Superior Debt to receive cash, securities or other property otherwise payable or
deliverable to Quaker State.
When the aggregate amount received by the holders of the Superior Debt
equals all amounts owed to the holders of the Superior Debt, Quaker State shall
be subrogated to all rights of any holders of such Superior Debt to receive any
further payments or distributions applicable to the Superior Debt until the
Subordinated Debt shall have been paid in full, and such payments or
distributions received by Quaker State by reason of such subrogation, whether in
cash, securities or other property which otherwise would be paid or distributed
to the holders of Superior Debt, shall, as between PPI and its creditors other
than the holders of other Superior Debt, on the one hand, and Quaker State on
the other hand, be deemed to be a payment by PPI on account of Superior Debt and
not on account of
5
<PAGE>
Subordinated Debt. Nothing contained in the foregoing shall reduce the amounts
owed by PPI to Quaker State hereunder and PPI agrees, subject to the terms of
this Environmental Note, that it is obligated to make payment in full to Quaker
State hereunder.
Quaker State will take such action (including, without limitation, the
delivery of this instrument to an agent for the holders of Superior Debt or the
filing of a financing statement with respect thereto) as may, in the opinion of
counsel designated by the holders of a majority in principal amount of the
obligations under the Senior Loan Agreement at the time outstanding, be
necessary or appropriate to assure the effectiveness of the subordination
effected by these provisions.
No failure or delay on the part of any holder hereof to exercise any of the
rights hereunder shall be deemed a waiver of any of such rights or of any
default hereunder.
PPI hereby waives demand, presentment for payment, notice of dishonor,
protest, notice of protest and notice of non-payment of this Environmental Note.
This Environmental Note may be sold, assigned or transferred by Quaker
State to any other party, upon written notice to PPI, provided that such
purchaser, assignee or transferee shall have assumed the indemnification
obligations of Quaker State under Section 10.4(b) the Agreement. This
Environmental Note may not otherwise be sold, assigned or transferred to any
other party without the express written consent of PPI. This Environmental Note
shall be binding not only upon PPI and Quaker State, but also upon their
permitted successors and/or assigns.
In the event any legal proceedings to enforce this Environmental Note are
commenced, the prevailing party shall be entitled to recover from the other
party all reasonable attorneys' fees and costs incurred in such proceedings,
including appeals and postjudgment execution.
This Environmental Note shall be governed by and construed in accordance
with the laws of the State of New York.
6
<PAGE>
IN WITNESS WHEREOF, PPI has caused this Environmental Note to be executed
by its duly authorized officer as of the date first above written.
PETROWAX PA INC.
By:
---------------------------
Gene R. Blendermann,
President and Chief
Executive Officer
7
<PAGE>
EXHIBIT F
<PAGE>
Exhibit F
[LETTERHEAD]
April _, 1990
Petrowax PA Inc.
230 Park Avenue
Suite 610
New York, NY 10169
Re: Asset Purchase and Sale Agreement and
Related Agreements
Gentlemen:
This opinion is delivered in connection with the Asset Purchase and Sale
Agreement (the "Agreement") dated ____________________ between Quaker State
Corporation ("Quaker State") and Petrowax PA Inc. ("PPI"). I have acted as
counsel to Quaker State in the course of negotiation of the Agreement. All
terms used herein which are defined in the Agreement shall have the same meaning
as set forth therein.
In making this opinion, I have examined the Charter and By-laws of Quaker
State, the minutes of meetings or actions of Quaker State's Board of Directors,
and such other corporate and official records as I deemed necessary or
appropriate. In addition, in rendering certain of the opinions stated below, I
have relied upon certificates from the Secretaries of State of Delaware and
Pennsylvania. The opinions made below are based upon the assumption that, with
respect to general principles of contract law and the general enforceability of
contracts, the law of New York is the same as that of Pennsylvania. My practice
is limited to Pennsylvania, and no opinion is made with respect to New York law
or the validity or enforceability of the Agreement under the law of New York.
Based upon the foregoing and upon such factual inquiries and legal
considerations which I deem relevant, I am of the following opinions, subject to
the limitations and conditions set forth below:
l. Quaker State is a corporation duly incorporated, validly existing, and
in good standing under the laws of the state of Delaware, and has full corporate
power and authority to carry on the business of the Facilities as presently
conducted and to own or lease and operate the Assets. Quaker State is qualified
to do business and is in good standing in each jurisdiction in which the nature
of the Facilities or the character of Quaker State's properties used in the
operation of the Facilities makes such qualification necessary except where the
failure to so qualify would not have a material adverse effect on the operation
of the Facilities.
<PAGE>
Petrowax PA Inc.
April ___, 1990
Page 2
2. The execution and delivery of the Agreement, the Supply Agreements, and
all other agreements and instruments to be executed by Quaker State in
connection therewith and the consummation of the transactions contemplated
thereby have been duly and validly authorized by all necessary corporate
action on the part of Quaker State.
3. The Agreement, the Supply Agreements and all other agreements and
instruments to be executed by Quaker State in connection therewith have been
duly and validly executed and delivered by Quaker State and constitute the valid
and binding obligations of Quaker State, enforceable against Quaker State in
accordance with their terms (subject as to the enforcement of remedies to Title
11 of the United State Code as from time to time in effect and to any other
applicable bankruptcy, reorganization, moratorium, insolvency, or other laws
generally affecting the enforcement of creditors' rights and the relief of
debtors, and to the general principles of equity).
4. The execution, delivery and performance of the Agreement, the Supply
Agreements and the agreements and instruments to be executed and delivered by
Quaker State in connection therewith do not result in a breach of any of the
terms or provisions of, or constitute a default (or an event which with the
passing of time or the giving of notice, or both, would constitute a default)
under, or conflict with, (i) the Certificate of Incorporation or By-Laws of
Quaker State, (ii) any statute or regulation binding upon Quaker State or, to
the best of my knowledge, any judgment, order or decree affecting Quaker State,
or (iii) to my knowledge, any material agreement, indenture or other instrument
to which Quaker State is a party or by which it is bound, except, in the case of
(ii) and (iii) above, for such breaches, defaults and conflicts which would
not, individually or in the aggregate, have a material adverse effect on either
of the Facilities, any of the Assets, or the transaction contemplated by the
Agreement.
5. All governmental consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation which must be obtained or
satisfied by Quaker State and which are necessary for the execution, delivery
and performance by Quaker State of the Agreement, the Supply Agreements and the
agreements and instruments to be executed and delivered by Quaker State pursuant
thereto have been obtained and satisfied, except where the failure to do so
would not, individually or in the aggregate, have a material adverse effect on
the business, results of operations or financial condition of Quaker State. In
rendering the opinion expressed in this paragraph 5, I have relied on the
representations and warranties made by PPI in the Agreement that no filing is
required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act.
6. To the best of my knowledge, there is no action, suit, claim,
proceeding, inquiry or investigation pending or threatened against or affecting
the Facilities at law or in equity, or before or by any arbitrator or any
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign that, if
<PAGE>
Petrowax PA Inc.
April , 1990
Page 3
decided adversely to the interests of Quaker State, could have a material
adverse effect on the Facilities, the Assets or the transactions contemplated by
the Agreement.
7. The bills of sale, assignments and other agreements and instruments
to be issued by Quaker State to effect the transfer of those items of
personal property included in the Assets are, or will be when executed and
delivered, sufficient to effect the sale, transfer and assignment of Quaker
State's right, title and interest in such Assets, and are, or will be when
executed and delivered, valid and binding obligations of Quaker State.
This opinion is based upon the present laws of the Commonwealth of
Pennsylvania, the Delaware General Corporation Law, and the laws of the United
States, to present judicial interpretations thereof and to the facts as they
presently exist or have been related to me. No obligation to revise or
supplement this opinion letter should the present laws be changed is assumed,
and no obligation is assumed to update this opinion with respect to any changes
in circumstances or facts occurring after the date hereof. This opinion is
rendered to you pursuant to the Agreement and may not be used or relied upon by
any other person or in any other context, or disclosed to any party other than
the addressee.
Very truly yours,
Richard Winkler
Senior Corporate Attorney
RW/bh
<PAGE>
EXHIBIT G
<PAGE>
EXHIBIT G
FORM OF OPINION OF
GIBSON, DUNN & CRUTCHER
April ___, 1990
(212) 351-4000 93273-00001
Quaker State Corporation
255 Elm Street
Oil City, Pennsylvania 16301
Gentlemen:
We have acted as counsel to Petrowax PA Inc., a Delaware corporation
(the "Company"), in connection with the purchase of the manufacturing and the
pipeline and terminal facilities (the "Facilities") known as the Emlenton Wax
Plant, the McKean Refinery and the crude oil pipeline and terminal department
running from the McKean Refinery to and including the Coleville Terminal, and
certain related assets of Quaker State Corporation, a Delaware corporation
("QSC"), pursuant to the terms of that certain Asset Purchase and Sale
Agreement, dated as of March 30, 1990, by and between the Company and QSC (the
"Agreement"). This opinion is being delivered to you pursuant to Section
10.2(c) of the Agreement. Capitalized terms used but not defined herein have
the meanings ascribed to them in the Agreement.
In our capacity as counsel, and for the purposes of rendering this
opinion, we have made such legal and factual inquiries and examinations as we
deemed advisable. We have also been furnished with evidence or
<PAGE>
Quaker State Corporation
April __, 1990
Page 2
advice satisfactory to us from the Secretary of State of the State of Delaware
with respect to the corporate good standing of the Company. In addition, we
have obtained and relied upon such other certificates and assurances from public
officials and from officers and representatives of the Company as we have deemed
necessary. We have also relied, generally without verification, on
representations and warranties as to the facts contained in any of the documents
referred to herein.
We have also examined the Slack Wax and Petrolatum Purchase Agreement
and the Crude Oil Purchase and Sale Agreement, both dated the date hereof (the
"Supply Agreements").
In all such examinations, we have assumed the genuineness of all
signatures by each party, the authenticity of all documents submitted to us as
originals and the conformity to the original documents of all documents
submitted to us as conformed or photostatic copies. For the purpose of the
opinions hereinafter expressed, we have assumed the due execution and delivery,
pursuant to due authorization, of each document referred to in this opinion by
each party thereto other than the Company and that each document constitutes the
valid and binding obligation of each other party enforceable against such party
in accordance with its terms.
On the basis of the foregoing and in reliance thereon, and subject to
the assumptions, exceptions, qualifications and limitations contained herein, we
are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of Delaware.
2. The execution and delivery of the Agreement, the Supply Agreements
and all other agreements and instruments to be executed by the Company in
connection therewith have been duly authorized by all necessary corporate action
on the part of the Company.
3. The Agreement and the Supply Agreements have been duly and validly
executed and delivered by the
<PAGE>
Quaker State Corporation
April __, 1990
Page 3
Company, and the Agreement constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
4. The execution, delivery and performance of the Agreement, the
Supply Agreements and the agreements and instruments to be executed and
delivered by the Company pursuant to the terms thereof do not result in a breach
of any of the terms or provisions of, or constitute a default (or an event which
with the passing of time or the giving of notice, or both, would constitute a
default) under, or conflict with: (a) the Certificate of Incorporation or
Bylaws of the Company, (b) any statute, rule or regulation binding upon the
Company or, to our knowledge, any judgment, order, writ, injunction or decree
affecting the Company, or (c) to our knowledge, any material agreement,
indenture or other instrument to which the Company is a party or by which it is
bound, except, in the case of (b) and (c) above, for such breaches, defaults and
conflicts which would not, individually or in the aggregate, have a material
adverse effect on the business, results of operations or financial condition of
the Company.
5. All consents, approvals, authorizations and other requirements
prescribed by any law, rule or regulation which must be obtained or satisfied by
the Company and which are necessary for the execution, delivery and performance
of the Agreement and the Supply Agreements by the Company have been obtained and
satisfied, except where the failure to do so would not, individually or in the
aggregate, have a material adverse effect on the business, results of operations
or financial condition of the Company.
The foregoing opinions are subject to the following qualifications,
exceptions, assumptions and limitations:
A. Our opinion as to the validity, binding effect and enforceability
of the Agreement is subject to limitations imposed by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity) and the effect of applicable bankruptcy, reorganization,
insolvency,
<PAGE>
Quaker State Corporation
April __, 1990
Page 4
moratorium and similar laws of general application relating to or affecting
creditors' rights, including, without limitation, the effect of statutory or
other law regarding fraudulent conveyances and preferential transfers. The
remedies of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
B. No opinion is expressed herein as to the enforceability of the
Agreement (i) for immaterial breaches; (ii) for material breaches which are the
proximate result of actions taken by you or your agents which actions you are
not entitled to take pursuant to the Agreement or applicable law or which
otherwise violate applicable law; or (iii) to the extent that you may take any
discretionary action insofar as such action is arbitrary, unreasonable or
capricious or is not performed in good faith or in a commercially reasonable
manner.
C. No opinion is expressed herein as to the enforceability of
provisions waiving broadly or vaguely stated rights, unknown future rights,
defenses to obligations or rights granted by law, to the extent such waivers are
held to be against public policy or prohibited by law.
D. No opinion is expressed herein as to the enforceability of
provisions to the effect that rights or remedies are not exclusive, that every
right or remedy is cumulative and may be exercised in addition to or together
with any other right or remedy, that election of a particular remedy or remedies
does not preclude recourse to one or more other remedies or that failure to
exercise or delay in exercising rights or remedies will not operate as a waiver
of any such right or remedy.
E. No opinion is expressed herein as to the enforceability of
provisions indemnifying a party against liability for its own wrongful or
negligent act or where such indemnification is contrary to public policy.
F. With respect to statements in this opinion based on our knowledge,
we have advised you only as to knowledge obtained by us in connection with
matters to
<PAGE>
Quaker State Corporation
April __, 1990
Page 5
which we have given substantive attention as counsel for the Company in the form
of legal consultation, and which knowledge refers only to the knowledge of the
lawyers in our firm participating in the preparation of the Agreement and not to
the knowledge of every lawyer in our firm.
We are admitted to practice in the State of New York. In addition, we
are generally familiar with the Delaware General Corporation Law and have made
such investigation thereof as we deemed necessary for the purpose of rendering
this opinion. This opinion is limited to the present laws of the State of New
York, the Delaware General Corporation Law and the federal law of the United
States of America, to present judicial interpretations thereof and to the facts
as they presently exist. We assume no obligation to revise or supplement this
opinion should the present laws of such jurisdictions be changed by legislative
action, judicial decision or otherwise. This opinion is rendered as of the date
hereof, and we express no opinion as to, and disclaim any undertaking or
obligation to update this opinion in respect of, changes of circumstances or
events which occur subsequent to this date.
This opinion is rendered to you pursuant to Section 10.2(c) of the
Agreement and may not be relied upon by any other person or by you in any other
context. This opinion may not be quoted nor may copies be furnished to any other
person without the prior written consent of this firm, except that you may
furnish a copy hereof (i) to your independent auditors and attorneys, (ii) to
any state or federal authority having regulatory jurisdiction over you, (iii)
pursuant to order or legal process of any court of governmental agency and (iv)
in connection with any legal action to which you are a party arising out of the
transactions contemplated by the Agreement.
Very truly yours,
<PAGE>
Schedule 1.13 Remedial Work
Remedial Work shall include, but not be limited to, those site
conditions at the McKean Plant and Emlenton Plant identified in the reports of
Duncan, Lagnese & Associates, Inc. dated November, 1989.
<PAGE>
Schedule 3.1(a)(i) McKean Plant Real Property
All of the tracts listed on this Schedule are conveyed under and subject to:
a) Any and all exceptions, reservations, rights of way and easements
granted or reserved by Seller, or its predecessors in title, to the
extent recorded in the county recorder's office or disclosed in
writing to Buyer by Seller;
b) taxes and assessments, both general and special, which are a lien but
not yet due and payable;
c) zoning and other ordinances, laws, regulations and other
governmental impositions, if any, in any way affecting the property
and any improvements thereon;
d) matters which may be discoverable by an accurate survey and
inspection of the property;
e) easements, rights of way and rights of passage, whether or not
appearing of public record;
f) those matters listed as items 1 through 39 of Schedule B. II. and 1.i,
and j. of Schedule B.I. of Ticor Title Insurance Commitment No. 1990-
0002, dated January 12, 1990.
<PAGE>
SCHEDULE A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 1 of 14
- --------------------------------------------------------------------------------
Commitment No. Effective Date of Commitment:
1990-0002 January 12, 1990
- --------------------------------------------------------------------------------
Your No.:
- --------------------------------------------------------------------------------
Prepared for
TICOR TITLE INSURANCE
ONE PENN SQUARE WEST, SUITE 1301
30 SOUTH 15TH STREET
PHILADELPHIA, PA 19102
Inquiries Should be Directed to:
BRUCE T. ROSEN, ESQ.
ROSEN, ROSEN & BLOOM
207 SENECA STREET
OIL, CITY, PA 16301
1. Policy or Policies to be issued: Amount
(a) / / ALTA Owners Policy - Form - 1970 $
------ -----------
Proposed Insured:
(b) / / ALTA Loan Policy 1970 $
-----------
Proposed Insured:
2. The estate or interest in the land described or referred to in this
Commitment and covered herein is a Fee Simple.
3. Title to said estate or interest in said land is at the effective date
hereof vested in: QUAKER STATE OIL REFINING CORPORATION
4. The land referred to in this Commitment is located in the County of McKean,
Township of Keating, State at Pennsylvania and described as follows:
PARCEL NO. 1
BEGINNING at a point in the center of the road leading from Farmers Valley to
Turtle Point, said point being one hundred forty-six (146) feet westerly
from the center line of the Pittsburgh, Shawmut and Northern Railroad
and twenty (20) feet South of an iron post marking the Eastern boundary of
the lot herein conveyed: and running thence Northerly one hundred fifty
(150) feet to the northeasterly corner hereof: and running thence Westerly
and parallel to the said Farmers Valley to Turtle point road one hundred
(100) feet to an iron pipe corner; and running thence Southerly and
parallel with the Eastern boundary hereof one hundred fifty (150) feet
to the center of said road; and running thence Easterly along the center
line of said road one hundred (100) feet to the place of beginning.
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
1990-0002 Page 2 of 14
- --------------------------------------------------------------------------------
PARCEL NO. 2(A):
BEGINNING at a post standing one hundred twelve (112) rods east, and fifty
one and three tenths (51.3) rods north of the northeast corner of a
lot of land conveyed by John Keating and Company to George Otto; thence
west two hundred and seventy one and nine-tenths (271.9) rods to a post
corner in the west line of Warrant No. 2091; thence by said line, north
fifty one and two-tenths (51.2) rods to a post corner thence east two hundred
and ninety nine and four-tenths (299.4) rods to a post corner on the west
bank of Potato Creek; thence up the said creek by its various courses and
distances to the place of beginning.
EXCEPTING AND RESERVING, however, that certain piece or parcel of land
bounded and described as follows:
BEGINNING at a point in the center of the public road leading from Smethport
to Olean, in the division line between the farms formerly of Eugene Mullin and
Pelton, an iron on the east side of the road one rod from the center thereof;
thence by the center of said road north fifteen (15) degrees east four
rods, north twenty (20) degrees east six rods, to an iron on east side of
road; thence east fifteen and six tenths (15.6) rods to an iron; thence
south nine and three tenths (9.3) rods to iron in said division line; thence
by said line west eighteen and eight tenths (18.8) rods to the place of
beginning.
ALSO EXCEPTING AND RESERVING, two and sixteen hundredths (2.16) acres of
land more particularly described in deed from Eugene Mullin and wife to the
Pittsburgh, Shawmut & Northern Railroad Company, dated October 31, 1899, and
recorded in Deed Book 109, page 486.
ALSO EXCEPTING AND RESERVING, that certain triangular piece or
parcel of land heretofore conveyed by Jack Kessler to McKean County
Refining Company by deed dated May 28, 1932, and recorded in Deed Book 222,
Page 120.
PARCEL NO. 2(B):
But granting and conveying hereby the said triangular piece, bounded and
described as follows: BEGINNING at a point of intersection of the center
lines of the concrete bridge and Cole Creek, said bridge being over Cole
Creek on U.S. Highway Route No. 6, and running thence southerly seventy three
degrees five minutes east five hundred forty-nine (549) feet to an iron pipe
situate in the westerly line of the Pittsburgh, Shawmut & Northern Railroad
Company's right of way, said pipe being north seventy three (73) decrees
five minutes west from the center pier of the Pittsburgh, Shawmut & Northern
Railroad Company bridge over Cole Creek; thence along the said right of way
north twenty six (26) degrees twenty (20) minutes east one hundred eighty
nine (189) feet to an iron pipe situated in the westerly line of said
right of way of the Pittsburgh, Shawmut & Northern Railroad Company; thence
south eighty nine (89) degrees ten (10) minutes west six hundred eight (608)
feet to the place of beginning.
PARCEL NO. 3(A)
All of the portions of Lot Nineteen (19) of the Keating Allotment of lands in
Keating Township, being part of Warrant 2091 which are located East of the
highway leading from Smethport to Coryville, Pennsylvania, Route 446,
bounded on the West by said
<PAGE>
SCHEDULE A - (CONTINUED)
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COMMITMENT NO.
1990-0002 Page 3 of 14
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highway on the North by lands now or formerly of L.D. Scowden, on the East by
Potatoe Creek; on the south by lands now or formerly of Quaker State Oil
Refining Corporation.
EXCEPTING THEREFROM THE FOLLOWING:
1) One (1) acre conveyed by Mary Decker to G. W. Smith by deed dated
September 15, 1921, in Deed Book 185, Page 295:
2) Fifteen thousand (15,000) square feet conveyed by Mary Decker to
Edward F. Fox by deed dated March 29, 1927, recorded in Deed Book 208,
Page 227;
3) Lot conveyed by Mary Decker to John Dickerson by deed dated
March 19, 1928, recorded in Deed Book 204, Page 375;
4) One-fourth (1/4) acre conveyed by Mary Decker to S. and R.B. Francisco,
by deed dated February 7, 1930, recorded in Deed Bock 229, Page 323;
5) Four tenths (.4) acre conveyed by Mary Decker to Shawmut Realty
Corporation by deed dated March 13, 1930, recorded in Deed Book 212,
Page 380;
6) Five and eight tenths (5.8) acres conveyed by Mary Decker to
School District of Keating Township by deed dated May 31, 1930,
recorded in Deed Book 214, Page 40.
7) Lot conveyed by B. D. Yates to Quaker State Oil Refining
Corporation by deed dated July 30, 1963, recorded in Deed Book 410,
Page 531;
8) Lot conveyed by B. D. Yates to Quaker State Oil Refining
Corporation by deed dated July 30, 1963, recorded in Deed Book 412,
Page 785.
9) Lot containing 2.49 acres conveyed by Mary Decker, et vir, to
Pittsburgh, Shawmutt and Northern Railroad Company, dated
December 4, 1889, recorded in Deed Book 109, Page 271;
10) Lot containing 1/2 acre conveyed from Mary Decker, et vir, to M.L. Weim,
et ux, dated March 29, 1927, recorded in Deed Book 106, Page 24;
11) Lot conveyed by Mary Decker, et vir, to Bradford Electric Company,
deed dated July 10, 193, and recorded in Deed Book 214, Page 74;
12) Lot containing 1/4 acre conveyed from Mary Decker, et: vir, to Sherman
Francisco, et ux, dated February 7, 1930, recorded in Deed Book 224,
Page 323:
13) Parcel containing 21.6 acres from John W. Yates, et ux, to Donald P.
Johnson, et ux, dated May 14, 1957, recorded in Deed Book 328. Page 25;
BEGINNING at an iron stake in the westerly line of the public highway leading
from Smethport to Coryville, the southeast corner of land of Joseph C. Stull
at Farmers Valley Corners, thence West along the north line of a lot conveyed
to B. Schoenemann by C. E. B. Hatch by deed dated April, 1884, DB 33, Page
50, 73 feet 6 inches to a post corner: thence northerly parallel with the
highway 56 feet to a post corner, thence Eastwardly at right angles to said
highway 18 feet to a post corner, thence northerly and parallel with said
highway, 28 feat to a post corner; thence easterly at right angles to said
highway 46 feet 2 inches to the westerly line of said highway, thence
southerly along said highway line 48 feet to the place of beginning.
PARCEL NO. 3(b)
BEGINNING at the intersection of the center line of the highway leading from
Farmers Valley to Colevile with the center line of the highway leading
from Smethport to Coryville; thence along the center of said Smethport
and Coryville Highway, South thirty-four and one-half degrees West (S. 34
1/2Degrees W.) two hundred fifty-three and five tenths (253.5) feet, more
or less, to the Northeast corner of land conveyed to Balthasar
Schoenemann by C. E. B. Hatch, by deed dated April 1, 1884, and recorded
<PAGE>
Schedule A - (Continued)
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COMMITMENT NO.
1990-0002 Page 4 of 14
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in Deed Book Volume 33, at page 50; thence West along the North
line of said Schoenemann's lot three hundred thirty-one (331) feet, more
or less, to the Northwest corner thereof: thence North eighty-one (81)
feet, more or less, to a post corner ninety (90) feet South of the South
line of the said Farmers Valley and Coleville Highway, being the Southeast
corner of a lot conveyed to said J. C. Stull by C. C. Sloan; thence West one
hundred (100) feet to a post corner; thence North ninety (90) feet to a post
corner in the South line of said highway; thence East along said South line
one hundred (100) feet to a post corner; thence North twenty-five (25)
feet, more or less, to the center of said highway; thence along the center of
said highway, South eighty-seven and one-half degrees East (S. 87 1/2 Degrees
E.) four hundred seventy-five (475) feet, more or less, to the place of
beginning.
EXCEPTING THEREFROM THE FOLLOWING:
BEGINNING at a post corner at the Northwest corner of a certain lot conveyed
by C. E. B. Hatch to B. Schonemann by deed dated April 1, 1889, recorded in
Deed Book Volume 33, Page 50: thence North eighty-one (81) feet, more or
less, to a post ninety (90) feet South from the South line of the Farmers
Valley - Coleville highway, being also the Southeast corner of lot conveyed
by C. C. Sloan to J. C. Stull by deed dated March 26, 1906, recorded in Deed
Book Volume 141, page 108; thence West thirty-five (35) feet more or less,
along the south line of said Stull lot, to a post corner therein; thence
North ninety (90) feet to a post corner in the South line of the Farmers
Valley - Coleville highway; thence east thirty-five (35) feet, more or less,
along the South line of said Farmers - Valley Coleville highway to a post
corner in the East line of the Stull lot; thence North twenty-five (25) feet
to the center line of said highway; thence East ninety (90) feet along
the center line of said highway to a point; thence South one hundred
eighty-nine (189) feet, more or less, to a post in the North line of said
Schonemann lot; thence West ninety-one (91) feet, more or less, along the
North line of said Schonemann lot to the place of beginning.
PARCEL NO. 3(c):
BEGINNING at a point in the center of State Highway #96 leading from Farmers
Valley to Bradford, the Northwest corner of the H. D. Marsh lot; thence South
by the West line of said Marsh lot one hundred (100) feet to an iron stake;
thence West one hundred twenty (120) feet to an iron stake; thence North and
parallel with first described course one hundred (100) feet to a point in
the center of said public highway; thence East by the center of said public
highway one hundred twenty (120) feet to the place of beginning.
PARCEL NO. 3(d):
BEGINNING at a stone corner on the bank of Potato Creek; thence running South
along the line of the; Shawmut Railroad until striking M. A. Decker's East
and West line thence directly East to Potato Creek; thence Northward to the
place of beginning.
PARCEL NO. 3(e):
BEGINNING at the Northwest corner of Lot 137 contracted to J. C. Nettleship;
thence East thirty-seven perches (37 p) to a post; thence North one
hundred one perches (101 p) to a post on the bank of Potato Creek; thence
up said creek North eighty-five degrees West (N. 85Degrees W.) seven (7)
perches: thence North twenty-five degrees West (N. 25Degrees W.) seventeen
(17) perches; thence North four degrees west (N. 4Degrees W.) ten and seven
tenths (10.7) perches: thence North forty-six degrees West (N. 46Degrees W.)
<PAGE>
SCHEDULE A - (CONTINUED)
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Commitment No.
1990-0002 Page 5 of 14
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ten (10) perches; thence South sixty-four degrees West (S. 64DEG. W.)
eleven (11) perches; thence South fifty degrees West (S. 50DEG. W.)
twenty-five and six tenths (25.6) perches: thence South eighteen degrees (S.
18DEG.) fifteen (15) perches; thence South twenty-one and one-half degrees
East (S. 21 1/2DEG. E.) twenty-eight (28) perches; thence South
twenty-five degrees West (S. 25DEG. W.) eighteen (18) perches; thence
South fifty-eight degrees West (S. 58DEG. W.) ten (10) perches; thence
South two degrees west (S. 2DEG. W.) eleven and eight tenths (11.8) perches:
thence North eighty-six and one-half degrees East (N. 86 1/2DEG. E. )
thirty-one and five tenths (31.5) perches; thence South forty-six degrees
East (S. 46DEG. E.) thirteen and eight tenths (13.8) perches; thence South
twenty degrees West (S. 20DEG. W.) seventeen (17) perches; thence
South thirty-six degrees West (S. 36DEG. W.) nineteen (19) perches to
the place of beginning.
PARCEL NO. 4:
BEGINNING at a post corner at the Northwest corner of premises conveyed by
Charles E. B. Hatch to Balthaser Schonemann by deed dated April 1, 1884,
and recorded McKean County Deed Bock Volume 33, Page 50; thence North eighty-
one (81) feet more or less to a post corner situate ninety (90) feet South
of the South line of the Farmers Valley-Coleville Highway, being the
Southeast corner of premises heretofore conveyed by Celestia C. Sloan to
Joseph C. Stull, by deed dated March 26, 1906, and recorded in Mckean County
Deed Book Volume 141, Page 108; thence West along the South line of said
Stull premises, one hundred (100) feet to a post corner, being the
Southwest corner of said Stull premises or lot; thence North fifteen (15)
feet more or less to a post corner, being the Southeast corner of a lot of
land conveyed by Thomas Soule, Jr. and wife to Charles W. Rounsville and Anna
Rousville, husband and wife, by deed dated October 23, 1926, recorded in
McKean County Deed Book 199, page 207: thence West one hundred twenty (120)
feet along the South line of said Rounsville lot to a post corner, being the
Southwest corner of said Rounsville lot; thence North along the west side
of said Rounsville lot, one hundred (100) feet to a point in the center
line of the said Farmers Valley-Coleville Highway; thence West by the
center line of said Highway to the point of intersection thereof with the
North line of the Smethport-Coleville Highway, known as State Highway
Route No. 46; thence Southeast by the North line of said Highway Route
No. 46 to a post corner, being the southwest corner of a parcel of land
heretofore conveyed by A. Chester Marsh, et al, to McKean County Refinery, by
deed dated May 4, 1927, and recorded in McKean County Deed Book 201, Page
444; thence along the West line of said parcel of land ninety-five (95) feet
more or less, to the point of beginning.
PARCEL NO. 5:
BEGINNING at a post corner at the Northwest corner of a certain lot
heretofore conveyed by Charles E. B. Hatch to Balthaser Schoneman, by
deed dated April 1, 1884, and recorded in McKean County Deed Book Vol. 33,
Page 50; thence North eighty-one (81) feet more or less to a post corner
ninety (90) feet South from the South line of the Farmers Valley-Coleville
Highway, being also the Southeast corner of a lot of land conveyed by
Celestia C. Sloan to Joseph C. Stull, by deed dated March 26, 1906, and
recorded in McKean County Deed Bock Volume 141, Page 108, etc;
thence West thirty-five (35) feet, more or less, along the South line of
said Stull lot to a post corner therein; thence North ninety (90) feet to
a post corner in the South line of said Farmers Valley-Coleville
Highway; thence East thirty-five (35) feet more or less along the South
line of said Farmers Valley-Coleville Highway to a post corner in the East
line of said Stull lot; thence North twenty-five (25) feet to the center
line of said highway; thence East ninety (90) feet along the center line
<PAGE>
SCHEDULE A - (CONTINUED)
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COMMITMENT NO. Page 6 of 14
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of said highway to a point; thence south one hundred eighty-nine
(189) feet more or less to a post in the North line of said Schoneman lot;
thence West ninety-one (91) feet, more or less along the north line
said Schoneman lot to the place of beginning.
PARCEL NO. 6:
BEGINNING at a point in the center of the public road leading from Smethport
to Olean in the division line between the farms formerly of Eugene Mullin and
Pelton, an iron on the east side of the road one rod from the center thereof;
thence by the center of said road north fifteen (15) degrees east four
rods north twenty (20) degrees east six rods to an iron on east side of
road; thence east fifteen and six tenths (15.6) rods to an iron; thence
south nine and three tenths (9.3) rods to iron in said division line;
thence by said line west eighteen and eight tenths (18.8) rods to the place
of beginning.
PARCEL NO. 7:
BEGINNING at a point on the improved highway, U.S. Route No. 6 and also the
northwest corner of land of Keating Township School District; thence south 34
degrees 57 minutes east, 10 rods to a point: thence south 36 degrees 34
minutes west, 4 rods to a point: thence north 34 degrees 57 minutes west 10
rods to a point on U.S. Route No. 6; thence along said U.S. Route No. 6 in
a northeasterly direction 4 rods to the northwest corner of land of
Keating Township School District mentioned aforesaid.
PARCEL NO. 8(A):
BEGINNING at a point in the South line of a Public Road, distant twenty-seven
feet and five-tenths of a foot southeastwardly at right angles from the
center line of main track of the Western New York and Pennsylvania Railroad
Company, formerly the main track of the Pittsburgh, Shawmut and
Northern Railroad, said beginning point being also distant thirty-four
feet and nine-tenths of a foot measured North eighty-eight degrees
fifteen minutes East along said south line of Public Road from a point at
Survey Station 4434 plus 31.72 in said center line of main track.
EXTENDING from said beginning point the following six courses and
distances: (1) North eighty-eight degrees fifteen minutes East along said
South line of Public Road twenty-eight feet and fifty-five one-hundredths of
a foot to a point in a northwesterly line of land of the Quaker State Oil
Refining Corporation, the following two courses and distances being by said
last mentioned land on a line parallel with and distant fifty feet
Southeastwardly at right angles and radially from said center line
of main tract; (2) South thirty-six degrees fifteen minutes West, nine
hundred fifty-four feet and sixty four one-hundredths of a foot to a point
Southeastwardly and radially from the point of curve at Survey Station 4443
plus 47.3 in said center line of main track; (3) Southwestwardly from the
last course as a tangent, on a curve to the left with a radius of one
thousand three hundred eighty-two feet and sixty nine one-hundredths
of a foot, crossing a private road an arc length of two hundred
sixty-five feet and forty-six one-hundredths of a foot to a point;
the following three courses and distances being by land of said Railway
Company; (4) North sixty-four degrees forty-five minutes West, twenty-two
feet and five-tenths of a foot to a point distant twenty-seven feet and
five-tenths of a foot Southeastwardly and radially from a point at
Survey Station 4446 plus 22.3 in said center line of main tract, the
following two courses and distances being on a line parallel with and
distant
<PAGE>
SCHEDULE A - (CONTINUED)
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COMMITMENT NO. Page 7 of 14
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twenty-seven feet and five-tenths of a foot Southeastwardly, radially and
at right angles from said center line of main tract; (5)
Northeastwardly on a curve to the right, with a radius of one thousand four
hundred five feet and nineteen one-hundredths of a foot, crossing said
private road an arc length of two hundred sixty-nine feet and seventy-eight
one-hundredths of a foot to a point Southeastwardly and radially from
said point of curve at Survey Station 4443 plus 47.3 in said center
line of main track, and thence (6) North thirty-six degrees fifteen minutes
East, tangential to said last described curve, nine hundred thirty-seven
feet and six one-hundredths of a foot to the place of beginning.
PARCEL NO. 8(b):
BEGINNING at a point in the South line of a Public Road, distant twenty-
seven feet and five-tenths of a foot Northwestwardly at right angles
from the center line of main track of the Western New York and Pennsylvania
Railway Company, formerly the main tract of the Pittsburgh, Shawmut and
Northern Railroad, said beginning point being also distant thirty-four feet
and nine-tenths of a foot measured South eighty-eight degrees fifteen minutes
West along said South line of Public Road from a point at Survey Station 4434
plus 31.72 in said center line of main track;
EXTENDING from said beginning point, the following six courses and distances:
the first three thereof being by land of said Railway Company and the first
two thereof being in a line parallel with and distant twenty-seven feet and
five-tenths of a foot Northwestwardly, at right angles and radially from said
center line of main track; (1) South thirty-six degrees fifteen minutes West,
eight hundred ninety-four feet and one-tenths of a foot to a point,
Northwestwardly and radially from the point of curve at Survey Station 4443
plus 47.3 in said center line of main track; (2) Southwestwardly from the
last course as a tangent, on a curve to the left with a radius of one
thousand four hundred sixty feet and nineteen one-hundredths of a foot,
crossing a private road, an arc length of three hundred feet and seventy-
three one-hundredths of a foot to a point Northwestwardly and radially from
Survey Station 4446 plus 42.3 in said center line of main track; (3) North
sixty-five degrees thirty-three minutes West twenty-two feet and five-tenths
of a foot to a point in a Southeasterly line of land of the Quaker State Oil
Refining Corporation, the following two courses and distances being by said
last mentioned land on a line parallel with and distant fifty feet
Northwestwardly, radially and at right angles from said center line of main
track; (4) Northeastwardly on a curve to the right with a radius of one
thousand four hundred eighty-two feet and sixty-nine one-hundredths of a
foot, crossing said private road an arc length of three hundred five feet and
thirty-six one-hundredths of a foot to a point Northwestwardly and radially
from said point of curve at Survey Station 4443 plus 47.3 in said center line
of main track; (5) North thirty-six degrees fifteen minutes East tangential
to said last described curve eight hundred seventy-six feet and fifty-two
one-hundredths of a foot to a point in said south line of Public Road, and
(6) thence North eighty-eight degrees fifteen minutes East along said south
line of Public Road twenty-eight feet and fifty-five one-hundredths of a foot
to the place of beginning.
PARCEL NO. 9(A):
All that certain piece or parcel of land, a portion of Lots 17 and 19 in
Warrant 2091, situate and lying along the Southeasterly side of Route 446 in
Keating Township. County of McKean, Commonwealth of Pennsylvania, and being
more particularly bounded
<PAGE>
SCHEDULE A - (CONTINUED)
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COMMITMENT NO.
Page 8 of 14
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and described as follows:
BEGINNING at a 1" pipe in the northwesterly right-of-way of the
former Pittsburgh, Shawmut & Northern Railroad, 50 feet at right
angles from the centerline thereof, being 1075 feet, more or less,
northeasterly along said railroad from the centerline of the Farmers Valley
Crossroad as shown on survey dated June 8, 1988, by Gregory C. Bell,
surveyor, said point of beginning being in the line dividing Lot 17 on the
north and Lot 19 on the south; thence from the place of beginning S 40 Degrees
03 Seconds W along said right-of-way line 442.2 feet to a 1" pipe set; thence
S 62 Degrees 36 Minutes W, along lands of Quaker State Corporation, a
distance of 217.8 feet to a 1" pipe set; thence N 54 Degrees 20 Minutes W
along lands of Quaker State Corporation, passing over a 1/2" iron rod at
549.2 Minutes, for a total distance of 578.7 feet to a point in the
centerline of Route 446; thence N 38 Degrees 00 Minutes E along said
centerline a distance of 239.0 feet to a point, the southwest corner of lands
of Marilyn Brown; thence S 55 Degrees 50 Minutes 20 Seconds E along said line
of Brown, 120.95 feet to a 3/4" pipe set in the aforementioned Lot Line;
thence S 88 Degrees 26 Minutes 20 Seconds E along said lot line a distance of
701.1 feet to the place of beginning.
PARCEL NO. 9(B):
BEGINNING at a point on the south line of the premises now or formerly of
Smethport Area School District, containing 14.8 acres and situate at
Farmers Valley, McKean County, Pennsylvania, said point being located
North 83 Degrees West 426 feet and 4 inches from a point in the center of
Pennsylvania State Highway Route 446, which point marks the southeast corner
of the parsonage lot adjacent to the church at Farmers Valley; thence North
7 Degrees East 20 feet to a corner; thence North 83 Degrees West 20 feet to a
corner; thence South 7 Degrees West 20 feet to a corner on the said south line
of the property now or formerly of Smethport Area School District;
thence by the South line of said property of land now or formerly of
Smethport Area School District, South 83 Degrees East, 20 feet to the place of
beginning.
EXCEPTING AND RESERVING, a parcel of land containing 3.45 acres,
conveyed from Smethport Area School District to Charles L. McKiernan, et
ux, dated August 23, 1984, recorded in Record Book 23, Page 1063.
PARCEL NO. 10:
BEGINNING at a point marking the Northwest corner of a lot of land heretofore
conveyed by Bessie D. Yates, widow, to Quaker State Oil Refining
Corporation by deed dated February 27, 1963, and recorded March 22, 1963, in
Deed Book Volume 410, page 531 and running thence North eighty-six
degrees fifty minutes West (N. 86 Degrees 50 Minutes W.) a distance of
two hundred forty (240) feet, more or less, to a point in the center of
the Smethport to Olean road; and running thence Southwesterly along the
center line of the said Olean road a distance of eighty (80) feet, more or
less, to a point marking the Northwest corner of a lot of land conveyed by L.
E. Scowden, et ux, to Quaker State Oil Refining Corporation by deed dated
April 10, 1963, and recorded April 11, 1963, in Deed Book 410, page 773
and running thence East along the North line of said Scowden property two
hundred seventy eight and eighty-five hundredths (278.85) feet, more or less,
to a point in the West line of the said property conveyed by Bessie D. Yates
to Quaker State Oil Refining Corporation; and running thence North three
degrees ten minutes East (N. 3 Degrees 10 Minutes E.) seventy (70) feet, more
or less, to the place of beginning.
PARCEL NO. 11:
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SCHEDULE A - (CONTINUED)
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COMMITMENT NO.
Page 9 of 14
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PARCEL NO. 11:
BEGINNING at a point in the center of the road leading from Farmers Valley to
Turtle Point, said point being one hundred forty-six feet (146) feet westerly
from the center line of the Pittsburgh, Shawmut and Northern Railroad
and twenty (20) feet South of an iron post marking the Eastern boundary of
the lot herein conveyed; and running thence Northerly one hundred fifty
(150) feet to the northeasterly corner thereof; and running thence Westerly
and parallel to the said Farmers Valley to Turtle Point road one hundred feet
(100) feet to an iron pipe corner; and running thence Southerly and parallel
with the Eastern boundary hereof one hundred fifty (150) feet to the center
of said road; and running thence Easterly along the center line of said road
one hundred feet (100) feet to the place of beginning.
PARCEL NO. 12:
BEGINNING at a point in the center line of the highway leading from the
corners at Farmers Valley Easterly to Turtlepoint and at the southwest
corner of a parcel of land conveyed by Mary A. Decker and husband to
the Shawmut Realty Corporation by deed dated March 13, 1930, and recorded
in McKean County Records in Deed Book Volume 212, Page 380, said point
being one hundred (100) feet distance Northwesterly at right angles
from the center line of the tract of land conveyed by the said Mary A.
Decker and husband to the Pittsburgh, Shawmut and Northern Railroad by deed
dated December 4, 1889, and recorded in said records in Deed Book Volume
109, Page 271; and running thence North eighty-six degrees fifty minutes
West (N. 86 Degrees 50 Minutes W.) along the center line of the said
Farmers Valley to Turtlepoint road four hundred fifteen and thirty-five
hundredths (415.35) feet, more or less, to the southeast corner of a parcel
of land conveyed by the said Mary A. Decker and husband to G. W. Smith by
deed dated September 15, 1921, and recorded in said records in Deed Book
Volume 185, at page 295; and running thence North three degrees ten minutes
East (N. 3 Degrees 10 Minutes E.) along the east line of the former G. W.
Smith (now Scowden) property, and other land now or formerly of Bessie D.
Yates, a distance of two hundred (200) feet, more or less, to an iron pipe
corner; and running thence South eighty-six degrees fifty minutes East (S.
86 Degrees 50 Minutes E.) on a line parallel with the center line of the
said Farmers alley to Turtle point road a distance of five hundred
eighty-one and eight-tenths (581.8) feet, more or less, to an iron pipe
corner set in the northwesterly line of the said Shawmut Realty lands
hereinabove referred to; and running thence South forty-two degrees
fifty-six minutes West (S. 42 Degrees 56 Minutes W.) along said line of the
Shawmut Realty Corporation two hundred sixty and two-tenths (260.2) feet,
more or less, to the place of beginning.
EXCEPTING AND RESERVING, therefrom, a certain parcel of land
heretofore conveyed by Mary A. Decker and husband to Edward F. Fox, by deed
dated March 29, 1927, and recorded in said McKean County Records in Deed Book
208, Page 227.
ALSO EXCEPTING AND RESERVING, therefrom, a certain parcel of land conveyed
by Mary A. Decker and husband to John Dickenson, by deed dated March 19,
1928, and recorded in said McKean County Records in Deed Book Volume 204,
Page 375.
PARCEL NO.13:
BEGINNING in the center of the public highway leading from the corners
at Farmer Valley easterly to Turtle Point at the southwest corner of a
parcel of land conveyed by Marsh Brothers to Harry Craft, and being
approximately twenty (20) feet south
<PAGE>
SCHEDULE A - (CONTINUED)
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COMMITMENT NO.
Page 10 of 14
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of an iron post corner; thence northerly one hundred fifty (150) feet, more
or less, to the north line of a parcel of land described in deed from John
Dickerson to Marsh Brother, dated September 1, 1930, and recorded in Deed
Book 214, at Page 283, McKean County records, being the northwest corner of
the said Harry Craft lot; thence westerly along the line mentioned in
said John Dickerson deed seventy (70) feet to an iron post corner;
thence southerly and parallel with the west line of said Harry Craft
lot one hundred forty-six and seventy one-hundredths (146.70) feet,
more or less, to the center of said public highway; thence easterly along
the center of said public highway, seventy (70) feet to the place of
beginning.
PARCEL NO. 14:
BEGINNING at a post standing in the center of the four corners of the road
two hundred and twenty (220) perches East from the Northwest corner of land
of William S. Moore Lot No. 20 of the Allotment of Keating lands in Keating
Township; thence by the center of the Olean Road North thirty seven and
one-half (37 1/2) degrees East ten and one tenths (10.1) perches to a post
corner; thence East sixteen and nine-tenths (16.9) perches to a post corner;
thence South eight (8) perches to the center of the Turtle Point Road; thence
by the said road West twenty-two and nine tenths (22.9) perches to the place
of beginning.
Parcel No. 15(A):
BEGINNING at a post corner in the bank of Potato Creek at Northwest corner of
land conveyed to Thomas Goodwin, Lot No. 141; thence South 135 rods to a
post, the southwest corner of same; thence West 13.5 rods to a birch
the Northwest corner of land heretofore conveyed to Byron D. Hamlin, Lot
No. 142; thence South 69.8 rods to the center of the Public Highway; thence
by center of said Public Highway South 47 degrees West 64.8 rods to a corner;
thence West 64 rods to a corner; thence North 81 rods to a corner; thence
West 16.4 rods to a corner; thence North 44 rods to the North line of
the Pennsylvania Railroad right-of-way; thence by said right of way
line South 50 degrees West 40 rods and South 48 degrees West 67.4 rods to
West line of Keating Lot No. 230; thence North 92 rods to a post in the South
bank of said Potato Creek, the Northwest corner of same; thence down the said
stream by its several courses and distances to the place of beginning. Being
Lot Nos. 139 and 230 and parts of Lot Nos. 140 and 225 in Warrants Nos.
2091, 2093, 2094 and 2095.
PARCEL NO. 15(B):
BEGINNING at a post, the Southwest corner of Lot No. 141 of Keating lands
in said Township and in the North line of Lot No. 142; thence South 8 1/2
Degrees East along the West line of land heretofore conveyed to F. Reed
and subsequently occupied or owned by D. C. Rice, 50.2 rods to a post in
the center of the public road; thence by the center of the public road
Southwesterly 25.8 rods to a post in the East line of Keating Lot No.
140: thence Northerly by the East line of Keating Lots 140, 225 and 139,
69.8 rods to a post, the Northwest corner of same Keating Lot No. 142;
thence by the North line of said lot No. 142, Easterly 13.5 rods to the
place of beginning.
EXCEPTING AND RESERVING thereout that part of the above described premises as
conveyed by Niagara Oil Corporation to Duane C. Rice and Bessie Lenora
Rice, by deed dated August 29, 1935, bounded and described as follows:
BEGINNING at a pipe in the south bank of Potato Creek said pipe being the
northwest
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
Page 11 of 14
- --------------------------------------------------------------------------------
corner of the D.C. Rice Farm, thence North 60 Degrees 16 Minutes West, along
the course of Potato Creek 169.5 feet to a pipe, thence south 3,363 feet to
the center line of the back road running between Smethport and Coryville;
thence north 51 Degrees east along the center line of the aforementioned
road, 349 feet to a pipe, the southwest corner of the D.C. Rice farm,
thence north 8 Degrees 25 Minutes west along the west line of the D.C. Rice
farm 829.2 feet to a pipe, thence north along the west line of the D.C. Rice
farm, 2,240.0 feet to the place of beginning. Being a strip of land
adjoining the west line of the D.C. Rice farm in Warrants 2093 and 2094.
PARCEL NO. 16(A):
BEGINNING at a corner on the East bank of Potato Creek, and being the
Northwest corner of Lot No. 136 contracted by Keating & Company to J.C.
Mosier; thence East one hundred and sixty-one (161) perches to the Northeast
corner of said Lot No. 136; thence North fifty (50) perches to a post on the
West line of Lot No. 225, and the Southeast corner of Lot No. 230; thence
by South line of Lot 230 and 138 West eighty five and three-tenths
(85.3) perches to a corner on the East bank of Potato Creek; thence
up said creek by the several courses and distances to the place of beginning.
Being Lot No. 137 of the Keating Allotment of land in Keating Township and
part of Warrant No. 2091.
EXCEPTING AND RESERVING, a lot 60 by 325 feet conveyed to E. Cooper by deed
dated July 17, 1882, and recorded in McKean County in Deed Book 16, Page 72.
Also excepting and reserving a lot conveyed to E. Vanvolkenburg by Daniel W.
Derby by deed dated November 5, 1888 and recorded in Deed Book 46, Page 197.
PARCEL NO. 16(B):
BEGINNING at the Southeast corner of land conveyed to Enos A.
Hatch, Keating Lot No. 137, and the Northeast corner of Keating Lot No. 136;
thence North eighty (80) perches to Northwest corner of Keating Lot No. 225;
thence East along the North line of said Lot No. 225, forty nine and two-
tenths (49.2) rods to a post corner; thence South eighty seven (87) rods to a
post corner in the North line of Keating Lot No. 224; thence West forty nine
and two-tenths (49.2) rods to the place of beginning.
PARCEL NO. 16(C):
BEGINNING at a post in the North line of said lot No. 137, at the
intersection of the East line of lands of the Mt. Jewett and Buffalo
Railroad; thence along said railroad line North 48 degrees East, sixty
seven and four-tenths (67.4) rods; thence North 58 degrees East, thirty six
(36) rods to the East line of Lot No. 230; thence South thirty eight (38)
rods to North line of Lot No. 225; thence West thirty six (36) rods to the
Northwest corner of Lot No. 225; thence South twenty-nine and five tenths
(29.5) rods to the Northeast corner of said Lot No. 137; thence West forty
eight (48) rods to the place of beginning. Part of Lot No. 230.
PARCEL NO. 16(D):
BEGINNING at a hemlock the Northwest corner of land of Calvin Spencer Lot No.
224; thence by West line of same South thirty nine and five-tenths (39.5)
perches to a post corner in the centre of the road; thence by the road North
forty nine and one-half (49 1/2) degrees West thirty four (34) rods and North
89 1/2 degrees West forty (40) perches to the Southeast corner of lot
containing one acre and 102/160 acres; thence North seventeen (17) perches to
a post, the Northeast corner of the same; thence East sixty
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
Page 12 of 14
- --------------------------------------------------------------------------------
five and eight-tenths (65.8) perches to the place of beginning.
Part of Lot no. 136 Keating Township and part of Warrant No. 2091.
PARCEL NO. 16(E):
BEGINNING at a post in the center of the road in the south line of lands of
Adam Brockham Lot No. 137; thence East by South line of Lot No. 137, thirty
and eight-tenths (30.8) rods to a post corner; thence South seventeen (17)
perches to a post corner in the center of the road; thence by the center of
the road North 62 degrees West thirty five (35) rods to the place of
beginning.
PARCEL NO. 16(F):
BEGINNING at a post corner in the center of the highway leading from
Farmers Valley to East Valley; thence South 30 1/2 degrees West, thirteen
and five-tenths (13.5) rods to a post corner in the line between Chas. E.
Hatch and H.S. Derby; thence West six (6) rods and nine (9) feet to a post
corner; thence North 29 1/2 degrees East twenty (20) rods and four (4) feet
to a post corner in the canter of the highway; thence East 57 degrees South
along said highway to the place of beginning. Part of Lot No. 137 of
Keating lands in said Township.
PARCEL NO. 16(G):
BEGINNING at a post on the East bank of Potato Creek the Northwest corner of
lands of Elisha K. Kane, formerly of Cynthia M. Otto; running thence by bank
of said Potato Creek in a general direction North 46 degrees East fifty six
(56) rods in a general direction North 36 degrees West thirteen and
eight-tenths (13.8) rods; thence by land of Richard Finn eastwardly forty
five and three-tenths (45.3) rods; thence by west boundary of right of way of
the Pennsylvania Railroad Company, formerly Western New York and
Pennsylvania Railroad Company, South forty degrees west six and five
tenths (6.5) rods South 26.2 degrees West, sixteen and five-tenths (16.5)
rods; thence south 17.5 degrees west, eighteen and four-tenths (18.4)
rods; South 35.5 degrees East three and five-tenths (3.5) rods and south 6
1/2 degrees West, nine and two-tenths (9.2) rods; thence by North line of
lands of Elisha K. Kane, formerly Otto, West sixty one (61) rods to the
place of beginning.
PARCEL NO. 17:
BEGINNING at a post standing one hundred and twelve (112) rods east and fifty
one and three tenths (51.3) rods north of the northeast corner of a lot of
land conveyed by John Keating and Company to George Otto; thence west two
hundred and seventy one and nine tenths (271.9) rods to a post corner in the
west line of Warrant No. 2091; thence by said line north fifty one and two
tenths (51.2) rods to a post corner; thence east two hundred and ninety nine
and four tenths (299.4) rods to a post corner on the west bank of Potato
Creek; thence up the said creek by its various courses and distances to the
place of beginning.
EXCEPTING AND RESERVING, however, all that certain piece or parcel of land
bounded and described as follows: BEGINNING at a point in the center
of the public road leading from Smethport to Olean in the division line
between the farms formerly of Eugene Mullin and Pelton, an iron on the east
side of the road one rod from the center thereof; thence by the center of
said road north fifteen (15) degrees east four rods,
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
Page 13 of 14
- --------------------------------------------------------------------------------
north twenty (20) degrees east six rods, to an iron on east side of road;
thence east fifteen and six tenths (15.6) rods to an iron; thence south nine
and three tenths (9.3) rods to iron in said division line; thence by said
line west eighteen and eight tenths (18.8) rods to the place of beginning.
ALSO EXCEPTING AND RESERVING, two and sixteen hundredths (2.16) acres of
land more particularly described in a deed from Eugene Mullin and wife, to
the Pittsburgh, Shawmut & Northern Railroad Company, dated October 31, 1899,
and recorded in said office of the Recorder of Deeds in Deed Book Volume
109, Page 486.
ALSO EXCEPTING AND RESERVING, that certain triangular piece or parcel of
land bounded and described as follows: BEGINNING at a point of intersection
of the center lines of the concrete bridge and Cole Creek, said bridge being
over Cole Creek on U.S. Highway Route No. 6 and running thence southerly
seventy three degrees five minutes east five hundred forty nine (549) feet
to an iron pipe situate in the westerly line of the Pittsburgh, Shawmut &
Northern Railroad Company's right of way, said pipe being north seventy
three (73) degrees five minutes west from the center pier of the Pittsburgh,
Shawmut & Northern Railroad Company bridge over Cole Creek; thence along the
said right of way north twenty six (26) degrees twenty (20) minutes east one
hundred eighty nine (189) feet to an iron pipe, situated in the westerly
line of said right of way of the Pittsburgh Shawmut & Northern Railroad
company; thence south eighty nine (89) degrees ten (10) minutes west six
hundred eight (608) feet to the place of beginning.
PARCEL NO. 18(A):
BEGINNING at a post on the west bank of Potato Creek, being the southeast
corner of land conveyed by John Keating and Company to R. P. Wright, in
warrant No. 2091, and being a part of said warrant; thence west one hundred
nine and four tenths (109.4) perches to a post in the center of the public
road; thence south 32 degrees west by said road, twenty-eight and eight
tenths (28.8) perches to a post in the center of said road; thence west one
hundred and ninety-nine (199) perches to a post in the west line of said
warrant; thence south by said warrant line twenty-four and one-tenths (24.1)
perches to the northwest corner of land conveyed to D. Voorhees by
Keating & Co., lot No. 21 in said township; thence east by said Voorhees'
North line, two hundred ninety-seven and four tenths (297.4) perches to the
west bank of Potato Creek; thence down said creek by its various courses
and distances to the place of beginning.
EXCEPTING AND RESERVING, out of the above described lands, a certain parcel
bounded and described as follows: BEGINNING at a post on the west bank of
Potato Creek in the center of the road crossing said creek in Farmers
Valley; thence north 60 decrees west six (6) perches to a post in the center
of said road; thence south 41 degrees west, twenty-five (25) perches to a
post on the north bank of a bayou; thence south 24 degrees west, twenty-
eight (28) perches to a post in the line of mill lot, now or formerly owned
by Daniel Crossmire and Co; thence east along the line of said Mill lot
eleven and one-half (11.5) perches to the west bank of Potato Creek; thence
down the bank of said creek to the place of beginning.
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
(Page 14 of 14)
- --------------------------------------------------------------------------------
PARCEL NO. 18(B):
BEGINNING in the center of the public State Road Highway leading from
Smethport to Farmers Valley at the northeast corner of the Edwin Schott lot,
where he resided in 1883; thence due west to the west line of said Erwin
Schott's "Brewery Lot", as heretofore conveyed to said Schott by deed from
C.E.B. Hatch, recorded in said McKean County in Deed Book No. 2, page 163;
thence north forty-six (46) feet to the south line of land formerly of B.
Schoenemann; thence by said south line east to the center of the highway
aforesaid; thence southerly by center of said highway to the place of
beginning.
PARCEL NO. 18(C):
BEGINNING in the center of the highway north of the Brewery; thence west in
the north line of land articled to Mrs. Sara Cook, to back line of said Cook
lot; thence north in line of said Hatch land forty-six (46) feet; thence
east in line of said Hatch's to the center of the highway aforesaid; thence
southerly in the center of said road to the place of beginning.
ALSO, that other lot of land adjacent to the above described lot, bounded
and described as follows: BEGINNING in the center of the highway leading
from Farmers Valley to Smethport and northeast corner of said Schoenemann
land; thence west by his line to northwest corner of same; thence south
ninety-two (92) feet to southwest corner of lot owned by Gallup L. Sinner;
thence west to northwest corner of land of Erwin Schott; thence north one
hundred and eight (108) feet to a post corner; thence east to the center of
the said highway to a post corner; thence southerly to the place of
beginning, more or less.
PARCEL NO. 18(D):
BEGINNING at a post in the west line of Pennsylvania State Highway Route No.
7, north from the bridge spanning Cole Creek, and in the north line of lands
hitherto conveyed to said grantor; thence west by said lands of said
grantor one hundred forty-five (145) feet to the easterly edge of the paved
road (State Highway Route No. 46); thence northwesterly by said paved road
two hundred (200) feet to a post; thence by straight line northeasterly a
distance of ninety-five (95) feet to a pipe corner, the northwest corner of
a lot heretofore conveyed to said grantor; thence south by the west line of
said grantor's lot one hundred eight (108) feet to a post, its southwest
corner: thence east by the south line of said grantor's lot two hundred
fifty-five (255) feet to a post and the paved west edge of aforesaid State
Highway Route No. 7; thence south by said State Highway one hundred forty-
three (143) feet to the place of beginning.
<PAGE>
Schedule 3.1(a)(ii) McKean Easements,
Rights of Way and Rail Crossing Agreements
Rent No. Registry No. Description
- -------- ------------ -----------
64500132 151571 6" & 8" water pipe crossing
550124012 267127 8" vapor pipe crossing
55079402 251014 aerial wire crossing
55079302 251013 3 aerial wire crossings
55074402 262016 8" vapor pipe crossing
55072602 251020 12" water pipe crossing
55070802 251009 2 4" steam pipe crossings
2", 3"and 4" oil pipe
crossings
43916562 173339 6", 12", 14", 18" water pipe
crossings
43960712 232938 1 circuit 440 volts, 2 poles
<PAGE>
Schedule 3.1(a)(ii) McKean Easements,
Rights of Way and Rail Crossing Agreements
ITEM DATE GRANTOR
- ---- ---- -------
l. 10-08-56 The Pennsylvania Railroad Company
2. 10-23-52 The Pennsylvania Railroad Company
3. 09-01-49 The Pennsylvania Railroad Company
4. 09-26-79 Consolidated Rail Corporation
5. 12-18-72 Penn Central Transportation Company
6. 09-01-48 The Pennsylvania Railroad Company
7. 09-01-38 Dickson, Receiver
8. 04-01-41 The Pittsburgh, Shawmut and Northern Railroad Company
9. 10-23-52 The Pennsylvania Railroad Company
10. 05-07-57 The Pennsylvania Railroad Company
11. 03-21-42 Dickson, Receiver
12. 12-20-48 The Pennsylvania Railroad Company
13. 12-15-48 The Pennsylvania Railroad Company
14. 05-04-48 The Pennsylvania Railroad Company
15. 06-22-32 Dickson, Receiver
16. 01-22-40 Dickson, Receiver
17. 07-13-48 The Pennsylvania Railroad Company
18. 06-14-48 The Pennsylvania Railroad Company
19. 07-09-81 Commonwealth of Pennsylvania
20. 02-01-37 Dickson, Receiver
21. 05-08-36 Dickson, Receiver
22. 07-17-84 Consolidated Rail Corporation
23. 07-20-84 Consolidated Rail Corporation
24. 12-20-84 The Pennsylvania Railroad Company
25. 12-10-48 The Pennsylvania Railroad Company
26. 12-10-48 The Pennsylvania Railroad Company
27. 12-10-48 The Pennsylvania Railroad Company
28. 04-01-41 Dickson, Receiver
29. 04-25-69 Penn Central Company
30. 11-02-48 The Pennsylvania Railroad Company
31. 12-31-47 The Pennsylvania Railroad Company
32. 12-29-49 The Pennsylvania Railroad Company
<PAGE>
Schedule 3.1(a)(iii) McKean Contracts and Lease Agreements
Process and catalyst agreements:
1. UOP Platforming Catalyst Supply Contract dated January 1, 1985, between
Quaker State and Cataleasco, Inc., as specifically related to the McKean
Plant.
2. Service Agreement dated June 1, 1978 between UOP Process Division of UOP,
Inc. and Quaker State, as specifically related to the McKean Plant.
3. UOP License and Stock Charge Release Agreement covering 400,000 barrels
per year of fresh stock charge.
Purchase orders and other nonbinding informal supply and service arrangements:
4. Coal Supply Contract dated September 17, 1982 with Valley Coal & Supply,
Inc.
5. North Penn Gas Co. Large Volume Service Agreement dated September 30,
1988
6. American Telephone & Telegraph
7. Culligan Water Conditioning, Inc.
8. United Parcel Service
9. Coyne Industrial Laundries
10. Allied Security
11. Kex Copysource
12. Xerox Corporation
Lease:
13. Commercial Lease dated October 1, 1989, with Cari Gross
Railroad Agreements:
14. Transportation Contract Number ICC CR-C-7552 (Conrail, Norfolk and
Western Railway Co. and Southern Railway Co.)
15. Transportation Contract Number ICC CR-C-7541 (Conrail)
16. Transportation Contract Number ICC CR-C-7788 (Conrail and Missouri
Pacific Railroad Company)
<PAGE>
17. Conrail Lease 64-3156
18. Conrail Lease 55-07160
19. Union Tank Car Company (cars 57990, 57991, 57992, 57993, 57994, 58581,
58950, and 58951)
20. General American Transportation Company (cars 66435, 66436, 66498, 66499,
66500, 66510, 66511, 66512, 77514, and 82842)
21. General American Transportation Company (cars 11825, 11827, 11828, 31562,
31563, 31564, 31566, 31567, 47152, 47155, 47156, 47157, 47161, 47176,
69251, 69252, 69253, 69254, 69255, 69256, 69257, 69258, 69259, 69260,
69261, 69262, 69263, 69264, 69265, 69266, 69267, 69268, 86452, 86453,
86462, 86463, 86467, and 86732) - under option
22. General American Transportation Company (cars 14699, 47153, 47154,
47159, 47165, 47166, 47167, 47168, 47173, 47175, and 47179)
23. Conrail Sidetrack Agreement Number 270191
<PAGE>
Schedule 3.1(a)(vi) McKean Vehicles
1984 Celebrity VIN G1AW19R3E1141224
1986 Ford Taurus VIN 1G4AH69AZBG175173
1982 Ford F-250 Pick-Up Truck VIN 2FTEF26E3CCA55106
1982 Ford F-250 Pick-Up Truck VIN 2FTEF26E5CCB02202
1969 Ford Platform Truck VIN F70DUF75218
1971 Chevrolet Rigging Truck VIN CE631P111537
1973 Chevrolet Dump Truck VIN CCE613V161543
1981 Chevrolet Truck VIN 1GBHC34M6BV129170
1985 Ford Pick-Up Truck VIN 2FTEF25Y2FCA45313
1973 Dodge Truck VIN D31BE3S205321
1984 Ford Dump Truck VIN 1GDNK74N8EVA24969
1973 International Truck VIN 53H3AOCHB18670PA
1982 Chevrolet Bucket Truck VIN 1GBHG34J1CV109674
Clark forklift
<PAGE>
Schedule 3.1 (a)(vii) McKean Permits, Licenses,
Certificates of Occupancy and Registrations
Permits:
- -------
NPDES Permit No. PA 0002372
Water Quality Management Permit No. 4271201
Water Quality Management Permit No. 4277201
Air Pollution Control Permit No. 42-302-009A
Air Pollution Control Permit No. 42-312-023
Air Pollution Control Permit No. 42-312-001
Air Pollution Control Permit No. 42-312-017
Hazardous Waste Permit PAD046761763
Wetlands Encroachment Permit E42172
Registrations and Licenses:
- --------------------------
Federal Registration for tax free transactions (fuel and gasoline) -Form 637
Pennsylvania Liquid Fuels Tax
Pennsylvania Oil Franchise Tax
Pennsylvania Diesel Fuel Use Tax
Yew York Sales and Use Tax prepayment on gasoline
New York Gasoline Tax
New York Report of Bulk Sales of Diesel Fuels
Pennsylvania Sales and Use Tax
Underground Storage Tank registrations:
500 gallon underground storage tank 001 (McKean)
Various registrations, above ground storage tanks
Certificates of Occupancy:
- -------------------------
None
<PAGE>
Schedule 3.1(b)(i) Emlenton Wax Plant Real Property
All of the tracts listed on this Schedule are conveyed under and subject to:
a) any and all exceptions, reservations, rights of way and easements
granted or reserved by Seller, or its predecessors in title, to the
extent recorded in the county recorder's office or disclosed in
writing to Buyer by Seller;
b) taxes and assessments, both general and special, which are a lien but
not yet due and payable;
c) zoning and other ordinances, laws regulations and other any
governmental impositions, if any, in any way affecting the property
and any improvements thereon;
d) matters which may be discoverable by an accurate survey and inspection
of the property;
e) easements, rights of way and rights of passage, whether or not
appearing of public record; and
f) those matters listed as items 1 through 43 of Schedule B.II. of Ticor
Title Insurance Commitment No.1990-0001, dated January 8, 1990.
<PAGE>
SCHEDULE A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Page 1 of 8)
- --------------------------------------------------------------------------------
Commitment No. Effective Date of Commitment:
1990-0001 January 8, 1990
- --------------------------------------------------------------------------------
Your No.:
- --------------------------------------------------------------------------------
Prepared For:
TICOR TITLE INSURANCE
ONE PENN SQUARE WEST, SUITE 1301
30 SOUTH 15TH STREET
PHILADELPHIA, PA 19102
Inquiries Should be Directed to:
BRUCE T. ROSEN, ESQ.
ROSEN, ROSEN & BLOOM
207 SENECA STREET
OIL CITY, PA 16301
1. Policy or Policies to be issued: Amount
(a) / / ALTA Owners Policy - Form_____- 1970 $______________
Proposed Insured:
(b) / / ALTA Loan Policy 1970 $______________
Proposed Insured
2. The estate or interest in the land described or referred to in this
Commitment and covered herein is a Fee Simple.
QUAKER STATE OIL REFINING CORPORATION
3. Title to said estate or interest in said land is at the effective date hereof
vested in:
QUAKER STATE OIL REFINING CORPORATION
4. The land referred to in this Commitment is located in the County of Venango,
Borough of Emlenton, State of Pennsylvania and described as follows:
PARCEL NO. 1(A): (09-05-01)
BEGINNING at a point on the west side of Tenth Street, where the said street
meets the Allegheny River as shown by plan of said Boro made by M. W. Sage,
A.D. 1877, thence northward along same side of said street to the place of
intersection thereof with the Right of Way of The Pennsylvania Railroad
Company; thence by same side of said Street north thirty-eight (38) degrees
east to Kerr, formerly known as Shippen Avenue; thence by said avenue,
northwestwardly fifty (50) feet to the northeast corner of lands of George B.
Morrison; thence by lands of George B. Morrison south fifty-nine (59) degrees
and forty-nine (49) minutes west one hundred (100) feet to a corner; thence
by same north
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
1990-0001 (Page 2 of 8)
- --------------------------------------------------------------------------------
thirty (30) degrees and eleven (11) minutes west seventy-five (75) feet to a
corner; thence by same north fifty-nine (59) degrees and forty-nine (49)
minutes east one hundred (100) feet to the southwest line of Kerr Avenue;
thence by the said Avenue northwestward ninety-four (94) feet; thence by the
same north five (5) degrees and forty-one (41) minutes east thirty-eight (38)
feet to the southernmost point of the Catholic Cemetery; thence by the same
cemetery north fifty-nine (59) degrees west twenty-five and seven-tenths
(25.7) rods to a stake; thence by the same north five (5) degrees east
seventeen and nine-tenths (17.9) rods to a rock; thence by lands of The
Emlenton Cemetery Company north thirty-nine (39) degrees east twenty-six and
two-tenths (26.2) rods to the northern boundary line of the said boro, being
a continuation of and in same direction as the north line of Boundary Street;
thence by the said Emlenton boundary line north sixty (60) degrees west forty
(40) rods, more or less, to the Allegheny River; and thence by the same river
down stream to the place of beginning.
PARCEL NO. 2(A): (09-04-54)
On the North by a lane, street or alley, on the east by lands formerly of W.
B. Jacobs, on the south by the Allegheny River, and on the west by Lot =113,
hereinafter described, said premises being Lots Numbers 105 to 112, both
inclusive, in M.W. Sage's survey and plan of the Borough of Emlenton made in
A.D. 1877, the same lots being designated as number 113 to 120, both
inclusive, in J.S. Devlin's survey of the lots in said Borough, A.D. 1868,
lot designated Number 105 in the Sage Survey being described as number 120 in
the Devlin Survey.
EXCEPTING AND RESERVING from the above-described parcel that certain piece or
parcel of land being marked and designated as Lots Nos. 104 and 105 on the
M.W. Sage Plan of the Borough of Emlenton, 1877, conveyed by Quaker State Oil
Refining Corporation to John C. Ritchey and Rose M. Ritchey, his wife, dated
June 29, 1977, and recorded in the Office of the Recorder of Deeds in and for
Venango County, Pennsylvania, in Deed Book 799, Page 764, which parcel is
more particularly bounded and described as follows:
BEGINNING at a point, which point is located at the northeast corner of Lot
No. 104 in the M.W. Sage Plan of the Borough of Emlenton, which is also the
northwest corner of Lot No. 103 and being at the point of intersection
between
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
1990-0001 (Page 3 of 8)
- --------------------------------------------------------------------------------
the division line of Lot No. 104 and No. 103 and the southern side of the
Allegheny Valley right-of-way, now the Penn Central right-of-way or Conrail;
thence North 71DEG. 6' West along the southern side of said Allegheny Valley
right-of-way, a railroad right-of-way, 50 feet to a point; thence North
65DEG. 28' West along the southern side of said right-of-way, 50 feet to a
point being the northwest corner of Lot No. 105 in said plan and being also
located at the point of intersection between the division line of Lot No. 106
and No. 105 and the southern side of the Allegheny Valley Railroad right-of-
way; thence in a southwesterly direction along the division line between Lot
No. 106 and No. 105 in the Sage Survey 129.5 feet to the low water mark of
the Allegheny River; thence in a southeasterly direction along the low water
mark of the Allegheny River by its various courses and distances, 113.75
feet, more or less, to the point of intersection between the division line of
Lot No. 104 and No. 103 in said Sage Plan aforesaid extended to the low water
mark of the Allegheny River; thence in a northeasterly direction from said
point sufficient distance along the division line between Lots 103 and 104 as
extended and the said division line, sufficient distance, being 137.47 feet,
more or less, to the southern side of the Allegheny Valley Railroad right-of-
way.
PARCEL NO. 2(B):
ALL the undivided one-half interest in that certain lot of land situate in
the Borough of Emlenton, County of Venango, Commonwealth of Pennsylvania,
bounded and described as follows:
On the North by a lane, street or alley, on the east by the lands next above
described, on the south by the Allegheny River, and on the west by the "Lee
Lot", and being Lot Number 113 in M. W. Sage's survey and plan of said
Borough of Emlenton made in A. D., 1877, or number 112 in J. S. Devlin's
survey or the lots in the said Borough, A.D., 1868.
PARCEL NO. 2(C):
On the north by a twenty (20) foot roadway; on the east by lands of Mrs. A.C.
Mackin; on the south by the Allegheny River; and on the west by lands now or
formerly owned by the heirs of J. C. Porterfield and the heirs of John
McCombs; and comprising all of lots numbered 121, 122, 123, 124 and 125 in
J. S. Devlin's survey of said Borough, the same being numbered 100, 101, 102,
103 and 104 according to M. W. Sage's plan of said Borough.
EXCEPTING AND RESERVING, that part of Lots Numbers 100, 101 and 102 according
to the M. W. Sage Plan of said Borough, as conveyed to George A. Breene,
and that part of said lots as excepted and reserved in deed dated March 31,
1947, from George A. Breene, et al, to Willis J. Sloan and recorded on
March 31, 1947, in Deed Book 524, Page 93.
EXCEPTING AND RESERVING, that portion of Lot 102 and Lot 103 conveyed to
Breene, et ux, by Deed dated July 19, 1955, and recorded in Deed Book 596,
Page 72, and also that certain Lot 106 conveyed to Grafo Colloids Corporation
by deed dated May 25, 1988, and recorded in Deed Book 905, Page 1012.
The lots herein conveyed are the following lots as marked and numbered on the
M.W. Sage Plan of the borough of Emlenton: 107, 108, 109, 110, 111, 112, and
an undivided one-half of Lot No. 113.
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
1990-0001 (Page 4 of 8)
- --------------------------------------------------------------------------------
PARCEL NO. 3: (Part of 09-04-37)
BEGINNING at a point on the southerly side of Hill Avenue at the northeast
corner of Lot No. 132 and the northwest corner of Lot No. 133 as marked and
numbered on the M. W. Sage Plan of the Borough of Emlenton; thence in a
southerly direction along the line dividing Lot No. 132 and Lot No. 133, one
hundred sixty-four (164) feet, more or less, to the right of way of the
Pennsylvania Railroad Company, formerly the Allegheny Valley Railroad
Company; thence along said right of way two hundred (200) feet, more or less,
to the line dividing Lot No. 136 and 137; thence in a northerly direction
along said dividing line one hundred forty-eight (148) feet, more or less, to
the southerly side of Hill Avenue; thence North 52DEG. 13' East, along the
southerly side of Hill Avenue two hundred (200) feet, more or less, to the
place of beginning.
Being all of Lot Nos. 133, 134, 135 and 136 as marked and numbered on the map
or plan of the Borough of Emlenton laid out in 1877 by M. W. Sage, and
bounded on the North by Hill Street, on the East by Lot No. 137, on the South
by right of way of the Pennsylvania Railroad Company, and on the West by Lot
No. 132.
EXCEPTING AND RESERVING, that part of Lot No. 136 as marked and numbered on
the map or plan of the Borough of Emlenton laid out in 1877 by M. W. Sage,
conveyed by Quaker State Oil Refining Corporation to Edward D. Work and
Mildred J. Work, his wife, by deed dated August 23, 1955, and recorded in the
Office of the Recorder of Deeds in and for Venango County, Pennsylvania, in
Deed Book 597, Page 121, which parcel is more particularly bounded and
described as follows:
BEGINNING at a point, the northeast corner of Lot Number 136 as marked and
numbered on the plan of lots of the said Borough of Emlenton as surveyed by
M. W. Sage in 1877; thence north 52DEG. 13' west along the north line of lot
number 136, 25 feet to a point therein; thence south 37DEG. 47' west, 60 feet
to a point: thence south 52DEG. 13' east, 25 feet to a point in the east line
of lot number 136 as marked and numbered on said plan of lots as aforesaid;
thence by the east line of said lot number 136, north 37DEG. 47' east, 60
feet to a point, the place of beginning. The parcel of land herein conveyed
being a lot of land having a frontage of 25 feet on Hill Street and extending
southerly therefrom a uniform width for a distance of 60 feet, and is part of
lot number 136 as marked and numbered on the plan of lots of the said Borough
of Emlenton as surveyed by M. W. Sage, 1877.
PARCEL NO. 4 (09-04-20)
BEGINNING at a point on the southerly side of Chestnut Street at the
intersection of the line dividing Lot Nos. 307 and 304, as marked and
numbered on the plan of M. W. Sage laid out in 1877, and the southerly line
of said Street; thence South 47DEG. 47' West one hundred twenty (120) feet,
more or less, to an alley: thence in a westerly direction along the northerly
side of said Alley, two hundred fifty (250) feet to the easterly line of Lot
No. 316 on said M. W. Sage Plan; thence north 37DEG. 47' East along the line
dividing Lot Nos. 316 and 315, one hundred twenty (120) feet, more or less,
to Chestnut Street; thence in an easterly direction along the southerly side
of Chestnut Street, two hundred fifty (250) feet to the place of beginning.
BEING all of Lot Nos.
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
1990-0001 (Page 5 of 8)
- --------------------------------------------------------------------------------
307-308-311-312 and 315 as marked and numbered on the M. W. Sage Plan of the
Borough of Emlenton laid out in 1877.
PARCEL NO. 5(A) (Part of 09-04-37)
BEGINNING at a point on Hill Avenue, said point marking the northeastern
corner of Lot No. 129 and the northwestern corner of Lot No. 130 as marked
and numbered on the map or plan of lots of the Borough of Emlenton, laid out
by M. W. Sage, C.E., in 1877; thence south along the line dividing Lot Nos.
129 and 130, one hundred sixty-two (162) feet ten (10) inches, more or less,
to the right of way of the Pennsylvania Railroad Company, formerly the
Allegheny Valley Railway Company; thence South 48DEG. 41' east along said
right of way to the line dividing lot Nos. 130 and 131; thence north 37DEG.
47' east along line dividing Lot No. 130 and 131, one hundred sixty-five
(165) feet eleven (11) inches, more or less, to Hill Avenue; thence North
52DEG. 13' West 50 feet along Hill Avenue to the place of beginning.
BEING all of Lot No. 130 as marked and numbered on the M. W. Sage Plan of the
Borough of Emlenton.
PARCEL NO. 5(B)
BEGINNING at a point, said point marking the northeast corner of Lot No. 130
and the northwest corner of Lot No. 131 on the plan or map of lots of the
Borough of Emlenton, laid out by M. W. Sage, C.E., in 1877; thence south
along the line dividing Lot Nos. 130 and 131, one hundred sixty-five (165)
feet, eleven (11) inches, more or less, to the right of way of the
Pennsylvania Railroad Company, formerly the Allegheny Valley Railroad
Company; thence South 53DEG. 18' east, fifty (50) feet along said right of
way to the line dividing Lot Nos. 131 and 132; thence north 37DEG. 47' east
along the line dividing Lot Nos. 131 and 132 one hundred sixty-five (165)
feet, more or less, to Hill Avenue; thence North 52DEG. 13' west, along Hill
Avenue, fifty (50) feet to the place of beginning.
BEING all of Lot No. 131 as marked and numbered on the M. W. Sage Map or Plan
of the Borough of Emlenton.
PARCEL NO. 6 (part of 09-04-37)
ALL of that certain piece of land situate in the said Borough of Emlenton,
including all of Lots Nos. 125, 126 and 127 according to the survey of M. W.
Sage, A.D., 1877, and extending, between parallel lines one hundred fifty
(150) feet apart, southward from Hill Avenue to the Right of Way of the
Pennsylvania Railroad Company, and bounded on the east by lands formerly of
Nicholas Makin; on the west by lands of Quaker State Oil Refining
Corporation, formerly of Willie W. Shores
PARCEL NO. 7: (09-04-01, 02, 03)
BEGINNING at the intersection of the southerly side of Elm Street with the
easterly side of Tenth Street; thence South 52 degrees 13 minutes east along
the southerly side of Elm Street 200 feet to lands now or formerly of L. L.
Levy; thence south 37 degrees 47 minutes west 127 feet along line of lands of
L. L. Levy and being the line dividing Lot No. 359 and 362 on the northerly
<PAGE>
SCHEDULE A- (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
1990-0001 (Page 6 of 8)
- --------------------------------------------------------------------------------
side of an alley known as Locust Alley; thence along the northerly side of
said alley north 52 degrees 13 minutes west 200 feet to Tenth Street; thence
north 37 degrees 47 minutes east along the easterly side of Tenth Street, 120
feet, more or less, to the place of beginning.
Being Lots Nos. 354, 355, 358 and 359 as marked and numbered on the M. W.
Sage Plan of the Borough of Emlenton.
PARCEL NO. 8: (part of 09-04-26)
Lots Numbered 314-317 on the map or plan of the Borough of Emlenton, laid out
in 1877 by M. W. Sage, and being bounded on the North by Cherry Alley, on the
East by Lot Number 313, on the South by Hill Street, and on the West by Tenth
Street.
PARCEL NO. 9(A) (09-04-47, 52, 53)
Lot designated No. 119 on the M. W. Sage Survey and plan of lots of the said
Borough of Emlenton, and bounded on the North by lands of Pennsylvania
Railroad Company; on the East by lands now or formerly of T. Colligan Estate;
on the South by Allegheny River; and on the West by lands of Quaker State Oil
Refining Corporation.
PARCEL NO. 9(B)
Undivided one-half (1/2) interest in lot designated No. 113 on the M. W. Sage
survey and plan of lots of the said Borough of Emlenton, bounded on the North
by Pennsylvania Railroad Company; on the East by lands of Quaker State Oil
Refining Corporation; on the South by Allegheny River; and on the West by Lot
No. 114.
PARCEL NO. 9(C)
Lot designated 114 on the M. W. Sage survey and plan of lots of the said
Borough of Emlenton, bounded on the North by Pennsylvania Railroad Company;
on the East by Lot No. 113; on the South by Allegheny River; and on the West
by Lot No. 115, now or formerly of Steve Sanders.
PARCEL NO. 10 (09-04-48, 49, 50)
Bounded on the North by a road, street or alley and the Pennsylvania
Railroad; on the East by Lot #115, now or formerly of George A. Breene; on
the South by the Allegheny River; on the West by lands now or formerly of
I. H. Webb, F. L. and N. P. Sloan, and now of Quaker State Oil Refining
Corporation and being Lot #119, and comprising all of Lots Nos. 116, 117 and
118 as marked and numbered on the M. W. Sage Plan of the Borough of Emlenton,
Venango County, Pennsylvania.
PARCEL NO. 11 (09-04-46)
BOUNDED on the North by a street, lane or alley; on the east by C. A. Kreis,
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
1990-0001 (Page 7 of 8)
- --------------------------------------------------------------------------------
lot number 119; on the South by the Allegheny River and on the West by Tenth:
Street or by lands now or formerly of the Emlenton Refining Company, the said
premises comprising all of Lots Numbers 120, 121, 122 and 123, as surveyed
and numbered by M. W. Sage, A.D. 1877.
PARCEL NO. 12 (09-04-51)
BEGINNING at a point located on the northeastern corner of Lot No. 116, which
is also the northwestern corner of Lot No. 115, as said Lots are marked and
numbered on the plan of lots of the M. W. Sage Plan of the Borough of
Emlenton laid out in 1877; thence along the line dividing said Lots Nos. 115
and 116, in a southerly direction, a distance of 99 feet and 11 inches, more
or less, to a point on the bank of the Allegheny River; thence along said
bank of the Allegheny River, South 55DEG. 57' East, a distance of 61 feet and
4 inches, to a point located at the southeast corner of said Lot No. 115,
which is also the southwest corner of Lot No. 114 in said Plan; thence along
the line dividing said Lots Nos. 115 and 114, in a northerly direction, a
distance of 94 feet and 6 inches, more or less, to the south line of the
right-of-way of the Penn-Central Railroad Company, formerly the Pennsylvania
Railroad Company; thence along said south line of said Railroad Company's
right-of-way North 55DEG. 57' West, a distance of 50 feet to the place of
beginning.
BEING all of Lot No. 115 as marked and numbered on the plan of lots of the
Borough of Emlenton as surveyed and laid out by M. W. Sage in 1877.
PARCEL NO. 13 (part. of 09-04-37)
ALL that certain piece or parcel of land situate in the Borough of Emlenton,
County of Venango, Commonwealth of Pennsylvania, known and designated as Lot
Number 88 in the J. S. Devlin Survey or plan of lots of the Borough of
Emlenton and also designated as Lot number 132 on the M. W. Sage plan and
survey of the Borough of Emlenton as laid out in 1877. Being bounded on the
North by Hill Avenue; on the South by the right of way of the Pennsylvania
Railroad Company; and on the East and West by lands now or formerly of Quaker
State Oil Refining Corporation, formerly of Porterfield and McCombs.
PARCEL NO. 14 (part of 09-04-37)
Bounded an the north by Hill Avenue, on the east by Lot No. 130, now or
formerly of Elizabetha S. McCombs, on the south by Pennsylvania Railroad
Right-of-way, and on the west by other lands of the Quaker State Oil Refining
Corporation. The said premises are those designated as Lots Nos. 128 and 129
on the M. W. Sage Survey of the said Borough of Emlenton, made in 1877, A.D.
PARCEL NO. 15 (09-04-37A)
Bounded on the north by Hill Avenue; on the east by lands of Elizabetha S.
McCombs; on the south by the Right of Way of the Pennsylvania Railroad
Company and on the West by Tenth Street, being all of lot designated No. 124
in a plan and map of lots in the said Borough of Emlenton, made by M. W.
Sage, A.D. 1877.
PARCEL NO. 16 (part of 09-04-26)
<PAGE>
SCHEDULE A - (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT NO.
1990-0001 (Page 8 of 8)
- --------------------------------------------------------------------------------
PARCEL NO. 16 (part of 09-04-26)
Bounded on the south by Hill Avenue; on the east by lands of the estate of
James J. Sheehan; on the west by lands of the Quaker State Oil Refining
Corporation and on the north by an alley, the said premises having an extent
of one hundred (100) feet on both the said Hill Avenue and the said alley,
and one hundred and twenty (120) feet on the east and west lines, comprising
all of Lots Nos. 306 and 309, as surveyed and numbered by M. W. Sage.
PARCEL NO. 17 (part of 09-04-26)
ALL of those two certain adjoining pieces of land situated in the Borough of
Emlenton, designated Lot No. 310 and Lot No. 313, in M. W. Sage's survey and
plan of the said Borough made A. D. 1877, having a frontage of one hundred
(100) feet on Hill Avenue and extending therefrom northward, between parallel
lines, one hundred and twenty (120) feet to an alley, being bounded on the
east by lands now or formerly of Peter J. O'Brien, et ux, and on the west by
lands now or formerly of Elisabetha S. McCombs and heirs of John C.
Porterfield, deceased.
PARCEL NO. 18 (09-04-06)
Bounded on the north by an alley; on the east by lands nw or formerly of
M. J. Glynn; on the south by Chestnut Street; and on the west by Tenth
Street, the said premises having a frontage of 150 feet on Chestnut Street
and an extent of one hundred and twenty (120) feet on Tenth Street, being
designated Lot No. 353, 356 and 357 in the general plan of the Borough of
Emlenton.
<PAGE>
Schedule 3.1(b)(vi) Emlenton Vehicles
1985 Dodge Caravan VIN: 1G1AW35K4CR198251
1969 GMC Dump Truck VIN: 3550VHC094262
1973 Chevrolet Dump Truck VIN: CCM613V165153
1976 Chevrolet Dump Truck VIN: CCE616V114244
1977 Chevrolet Welding Truck VIN: CCT337B153964
1980 Chevrolet Pickup VIN: CCT34AB134702
1984 Dodge Ram VIN: 1B7KD34W7ES323938
1987 Case Tractor VIN: 12203148
1984 Chevrolet S-10 VIN: 1GCCT14BXE2203074
<PAGE>
Schedule 3.1(b)(vii) Emlenton Permits, Licenses,
Certificates of Occupancy and Registrations
PERMITS:
Water Quality Management (N.P.D.E.S.) Permit PA 0002381
Water Quality Management Permit 6177202
Hazardous Waste Permit by Rule No. PAD004337127
Air Quality Operating Permit 61-302-014
Air Quality Operating Permit 61-312-001
REGISTRATIONS:
Underground Storage Tank Registrations for ten permanently out of service
tanks.
Various registrations, aboveground storage tanks
CERTIFICATES OF OCCUPANCY:
None
<PAGE>
Schedule 3.2(a) Coleville Station Assets
Real property and interests in real property:
The tract listed below is conveyed under and subject to:
a) any and all exceptions, reservations, rights of way and easements
granted or reserved by Quaker State, or its predecessors in title;
b) taxes and assessments, both general and special, which are a lien but
not yet due and payable;
c) zoning and other ordinances, laws, regulations and other governmental
impositions, if any, in any way affecting the property and any
improvements thereon;
d) matters which may be discoverable by an accurate survey and inspection
of the property;
e) easements, rights of way and rights of passage, whether or not
appearing of public record; and
f) those other matters listed below.
COLEVILLE STATION/FEE PARCEL:
United Refining Company to Quaker State Oil Refining Corporation, by Deed
dated October 28, 1948 and recorded in McKean County, PA in Deed Book Volume
301, page 6.
SUBJECT TO Right-of-way to Pennsylvania Electric Company dated June 4, 1956.
SUBJECT TO Right-of-way to North Penn Gas Company, dated August 8, 1974 and
recorded in McKean County, PA in Deed Book Volume 487, page 117.
COLEVILLE STATION LEASE:
Barry et al. to McKean County Refining Company dated July 10, 1930 and
of record in McKean County, PA in Deed Book Volume 215, page 471.
RIGHT OF WAY AGREEMENTS:
Raymond Estate to Quaker State Oil Refining Corporation, dated July
27, 1987 and recorded in McKean County, PA in Record Book 69, page 134.
Carpenter et al. to Quaker State Corporation, dated February 21, 1990.
Cosper et ux. to Quaker State Corporation, dated February 23, 1990.
S. Johnson to Quaker State Corporation
R. Johnson to Quaker State Corporation
K. Vincia to Quaker State Corporation
A. Brooder to Quaker State Corporation
- -Others to be added-
<PAGE>
Personal property:
3 Smith meters with 4 inch Roper unloading pump
2 4 inch Roper unloading pumps
1 Oil Well triplex discharge pump with two sets of spare plungers
1 Gardner-Denver duplex discharge pump (spare)
100 feet of Slick bar with accessories
1 55-gallon drum of Mobil oil (Alma 527)
Tank 8803--10,000 barrel capacity with floating roof
Tank 8806--11,000 barrel capacity with floating roof
Tank 8810--59,000 barrel capacity
Tank 8811--59,000 barrel capacity with floating roof
Tank 8819--67,000 barrel capacity with floating roof
Tank 8872--600 barrel capacity
Tank 8895--600 barrel capacity
-2-
<PAGE>
Schedule 3.3(a)(i)
Product Equivalencies and Brand Names
to be Used for One Year
<TABLE>
<CAPTION>
Quaker State Petrowax
Product No. Product Name Product No. Product Name*
- ------------ ------------ ----------- ------------
<S> <C> <C> <C>
*Waxes
600039 Q.S. 117/122 Special 211700 Petrowax 1940 F.R. Paraffin
Paraffin
600044 Q.S. 125/129 Semi- 212500 Petrowax 2730 Scale
Refined Paraffin Wax Paraffin Wax
600051 Q.S. 127/129 Fully 212700 Petrowax 2818 F.R. Paraffin
Refined Paraffin
600073 145/150 Fully Refined 214500 Petrowax 4718 F.R. Paraffin
Paraffin Wax
Q.S. 145/150 Unfiltered 114500 Petrowax 4717 Unfltrd. Paraffin
Paraffin
600031 Q.S. L-500 Superflex 415000 Petrowax 5530 F.R. Micro Wax
Micro Wax
600069 Q.S. L-700 Superflex 417000 Petrowax 7530 F.R. Micro Wax
Micro Wax
600058 Q.S. 130 PA Petrolatum 069800 Petrowax 130 Petrolatum
600045 Q.S. 95/105 PA Petrol 067800 Petrowax 95/105 Petrolatum
600091 Q.S. Poly-Flex Wax S-1 701000 Petrowax 2727 Poly 1
600092 Q.S. Poly-Flex Wax S-2 702000 Petrowax 2725 Poly 2
600047 Q.S. Poly-Flex Wax 711000 Petrowax 2815 Poly 1
1% Poly
600048 Q.S. Poly-Flex Wax 702000 Petrowax 2812 Poly 2
2% Poly
600038 Q.S. Superflex B 783900 Petrowax 5535 B.R
</TABLE>
*or any variant thereof.
<PAGE>
Schedule 3.3(a)(ii)
Product Equivalencies and Brand Names
to be Used for the Term of the
Crude Oil Purchase and Sale Agreement
<TABLE>
<CAPTION>
Quaker State Petrowax
Product No. Product Name Product No. Product Name*
- ----------- ------------ ----------- -------------
<S> <C> <C> <C>
*Fuels
600001 Q.S. Sterling Gasoline 018900 Leaded Reg. Gasoline
600002 Q.S. Unleaded Gasoline 018700 Unleaded Reg. Gasoline
Q.S. Premium Unl. Gas. 019100 Unleaded Prem. Gasoline
Q.S. Kerosene Distillate 021000 Kerosene Distillate
600003 Q.S. No.1 Fuel Oil 020100 No.1 Fuel Oil
600004 Q.S. No.2 Burner and Diesel Fuel 020200 No.2 Fuel Oil
600006 Q.S. No.6 Fuel Oil 020600 No.6 Fuel Oil O.5S
600005 Q.S. 36/40 Fuel Oil 023600 36/40 Fuel Oil
*Lubes
600067 Q.S. 125 Neutral 081200 Petrowax lube 125 Neutral
600086 Q.S. McK 450 Neutral 084500 Petrowax lube 450 Neutral
600011 Q.S. 150 Bright Stock 086000 Petrowax lube 15O Bright Stock
600018 Q.S. 600SR Cylinder Stock 046000 Petrowax lube 600SR Vac. Bottoms
600017 Q.S. 630/635 Flash Cylinder Stock 046300 Petrowax lube 630 Flash Vac. Bottoms
600016 Q.S. 650 Special Cylinder Stock 046500 Petrowax lube 650 Fire Vac. Bottoms
600010 Q.S. 2000/3000 Propane Resin 052600 Petrowax lube 2600 Vis. Resins
</TABLE>
*or any variant thereof.
<PAGE>
Schedule 3.3(c) Customer Assets at the Facilities
None
<PAGE>
Schedule 3.3 (f) Computers and Data Processing Equipment
At Emlenton:
1 AT & T 2048T Modem
1 IBM 3174--51R Controller, Serial No. T0560
1 IBM 3192--CDO CRT, Serial No. N8862
1 IBM 3192--CDO CRT, Serial No. R0308
1 IBM 3192--CDO CRT, Serial No. 40302
1 IBM 3287--002 Printer, Serial No. C9755
1 IBM 3287--002 Printer, Serial No. D1120
1 IBM 3287--002 Printer, Serial No. D1121
At McKean:
1 AT & T 2048T Modem
1 AT & T 63A2 Modem mounting
1 IBM 3274--C61 Controller, Serial So. Y9709
1 IBM 3178--C30 CRT, Serial No. XT097
1 IBM 3178--C30 CRT, Serial No. XT100
1 IBM 3179--100 CRT, Serial No. GR240
1 IBM 3179--100 CRT, Serial No. DC454
1 IBM 3192--CDO CRT, Serial No. L9243
1 IBM 3192--CDO CRT, Serial No. 14888
1 IBM 3192--CDO CRT, Serial No. R0309
1 IBM 3192--CDO CRT, Serial No. 20447
1 IBM 3268--002 Printer, Serial No. 35766
1 IBM 3287--002 Printer, Serial No. 56963
1 IBM 3287--002 Printer, Serial No. 56964
1 IBM 3287--002 Printer, Serial No. 57139
<PAGE>
Schedule 3.3(g) Type of Products in Inventory
Quaker State Finished Neutral
Quaker State Heavy Vis Neutral (450)
Quaker State Finished Bright Stock
Platformate (Finished Gasoline)
Mineral Seal Oil
Finished Micro Wax
Finished Paraffin Wax
Unleaded Gasoline
Distillate Fuel Oil
<PAGE>
Schedule 3.4 Assumed Liabilities
MCKEAN:
- ------
RAILROAD AGREEMENTS:
- -------------------
1. 10-08-56 The Pennsylvania Railroad Company
2. 10-23-52 The Pennsylvania Railroad Company
3. 09-01-49 The Pennsylvania Railroad Company
4. 09-26-79 Consolidated Rail Corporation
5. 12-18-72 Penn Central Transportation Company
6. 09-01-48 The Pennsylvania Railroad Company
7. 09-01-38 Dickson, Receiver
8. 04-01-41 The Pittsburgh, Shawmut and Northern Railroad Company
9. 10-23-52 The Pennsylvania Railroad Company
10. 05-07-57 The Pennsylvania Railroad Company
11. 03-21-42 Dickson, Receiver
12. 12-20-48 The Pennsylvania Railroad Company
13. 12-15-48 The Pennsylvania Railroad Company
14. 05-04-48 The Pennsylvania Railroad Company
15. 06-22-32 Dickson, Receiver
16. 01-22-40 Dickson, Receiver
17. 07-13-48 The Pennsylvania Railroad Company
18. 06-14-48 The Pennsylvania Railroad Company
19. 07-09-81 Commonwealth of Pennsylvania
20. 02-01-37 Dickson, Receiver
21. 05-08-36 Dickson, Receiver
22. 07-17-84 Consolidated Rail Corporation
23. 07-20-84 Consolidated Rail Corporation
24. 12-20-84 The Pennsylvania Railroad Company
25. 12-10-48 The Pennsylvania Railroad Company
26. 12-10-48 The Pennsylvania Railroad Company
27. 12-10-48 The Pennsylvania Railroad Company
28. 04-01-41 Dickson, Receiver
29. 04-25-69 Penn Central Company
30. 11-02-48 The Pennsylvania Railroad Company
31. 12-31-47 The Pennsylvania Railroad Company
32. 12-29-49 The Pennsylvania Railroad Company
SUPPLY AGREEMENTS, PURCHASE ORDERS AND OTHER NONBINDING INFORMAL ARRANGEMENTS;
1. UOP Platforming Catalyst Supply Contract dated January 1, 1985, between
Quaker State and Cataleasco, Inc., as specifically related to McKean
Refinery.
2. Service Agreement dated June 1, 1978 between UOP Process Division of UOP,
Inc. and Quaker State, as specifically related to McKean Refinery.
3. Coal Supply Contract dated September 17, 1982 with Valley Coal & Supply,
Inc.
<PAGE>
4. North Penn Gas Co. Large Volume Service Agreement dated September 30, 1988
5. American Telephone & Telegraph
6. Culligan Water Conditioning, Inc.
7. United Parcel Service
8. Coyne Industrial Laundries
9. Allied Security
10. Kex Copysource
11. Xerox Corporation
LEASE:
12. Commercial Lease dated October 1, 1989, with Cari Gross
RAILROAD AGREEMENTS:
13. Transportation Contract Number ICC CR-C-7552 (Conrail, Norfolk and Western
Railway Co. and Southern Railway Co.)
14. Transportation Contract Number ICC CR-C-7541 (Conrail)
15. Transportation Contract Number ICC CR-C-7788 (Conrail and Missouri Pacific
Railroad Company)
16. Conrail Lease 64-3156
17. Conrail Lease 55-07160
18. Union Tank Car Company (cars 57990, 57991, 57992, 57993, 57994, 58581,
58950, and 58951)
19. General American Transportation Company (cars 66435, 66436, 66498, 66499,
66500, 66510, 66511, 66512, 77514, and 82842)
20. General American Transportation Company (cars 11825, 11827, 11828, 31562,
31563, 31564, 31566, 31567, 47152, 47155, 47156, 47157, 47161, 47176,
69251, 69252, 69253, 69254, 69255, 69256, 69257, 69258, 69259, 69260,
69261, 69262, 69263, 69264, 69265, 69266, 69267, 69268, 86452, 86453,
86462, 86463, 86467, and 86732) - under option
21. General American Transportation Company (cars 14699, 47153, 47154,
47159, 47165, 47166, 47167, 47168, 47173, 47175, and 47179)
22. Conrail Sidetrack Agreement Number 270191
EMLENTON:
UTILITIES:
1. Agreement dated February 13, 1989 with Pennsylvania Electric Company, for
electric service.
-2-
<PAGE>
2. Service Agreement with Columbia Gas Transmission Corporation.
3. Agreement for Gas Transportation Service dated August 12, 1988, with
Columbia Gas of Pennsylvania, Inc.
4. United Telephone Co.
5. Emlenton Water Co.
6. Emlenton Area Municipal Authority
SUPPLY AGREEMENTS, PURCHASE ORDERS AND OTHER NONBINDING INFORMAL ARRANGEMENTS
FOR SUPPLIES AND SERVICES:
7. Blanket purchase order dated January 9, 1989, R & J Resources, Inc.
8. Blanket purchase order dated January 9, 1989, DWL Coal Company.
9. Allied Security
10. Service Master
11. L.M.I. Development
12. Servi-Clean Industries
13. J.C. Ehrlich
14. Rochester Midland Corp.
15. United Parcel Service
16. R & S Oil
17. Exxon Company U.S.A.
18. Arco Chemical Co.
19. Interstate Chemical
20. Textile Chemical Co.
21. Englehard Minerals
22. Hamler
23. Custom Valve Repairs
24. Fisher Scientific
25. Gage Company
26. R.N. Goss Gas Co.
-3-
<PAGE>
27. Leak Repairs
28. Stewart Laboratories
29. The Warren Co.
30. Chemply Ind. Chem.
31. NUS
32. I.B.M.
33. Venango Clarion Business Machines
34. Monroe Systems
35. Simplex
36. McClearys Business Machines
37. CTS Associates
38. Diskwriter Inc.
-4-
<PAGE>
Schedule 4.3(d)(i)
Fully Allocated February 1990 Processing Costs
<TABLE>
<S> <C>
VALUATION OF "AFTER MEK" (Valued at 90% of Market minus Cost)
QS Neutral Unfiltered
Neutral @ 100% 100% x (90% of Market) - $2.836/B
$2.836/B = Clay Finishing Cost
Unproc Neutral - Unext.
450 Neutral @ 96% 96% x (90% of Market) - $6.180/B x 96%
FCC @ 4% 4% x (90% of Market)
$2.836/B = Clay Finishing Cost
$3.344/B = Furfural Extr. Cost
QS B.S. unfiltered
B.S. @ 100% 100% x (90% of Market) - $2.836/B
$2.836/B = Clay Finishing Cost
600 Deresined - DROD
B.S. @ 94% 94%. x (90% of Market) - $6.392/B x 94%
Resid @ 6% 6% x (90% of Market)
$2.836/B = Clay Finishing Cost
$3.556/B = Furfural Extr. Cost
Paraffin Unfiltered
Para @ 100% 100% x (90% of Market) - $2.836/B
$2.836/B = Clay Finishing Cost
VALUATION OF OTHER PRODUCTS (Valued at 90% of crude plus upgrade
cost)
Unfinished Gasoline 90% x (Crude cost + $1.006/B)
$1.006/B = Atmos. Dist. Cost
Light Charging Stock 90% x (Crude cost + $2.286/B)
$1.006/B = Atmos. Dist. Cost
$1.280/B = vac. Dist. Cost
Heavy Charging Stock 90% x (Crude cost + $2.286/B)
$1.006/B = Atmos. Dist. Cost
$1.280/B = vac. Dist. Cost
Wax Dist./Heavy Dist. 90%. x (Crude cost + 2.286/B)
$1.006/B = Atmos. Dist. Cost
$1.280/B = vac. Dist. Cost
</TABLE>
<PAGE>
Schedule 4.3(d)(i)
Fully Allocated February 1990 Processing Costs
VALUATION OF OTHER PRODUCTS (Valued at 90% of crude plus upgrade
cost)
Steam Ref. St. - Raw 600 90% x (Crude cost + $2.286/B)
$1.006/B = Atoms. Dist. Cost
$1.280/B = vac. Dist. Cost
600 Deresined - DRO 90% x (Crude cost + $11.546/B)
$1.006/B = Atmos. Dist. Cost
$1.280/B = vac. Dist. Cost
$9.260/B = Propane Deres. Cost
Propane Resins 90% x (Market price of resins)
Slop (Crude cost)
<PAGE>
Schedule 6.3 Encumbrances
NONE
<PAGE>
Schedule 3.1(b)(ii) Emlenton Easements,
Rights of Way and Rail Crossing Agreements
Right of Way Agreements:
Item Date Grantor Deed Book Reference
- ---- ---- ------- -------------------
1. 07/06/87 Borough of Emlenton 898/953
2. 08/24/87 Milford et ux., et al. 899/232
3. 08/27/87 Grafo Colloids Corp. 898/956
4. 08/28/87 Whitmer et ux. 898/961
5. 09/01/87 Shuart et ux. 901/1
6. 09/21/87 Ritchey et ux. 898/964
7. 02/11/88 Foust et ux. 901/4
8. 02/29/88 Ritchey et ux. 902/93
9 06/29/88 Grafo Colloids Corporation 905/1018
10. 03/01/89 Foust et ux. 913/255
Rail Crossing Agreements:
None
<PAGE>
Schedule 3.1(b)(iii) Emlenton Contracts and
Lease Agreements
Utilities:
1. Agreement dated February 13, 1989 with Pennsylvania Electric Company,
for electric service.
2. Service Agreement with Columbia Gas Transmission Corporation and
Columbia Gas of Pennsylvania, Inc. dated September 14, 1988.
3. Agreement for Gas Transportation Service dated August 12, 1988, with
Columbia Gas of Pennsylvania, Inc.
4. United Telephone Co.
5. Emlenton Water Co.
6. Emlenton Area Municipal Authority
Purchase orders and other nonbinding informal arrangements for supplies and
services:
7. Blanket purchase order dated January 9, 1989, R & J Resources, Inc.
8. Blanket purchase order dated January 9, 1989, DWL Coal Company.
9. Allied Security
10. Service Master
11. L.M.I. Development
12. Servi-Clean Industries
13. J.C. Ehrlich
14. Rochester Midland Corp.
15. United Parcel Service
16. B & S Oil
17. Exxon Company U.S.A.
18. Arco Chemical Co.
19. Interstate Chemical
20. Textile Chemical Co.
<PAGE>
21. Englehard Minerals
22. Hamler
23. Custom Valve Repairs
24. Fisher Scientific
25. Gage Company
26. R.N. Goss Gas Co.
27. Leak Repairs
28. Stewart Laboratories
29. The Warren Co.
30. Chemply Ind. Chem.
31. NUS
32. I.B.M.
33. Venango Clarion Business Machines
34. Monroe Systems
35. Simplex
36. McClearys Business Machines
37. CTS Associates
38. Diskwriter Inc.
-2-
<PAGE>
Schedule 6.4 Compliance With Laws
McKean Plant:
1. Requirements of 25 Pa. Code Section 129.55 relating to air emissions
from refineries: (a) steam reciprocating pumps containing volatile organic
compounds without mechanical seals; (b) discharge to open sump from furfural
extractor vacuum unit condenser.
2. Failure to maintain annual reports pursuant to 40 C.F.R.761, and the
Toxic Substance Control Act, for certain years.
3. Use of an independent contractor, E.T.S.S., Inc. for dewatering of API
separator sludge and DAF float on-site. This contractor did not have a permit
for treatment of hazardous waste.
4. Drying of flyash/bauxite fines from waste water separator on-site. No
permit for such activity has been located.
Emlenton:
1. Potential flooding of wax-water separator and API separator,
resulting in untreated discharge.
2. There is a possibility that several PCB--contaminated transformers are
on-site; a number of transformers which could contain PCB's have not been fully
tested and cannot be until a partial plant down time occurs.
3. There is a possibility that on occasion small quantities of lab
wastes and solvents may have been disposed; Pennsylvania has no counterpart to
the federal DE MINIMUS rule for hazardous waste mixtures.
<PAGE>
SCHEDULE 6.5(a)
PERMITTED EXCEPTIONS
A. MCKEAN PLANT - the following items shown in Part II of Schedule B of Ticor
Title Insurance Company Title Commitment No. 1990-0002 dated January 12,
1990: ("McKean Commitment"):
2(a) - limited to rights of tenants under leases set forth in schedule to be
attached to policy.
2(b) and 2(c), modified by endorsements insuring absence of encroachments or
boundary line disputes, as shown by the boundary and right of way surveys
prepared by E&M Engineers and Surveyors.
3(a) and (b), to the extent a lien but not yet due and payable.
11-13, inclusive.
15-16 - if surveyor confirms this applies to McKean.
16-17
19-23, inclusive
26-30, inclusive
31
35-37, inclusive
39
Survey readings reflecting encroachment upon Conrail property by brick
building and asphalt road, provided title company affirmatively insures Buyer
will not be obligated to remove such improvements.
B. EMLENTON WAX PLANT - the following items in Part II of Schedule B of Ticor
Title Insurance Company Commitment No. 1990-0001 dated January 12, 1990
("Emlenton Commitment"):
2(a), limited as for McKean Plant.
2(b) and 2(c), modified as for McKean Plant.
3(a) and (b), to the extent a lien but not yet due and payable.
<PAGE>
27, with affirmative insurance that right of way may be used only for
railroad purposes.
28-33, inclusive
35
37
38
A standard exception for riparian rights of third parties in Allegheny
River.
Survey reading reflecting streets shown on Sage Plan dated 1877, but policy
to insure ownership by Buyer to center line of such streets.
Exception for rights of owner of Lot 316 to ingress and egress.
<PAGE>
Schedule 6.5(b)
EXCEPTIONS TO BE REMOVED BY SELLER
A. MCKEAN PLANT - the following items from McKean Commitment:
Schedule B, I - requirements (a) through (i).
Schedule B, II - Exceptions 1, 2(d), 4 through 10 and 24.
B. EMLENTON WAX PLANT - the following items from Emlenton Commitment:
Schedule B, I - requirements (a) through (g).
Schedule B, II - Exceptions 1, 2(d), 4 through 26.
Frame shed near Kerr Avenue to be removed.
<PAGE>
Schedule 6.6(a) Encumbrances and Third Party Rights and
Interests in Personal Property
None
<PAGE>
Schedule 6.6(b) Personal Property Constituting
Process Units at the Facilities
Emlenton:
MEK deoiling unit
Bauxite filtering unit
Waste water treatment plant
Boiler house
Rerun units
Miscellaneous tanks, pumps, piping, conveyors, tools, laboratory
equipment, and office furniture and equipment
Electrical and natural gas systems
Inactive units:
Crude distillation unit
Unifiner/platforming unit
Furfural extraction unit
Lube blending equipment
Loading rack
McKean:
Crude distillation unit
Unifiner/platforming/isom unit
Propane deresining unit
MEK dewaxing unit
Furfural extraction unit
Boiler house
Filter house
Rerun units
Waste water treatment plant
Lube blending plant
Loading racks
Miscellaneous tanks, pumps, piping, conveyors, tools, laboratory
equipment and office furniture and equipment
Electrical and natural gas systems
Five personal computers and associated peripheral equipment
The special purpose packaging plant building
Such rhenium and platinum as may be contained at the time of Closing in
the catalyst in use in process units
Both Plants:
Such personal property, machinery and equipment listed in the appraisals of
both plants done by Valuation Engineers, Inc. as has not been removed,
destroyed, discarded, replaced or sold by Seller prior to July 5, 1989, and has
not been removed or replaced in the ordinary course of business since July 5,
1989. In particular, the packaging plant equipment at the McKean Plant has
been removed by Seller prior to the date hereof.
<PAGE>
Schedule 6.8 Permits, Licenses, Approvals, Consents,
Franchises and Authorizations Associated with the Facilities
McKean:
NPDES Permit No. PA 0002372
Water Quality Management Permit No. 4277201
Water Quality Management Permit No. 4271201
Air Pollution Control Permit No. 42-302-009A
Air Pollution Control Permit No. 42-312-023
Air Pollution Control Permit No. 42-312-001
Air Pollution Control Permit No. 42-312-017
Hazardous Waste Permit PAD046761763
Federal Registration for tax free transactions (fuel and gasoline) -Form 637
Pennsylvania Liquid Fuels Tax
Pennsylvania Oil Franchise Tax
Pennsylvania Diesel Fuel Use Tax
New York Sales and Use Tax prepayment on gasoline
New York Gasoline Tax
New York Report of Bulk Sales of Diesel Fuels
Pennsylvania Sales and Use Tax
Underground Storage Tank registrations:
500 gallon underground storage tank, Number 001
Various registrations, above ground storage tanks
Pending Application for Wetlands Encroachment Permit
Emlenton:
Solid Waste Disposal Permit 300619 (not to be transferred to Buyer)
Water Quality Management (N.P.D.E.S.) Permit PA 0002381
Water Quality Management Permit 6177202
Hazardous Waste Permit by Rule No. PA D004337127
Air Quality Operating Permit 61-302-014
Air Quality Operating Permit 61-312-001
Underground Storage Tank Registration for Tank number 114 (withdrawn and not
to be transferred to Buyer) and ten permanently out of service tanks
Various registrations, above ground storage tanks
Coleville:
Underground Storage Tank registration for 10,000 gallon tank, Facility
ID# 42-14516
Pennsylvania Fire Marshall Permits
Air Quality Control Permits 42-312-011 and 42-312-007
Pennsylvania Department of Transportation
Hazardous Materials Terminal registration
<PAGE>
Schedule 6.9 Litigation
Quaker State Corporation v. Commonwealth of Pennsylvania, Department of
Environmental Resources, Case No. 284 MD 1989 in the Commonwealth Court of
Pennsylvania
Weber v. Quaker State Corporation, No. 3562 1987 Term, in the Court
of Common Pleas of Philadelphia County, Pennsylvania
Worker's Compensation claims (all at McKean Plant):
Jim Arthurs
Thomas Brown
Ray Keech
Unemployment Compensation claim:
M. Norgrove
Labor Grievance:
Keith Owen, dated February 26, 1990 (Emlenton Plant)
<PAGE>
Schedule 6.10 Insurance Policies
Home Indemnity Company Policy No. GLR989018 (General Liability Insurance)
Home Indemnity Company Policy No. BAK980260 (Business Auto Policy)
Umbrella/Excess Liability Insurance:
National Union Fire Insurance Company Policy No. 307-77-22
California Union Insurance Company Policy No. 2CXD09846
Pacific Employers Insurance Company Policy No. XCC028363
American Zurich Insurance Company Policy No. CE0132827402
I.N.A. Policy No. XCPG10237543
Lexington Insurance Company Policy No. 5567113
Agricultural Excess and Surplus Policy No. X50007147
American International Underwriters (A.I.U.) Policy No. 75104898
Pennsylvania Manufacturers' Association Policy No. 20890070-40-03-3
(Pennsylvania Workers' Compensation)
Lloyd's Policy Number L89253--Sudden and Accidental Pollution Liability
Industrial Risk Insurers (Blanket Property Coverage)
Kemper Insurance Group Policy No. 3XCL11149601 (Boiler and Machinery Insurance)
<PAGE>
Schedule 6.11 Labor and Employment Matters
(i) Agreement between Quaker State Corporation, Emlenton Plant and Oil,
Chemical and Atomic Workers International Union, Local 8-481
Agreement between Quaker State Corporation, McKean Plant and Oil,
Chemical and Atomic Workers International Union, Local 8-607
(ii) Quaker State Corporation Salaried Welfare Benefits Plan
Quaker State Corporation Pension Plan for Salaried Employees
Quaker State Corporation Thrift and Stock Purchase Plan
Quaker State Corporation Employee Stock Ownership Plan
Quaker State Corporation Severance Plan
Quaker State Corporation Stock Option Plan
Quaker State Corporation Pension Plan for Hourly Employees
Quaker State Corporation Hourly Welfare Benefits Plan
<PAGE>
Schedule 7.3 Conflicts and Consents
None
5111P
<PAGE>
Schedule 8.8 Third Party Handling Charges
(Gordon Terminal Service Co. 1989 at McKees Rocks, PA)
1. Receipt by barge and tank storage of oils
(no charge for additive) $0.0287/gal.*
2. Receipt of oils by tank car or tank truck $0.015/gal.*
3. Blending of base oils (no additives) $0.02/gal.
4. Compounding $0.03/gal.
5. Minimum Blends - Charges to blend and compound
less 3,300 gallons $0.0300/gal.
6. Bulk loading fee (5,000 gal. min. load)
1 Product $0.01/gal
2 Products (minimum per product 1,000 gal.) 0.0125/gal.
3 Products (minimum per product 1,000 gal.) 0.015/gal.
4 Products (minimum per product 1,000 gal.) 0.0175/gal.
7. Fill/Ship
55 gallon drums $0.0765/gal.
16 gallon drums 0.1060/gal.
5 gallon pails 0.1765/gal.
8. Storage (filled containers on inventory at end of month)
55 gallon drums $0.82/dr./mo.
16 gallon drums 0.38/dr./mo.
5 gallon pails 0.236/dr./mo.
9. Additive Tank Rental $550/month
10. Pallets Cost + 10%
11. Weighing Charges:
Charges cover empty and full weighing
on Gordon's Certified truck scale $1.50/weighing
Note: Quaker State Corp. ("QSC"); Petrowax Pa Inc. ("PPI")
QSC charges to PPI: The fees for receiving, storing and bulk loading slack wax
at Congo will be based on the prices quoted under #1 and the "1 Product" heading
under #6 above.
PPI charges to QSC: Tank storage of products at PPI and truck loading fees will
be based on #1 and on the applicable charges under #6 above.
If QSC requests PPI to blend any products, blending charges will be based on the
blending rates and other applicable fees quoted above.
With respect to deliveries of slack wax at Congo, PPI will be charged for any
applicable bankermen and third party inspection charges.
* Products requiring heat in the storage tanks and heat to unload tank cars
or barges will carry a surcharge for heating costs.
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement entered into as of June 8, 1994, by and between ABI Corporation,
a Delaware corporation (the "BUYER") and Concorde Industries, Inc., a Colorado
corporation (the "SELLER"). The Buyer and the Seller are sometimes hereinafter
referred to collectively herein as the "PARTIES".
The Seller owns Five Hundred and Fifty (550) shares of the issued and
outstanding Class A common stock of Rheochem Manufacturing Co., Inc., a Colorado
corporation (the "Target"), which shares represent fifty percent (50%) of the
total outstanding shares of all classes of Target's capital stock.
This Agreement contemplates a transaction in which the Buyer will purchase
from the Seller, and the Seller will sell to the Buyer, all Five Hundred and
Fifty shares of the outstanding Class A common stock of the Target owned by
Seller in return for cash.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorney's fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Sec. 1504 [or any similar group defined under a similar provision of state,
local or foreign law].
"APPLICABLE RATE" means the corporate base rate of interest announced from
time to time by Integra Bank.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
Page 1
<PAGE>
"BUYER" has the meaning set forth in the preface above.
"CLOSING" has the meaning set forth in Section 2(c) below.
"CLOSING DATE" has the meaning set forth in Section 2(c) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of the Target that is not already generally available to the public
or does not hereafter become generally available to the public without breach of
this Agreement by Seller or an Affiliate of Seller.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code
Sec. 1563.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4 below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(1).
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder to the extent they have statutory force) of federal, state,
local, and foreign governments (and all agencies thereof) concerning pollution
or protection of the environment, public health and safety, or employee health
and safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution,
Page 2
<PAGE>
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
as applicable to the properties of Target.
"ERISA" means the Employer Retirement Income Security Act of 1974, as
amended.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3 (21) .
"FINANCIAL STATEMENT" has the meaning set forth in Section 4 (g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d) below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together will all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together will all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
Page 3
<PAGE>
"LIABILITY" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section 4(g)
below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section 4 (g)
below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 4 (g)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"OTHER BUYER OBLIGATIONS" means any contractual obligations of Buyer, an
Affiliate of the Buyer, or the Target to provide quantifiable economic benefits
to the Seller or an Affiliate of the Seller, whether pursuant to this Agreement
or other written contracts to be executed pursuant to this Agreement between the
Buyer, an Affiliate of the Buyer, or the Target on one hand, and the Seller or
an Affiliate of the Seller on the other hand.
"PARTY OR PARTIES" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Sec. 406 and
Code SEC. 4975.
"PURCHASE PRICE" has the meaning set forth in Section 2 (b) below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
Page 4
<PAGE>
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, OTHER THAN (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SELLER'S TARGET SHARES" means all of the Target Shares owned by the Seller as
of the date of this Agreement as identified on the Disclosure Schedule.
"SUBSIDIARY" means any corporation with respect to which a specified Person (or
Subsidiary thereof) owns a majority of the common stock or has the power to vote
or direct the voting of sufficient securities to elect a majority of the
directors.
"SURVEY" has the meaning set forth in Section 5 (i) below.
"TARGET" has the meaning set forth in the preface above.
"TARGET SHARE" means any share of any class of the Common Stock without par
value of the Target. "Target Shares" means any of the shares of any class of
the Common Stock without par value of the Target.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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"THIRD PARTY CLAIM" has the meaning set forth in Section 8 (d) below.
2. PURCHASE AND SALE OF SELLER'S TARGET SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees
to sell to the Buyer, all of its Seller's Target Shares for the consideration
specified below in Section 2(b).
(b) PURCHASE PRICE. The Buyer agrees to pay to the Seller at the Closing
$2,150,000 (the "PURCHASE PRICE") by delivery of cash in an amount equal to the
Purchase Price payable by wire transfer or delivery of other immediately
available funds.
(c) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall be accomplished by use of an expedited mail
service such as Federal Express or other overnight courier service on the third
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) or such other date as the Buyer and Seller may mutually
determine (the "CLOSING DATE"); provided, however, that the Closing Date shall
be no later than June 30, 1994.
(d) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will deliver
to the Buyer the various certificates, instruments, and documents referred to in
Section 7(a) below, (ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 7(b) below,
(iii) the Seller will deliver to the Buyer stock certificates representing all
of the Seller's Target Shares, endorsed in blank or accompanied by duly executed
assignment documents, and (iv) the Buyer will deliver to the Seller the
consideration specified in Section 2(b) above.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyer that the statements contained in this Section
3(a) are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to itself.
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(i) ORGANIZATION. The Seller is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(ii) AUTHORIZATION OF TRANSACTION. The Seller has full corporate
power and authority to execute and deliver this Agreement and to perform
its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Seller, enforceable in accordance with
its terms and conditions. The Seller does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(iii) NONCONTRAVENTION. Except as expressly described in Section
4(e) of the Disclosure Schedule, neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Seller is
subject or any provision of the Seller's charter or bylaws, or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Seller is a
party or by which it is bound or to which any of its assets are subject.
(iv) BROKERS' FEES. The Seller does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(v) SELLER'S TARGET SHARES. The Seller holds of record and owns
beneficially the number of Target Shares set forth next its name in Section
4(b) of the Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. The Seller
is not a party to any option, warranty, purchase right, or other contract
or commitment that could require the Seller to sell, transfer, or otherwise
dispose of any capital stock of the Target (other than this Agreement).
The Seller is not a party to any
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voting trust, proxy, or other agreement or understanding with respect to
the voting of any capital stock of the Target.
(b) REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Seller that the statements contained in this Section 3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3(b)), except as set forth in Annex I attached hereto.
(i) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(ii) AUTHORIZATION OF TRANSACTION. The Buyer has full corporate
power and authority to execute and deliver this Agreement and to perform
its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in accordance with its
terms and conditions. Except as set forth in the following sentence, the
Buyer need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement. The Buyer shall make all filings with the U.S. Department of
Commerce, Bureau of Economic Analysis, on Form BE-13 or otherwise, which
may be required to be filed before Closing.
(iii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is
subject or any provision of its charter or bylaws or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject.
(iv) BROKER'S FEES. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions
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contemplated by this Agreement for which the Seller could become liable or
obligated.
(v) INVESTMENT. The Buyer understands that the Seller's Target
Shares have not been registered under the Securities Act, or any state
securities laws, in reliance upon exemptions. The exemption upon which
there is reliance under the Securities Act is for what may be called a
private placement. The Buyer is not acquiring the Seller's Target Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act. With respect to the Securities
Act, the Buyer has had and continues to have (A) effective access to, and
the opportunity to examine, all books, records, files, financial
statements, financial reports, plans, sales data, cost data, copies of
contracts, licenses, and other instruments to which the Target is a party
or by which its properties or interests are affected, (B) the opportunity
to question, and to receive information from, the President and all other
officers of the Target and the independent certified public accountants of
the Target concerning the Target, and (C) the opportunity to obtain any and
all additional information necessary to verify the accuracy of the
information furnished to it or any other supplemental information which the
Buyer deems relevant to make an informed investment decision as to
acquisition of the Seller's Target Shares. The Buyer, its officers and
advisors, have sufficient knowledge and experience in business and
financial matters in general, and are capable of utilizing the information
available to them, to evaluate the risks involved in acquiring the Seller's
Target Shares. The Buyer is capable of hearing all the economic risks
involved in ownership of the Seller's Target Shares. The Buyer understands
that it must hear the economic risk of the investment for an indefinite
period because the Seller's Target Shares have not been registered under
the Securities Act and, therefore, are subject to restrictions upon
transfer such that they may not be sold or otherwise transferred unless
they are registered under the Securities Act or an exemption from such
registration is available. The Buyer shall not assign, sell or make any
other disposition of any shares in the Target in the absence of an
effective registration statement, qualification, or other authorization
relating thereto under the Securities Act, or an opinion of qualified
counsel reasonably satisfactory to the Target to the effect that such
registration, qualification or other authorization is not required in
connection with the proposed assignment, sale or other disposition. Any
certificates which are issued representing the Seller's Target Shares shall
be endorsed with a legend to this effect. Notwithstanding the foregoing,
the Seller expressly acknowledges and agrees that
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the provisions of this Section 3(b)(v) in no way diminish Buyer's reliance
upon the Seller's representations, warranties, covenants and
indemnification obligations contained in this Agreement as a material
inducement to acquire Seller's Target Shares.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE TARGET.
The Seller represents and warrants to the Buyer that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 4, except as set forth in the disclosure
schedule delivered by the Seller to the Buyer on the date hereof and
initialed by the Parties (the "DISCLOSURE SCHEDULE"). Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception with particularity and describes the
relevant facts in detail. Without limiting the generality of the foregoing,
the mere listing (or inclusion of a copy) of a document or other item shall
not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with
the existence of the document or other item itself). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Target is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Target is duly authorized
to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required and where failure to
qualify would have a material adverse effect on the Target. The Target has
full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged
and in which it presently proposes to engage and to own and use the
properties owned and used by it. Section 4(a) of the Disclosure Schedule
lists the directors and officers of The Target. The Seller has delivered to
the Buyer correct and complete copies of the charter, bylaws, minute books,
stock certificate books, and stock record books of the Target (as amended to
date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Target are correct and complete. The Target is not in default under or in
violation of any provision of its charter or bylaws.
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(b) CAPITALIZATION. The entire authorized capital stock of the Target
consists of 50,000 shares of Class A common stock without par value, of which
550 shares are outstanding, and 50,000 shares of Class B common stock without
par value, of which 550 shares are outstanding and no Target Shares are held in
treasury. All of the issued and outstanding Target Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the Seller and Rheochem as set forth in Section 4(b) of the Disclosure
Schedule. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Target to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Target. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Target.
(c) NONCONTRAVENTION. Except as expressly described in Section 4(e) of the
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which the Target is subject or any provision of the charter
or bylaws of any of the Target or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which the Target is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon any
of its assets). The Target does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(d) BROKER'S FEES. The Target does not have any Liability or obligation to
pay any fees or commissions to any broker, finder, or agency with respect to the
transactions contemplated by this Agreement.
(e) TITLE TO ASSETS. Except as expressly described in Section 4 (e) of
the Disclosure Schedule, the Target has good and marketable title to, or a
valid leasehold interest in the properties and assets used by it, located on
Target's premises, or shown on the Most Recent Balance Sheet or acquired
after the date thereof, free and
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clear of all Security Interests, except for properties and assets disposed of in
the Ordinary Course of Business since the date of the Most Recent Balance Sheet.
(f) FINANCIAL STATEMENTS. Attached hereto as Exhibit A are the following
financial statements (collectively the "FINANCIAL STATEMENTS"): (i) audited
balance sheet as of November 30, 1990 and audited balance sheet, statement of
income, changes in stockholders equity and cash flow as of and for the financial
years ended December 31, 1991, 1992, and for the financial year end December 31,
1993 (the "MOST RECENT FISCAL YEAR END") for the Target; and (ii) unaudited
consolidated and consolidating balance sheets and statements of income, changes
in stockholders' equity, and cash flow (the "MOST RECENT FINANCIAL STATEMENTS")
as of and for the four months ended April 30, 1994 (the "MOST RECENT FISCAL
MONTH END") for the Target. The Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, present fairly the financial
condition of the Target as of such dates and the results of operations of the
Target for such periods, are correct and complete, and are consistent with the
books and records of the Target (which books and records are correct and
complete).
(g) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, to the Knowledge of the Seller, there has not been any
adverse change in the business, financial condition, operations, results of
operations, or future prospects of the Target taken as a whole. Without
limiting the generality of the foregoing, since that date:
(i) the Target has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, outside the Ordinary Course of
Business;
(ii) to the Knowledge of the Seller, the Target has not entered
into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) outside the Ordinary Course of
Business;
(iii) no party (including the Target) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) involving
more than $5,000 to which the Target is a party or by which it is bound;
(iv) except as expressly described in Section 4(e) of the
Disclosure Schedule, the Target has not imposed any Security Interest upon
any of its assets, tangible or intangible;
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(v) except as expressly described in Section 4(g)(v) of the
Disclosure Schedule, the Target has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of
Business;
(vi) the Target has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $5,000 or outside the Ordinary Course of Business;
(vii) the Target has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$5,000 singly or $10,000 in the aggregate;
(viii) the Target has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) the Target has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
(x) the Target has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter
or bylaws of the Target;
(xii) the Target has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xiii) the Target has not declared, set aside, or paid any dividend
or made any distributions with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock; provided, however, that effective February 23, 1994, the
Target declared a dividend in the amount of $227.50 per Target Share
payable no later than October 31, 1994 to holders of record of the Target
Shares on February 23, 1994, which the Buyer acknowledges the Target is
obligated to pay to the extent that payment does not result in a breach of
Section 4(g)(xxii), or would not have resulted in a breach of Section
4(g)(xxii) if made on the Closing Date and not before.
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(xiv) the Target has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xv) the Target has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) except as expressly described in Section 4(g)
(xvi) of the Disclosure Schedule, the Target has not entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement (such representation and
warranty by the Seller, as to employment agreements being limited to the
Knowledge of the Seller);
(xvii) except as expressly described in Section 4(g) (xvii) of the
Disclosure Schedule, the Target has not granted any increase in the base
compensation of any of its directors, officers, and management employees
outside the Ordinary Course of Business;
(xviii) except as expressly described in Section 4(w) of the
Disclosure Schedule, the Target has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers,
and employees (or taken any such action with respect to any other Employee
Benefit Plan);
(xix) the Target has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xx) the Target has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Target, which has or will result in any adverse
change in the business, financial condition, results of operations, or
future prospects of the Target taken as a whole;
(xxii) the Target has not taken any action(s) which has caused the
Shareholder's equity of the Target to be less than $2,000,000; and
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(xxiii) the Target has not committed to any of the foregoing.
(h) UNDISCLOSED LIABILITIES. The Target has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Target giving rise to
any Liability) required to be disclosed on the Most Recent Balance Sheet in
accordance with GAAP, except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet (including any notes thereto) and (ii) Liabilities
which have arisen after the Most Recent Fiscal Month End in the Ordinary Course
of Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law.)
(i) LEGAL COMPLIANCE. The Target, and its predecessors and Affiliates have
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply, except where the failure to comply would not have an
adverse effect on the business, financial condition, operations, results of
operations, or future prospects of the Target.
(j) TAX MATTERS.
(i) The Target has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Target (whether or not shown on any Tax Return) have been
paid. The Target currently is not the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Target does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of the Target that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Target has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(iii) No Seller or director or officer (or employee responsible
for Tax matters) of the Target expects any authority to assess any
additional Taxes for any period for
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which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Target either (a) claimed or raised by any
authority in writing or (b) as to which any of the Seller and the directors
and officers (and employees responsible for Tax matters) of the Target has
Knowledge based upon personal contact with any agent of such authority.
Section 4(j) of the Disclosure Schedule lists all federal, state, local,
and foreign income Tax Returns filed with respect to the Target for taxable
periods ended on or after December 31, 1988, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are
the subject of audit. The Seller has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Target
since December 31, 1988.
(iv) The Target has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Target has not filed a consent under Code Sec.
341(f) concerning collapsible corporations. The Target has not made
any payments, nor is obligated to make any payments, nor is a party
to any agreement that under certain circumstances could obligate it
to make any payments that will not he deductible under Code Sec.
280G. The Target has not been a United States real property holding
corporation within the meaning of Code Sec. 897(C)(2) during the
applicable period specified in Code Sec. 897(C)(1)(A)(ii). The
Target has disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Sec. 6662. The Target
is not a party to any Tax allocation or sharing agreement. The
Target (a) has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return or (b) has any Liability for
the Taxes of any Person (other than of the Target) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(vi) Section 4(j) of the Disclosure Schedule sets forth the
following information with respect to the Target as of the most recent
practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions contemplated
hereby): (a) the basis of the Target in its assets; (b) the amount of any
net operating loss, net capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution of the Target.
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(vii) The unpaid Taxes of the Target (a) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (b) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Target in filing its
Tax Returns.
(k) REAL PROPERTY.
(i) Section 4(k)(i) of the Disclosure Schedule lists and
describes briefly all real property that the Target owns. With respect to
each such parcel of owned real property:
(A) Since April 1, 1993, the effective date of that certain
Chicago Title Insurance Company Owner's Policy of title insurance
issued to Target, Policy Number 26013460000849, there have been no
changes with respect to or affecting Target's title to the property,
including by way of illustration but not limitation, Security
Interests, easements, covenants or other restrictions;
(B) there are no pending or, to the Knowledge of the Seller,
threatened condemnation proceedings, lawsuits, or administrative
actions relating to the property or other matters affecting and
adversely the current use, occupancy, or value thereof;
(C) the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described
parcels of land, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties
or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure"
classifications), and do not encroach on any easement which may burden
the land, and the land does not serve any adjoining property for any
purpose inconsistent with the use of the land, and the property is not
located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the use
thereof have net been obtained;
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(D) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection
with the ownership or operation thereof and have been operated and
maintained in accordance with applicable laws, rules and regulations;
(E) there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties
the right of use or occupancy of any portion of the parcel or real
property;
(F) there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or
interest therein;
(G) there are no parties (other than the Target) in possession
of the parcel of real property;
(H) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation
of such facilities, including gas, electricity, water, telephone,
(with the exceptions noted in Section 4(o) of the Disclosure Schedule
pertaining to the agreement between the Seller and the Target for
supply of wastewater treatment services and the projected requirement
for the Target to arrange for municipal wastewater treatment
services) sanitary sewer, and storm sewer, all of which services are
adequate in accordance with all applicable laws, ordinances, rules,
and regulations and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcel of real
property; and
(I) each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via
a permanent, irrevocable, appurtenant easement benefitting the parcel
of real property, and access to the property is provided by paved
public right-of-way with adequate curb cuts available.
(ii) No real property is either leased or subleased to the
Target.
(l) INTELLECTUAL PROPERTY.
(i) The Target owns or has the right to use pursuant to license,
sublicense, agreement, permission, or otherwise all Intellectual Property
necessary for the operation of the
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businesses of the Target as presently conducted and as presently proposed
to be conducted. Each item of Intellectual Property owned or used by the
Target immediately prior to the Closing hereunder will be owned or
available for use by the Target on identical terms and conditions
immediately subsequent to the Closing hereunder. The Intellectual Property
owned or used by the Target in its business consists (in addition to
certain computer software which it uses under licenses) of certain
nonpatented information of the type described generally in clause (e) of
the definition of Intellectual Property, above, the principal components of
which are proprietary process technology and formulae generally described
in Section 4(l)(i) of the Disclosure Schedule. The Target has not granted
to any third party any license or other rights with respect to any of its
proprietary technology. The Target holds no patents and has not applied
for any patents. To the Seller's Knowledge, the Target has taken those
steps which are reasonable and customary in the industry to maintain and
protect such proprietary technology.
(ii) The Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties and neither the Seller nor, to the
Knowledge of the Seller, the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Target has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that the Target must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the Seller, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of the
Target.
(iii) Section 4(l)(i) of the Disclosure Schedule identifies each
trade name or unregistered trademark used by the Target in connection with
any of its businesses. With respect to each item of Intellectual Property
identified in Section 4(l)(i) of the Disclosure Schedule:
(A) to Seller's Knowledge, the Target possesses all right,
title, and interest in and to the item, free and clear of any Security
Interest (other than the Security Interest securing the line of credit
from Lakeshore National Bank described in Section 4(o) of the
Disclosure Schedule, license, or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
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(C) to the Seller's Knowledge no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is pending
or is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Target has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iv) The Target does not use pursuant to license, sublicense,
agreement, or permission any Intellectual Property owned by any third party
other than computer software programs, which Target has a valid license to
use.
(v) To the Knowledge of any of the Seller and the directors and
officers (and employees with responsibility for Intellectual Property
matters) of the Target, the continued operation of the Target's business as
presently conducted and as presently proposed to he conducted will not
interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties.
(vi) The Seller does not have Knowledge of any new products,
inventions, procedures, or methods of manufacturing or processing that any
competitors or other third parties have developed which reasonably could
be expected to supersede or make obsolete any product or process of any of
the Target.
(m) TANGIBLE ASSETS. The Target owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted and as presently proposed to he conducted. Such tangible
assets, taken as a whole, have been maintained in accordance with normal
industry practice, are in good operating condition and repair (subject to normal
wear and tear), and are suitable for the purposes for which they are presently
used.
(n) INVENTORY. The inventory of the Target consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Target.
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(o) CONTRACTS. Section 4(o) of the Disclosure Schedule lists following
written contracts and agreements and oral contracts and agreements to which the
Target is a party of which the Seller Knowledge:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments in
excess of $5,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year and
involve consideration of more than $10,000, or result in a loss to the
Target, or involve consideration, in excess of $20,000;
(iii) any agreement concerning participation by the Target in a
partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $5,000 or
under which it has imposed a Security Interest on any of its assets,
tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with the Seller and/or its Affiliates;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $20,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have a adverse effect on the
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business, financial condition, operations, results of operations, or future
prospects of the Target; or
(xii) any other agreement (or group of related agreements) outside
the Ordinary Course of Business the performance of which involves
consideration in excess of $20,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 4(o) of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 4(o) of the Disclosure
Schedule. With respect to each such agreement, except as may be expressly
disclosed in Section 4(o) of the Disclosure Schedule: (A) the agreement is
presently in full force and effect; (B) the agreement will continue to be in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) to the Knowledge of the Seller, no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or petit termination,
modification, or acceleration, under the agreement; and (D) to the Knowledge
of the Seller, no party has repudiated any provision of the agreement.
(p) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of
the Target are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Target.
(q) POWER OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Target.
(r) INSURANCE. Section 4(r) of the Disclosure Schedule
contains a listing of each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which the Target has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past five (5)
years, and a written description of any retroactive premium adjustments or other
loss-sharing arrangements pertaining thereto. Copies of (I) each of those
policies which are currently in effect and (II) each of the other policies
listed (except for the property insurance) in Section 4(r) of
the Disclosure Schedule have been furnished to the Buyer.
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With respect to each insurance policy referred to in clause (I) above: (A) the
policy is presently in full force and effect; (B) the policy will continue to be
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither the Target nor any other party to
the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. Section 4(r) of the
Disclosure Schedule describes any self-insurance arrangements affecting the
Target.
(s) LITIGATION. Section 4(s) of the Disclosure Schedule sets forth each
instance in which the Target (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or is, to the
Knowledge of the Seller, threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in Section 4(s) of the Disclosure
Schedule will result in any adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Target. Based on
its Knowledge, the Seller has no reason to believe that any such action, suit,
proceeding, hearing, or investigation may be brought or threatened against the
Target.
(t) PRODUCT WARRANTY. Substantially all of the products manufactured,
sold, leased, or delivered by the Target have been in conformity with all
applicable contractual commitments and all express and implied warranties, and
the Target has no Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against it giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for product warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Target. No product manufactured, sold, leased, or delivered by the Target is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Section 4(t) of the Disclosure
Schedule includes copies of the standard teams and conditions of sale or lease
for each of the Target (containing applicable guaranty, warranty, and indemnity
provisions).
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(u) PRODUCT LIABILITY. To the Seller's Knowledge, the Target does not have
any Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by the Target.
(v) EMPLOYEES. To the Knowledge of the Seller, no executive, key employee,
or group of employees has any plans to terminate employment with the Target.
The Target is not a party to or bound by any collective bargaining agreement,
nor has it experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. To the Seller's Knowledge,
the Target has not committed any unfair labor practice. To the Seller's
Knowledge, there is no organizational effort presently being made or threatened
by or on behalf of any labor union with respect to employees of the Target.
(w) EMPLOYEE BENEFITS.
(i) Section 4(w) of the Disclosure Schedule lists each Employee
Benefit Plan that the Target maintains or to which the Target contributes.
(A) Each such Employee Benefit (and each related trust,
insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA, the Code, and
other applicable laws.
(B) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part
6 of Subtitle B of Title I of ERISA and of Code Sec. 4980B have been
met with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(C) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid
to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of the Target. All premiums or
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other payments for all periods ending on or before the Closing Date
have been paid with respect to each such Employee Benefit plan which
is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code
Sec. 401(a) and has received, within the last two years, a favorable
determination letter from the Internal Revenue Service.
(E) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in accordance with
PBGC methods, factors, and assumptions applicable to an employee
Pension Benefit Plan terminating on the date for determination.
(F) The Seller has delivered to the Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue
Service, the most recant Form 5500 Annual Report, and all related
trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that any of the
Target and the Controlled Group of Corporations which includes the Target
maintains or ever has maintained or to which any of them contributes, ever
has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is in Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely
or partially terminated or been the subject of a Reportable Event as
to which notices would he required to he filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted or
threatened.
(B) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with
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respect to the administration or the investment of the assets of any
such Employee Benefit Plan (other than routine claims for benefits) is
pending or threatened. None of the Seller and the directors and
officers (and employees with responsibility for employee benefits
matters) of the Target has any Knowledge of any Basis for any such
action, suit, proceeding, hearing, or investigation.
(C) The Target has not incurred, and none of the Seller and the
directors and officers (and employees with responsibility for employee
benefits matters) of the Target has any reason to expect that the
Target will incur, any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any
withdrawal Liability) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(iii) None of the Target and the other members of the Controlled
Group of Corporations that includes the Target contributes to, ever has
contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
(iv) The Target does not maintain or never has maintained or
contributes, ever has contributed, or ever has been required to contribute
to any Employee Welfare Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with Code Sec. 4980B).
(x) GUARANTIES. The Target is not a guarantor or otherwise is liable for
any Liability or obligation (including indebtedness) of any other Person.
(y) ENVIRONMENT, HEALTH, AND SAFETY.
(i) Except as disclosed in the report of the "Level I Assessment of
the Concorde Industries Properties," dated November 15, 1990, prepared by
ERM -- New England, Inc., a copy of which has previously been provided to
the Buyer, to the Knowledge of the Seller: each of the Target and its
respective predecessors and Affiliates has complied with all Environmental,
Health, and Safety Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed
or commenced against any of them alleging any failure so to comply.
Without limiting the generality of the preceding sentence, each of
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the Target and its respective predecessors and Affiliates has obtained and
been in compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which
are contained in, all Environmental, Health, and Safety Laws.
(ii) The Target does not have any Liability (and none of the
Target and its respective predecessors and Affiliates has handled or
disposed of any substances, arranged for the disposal of any substances,
exposed any employee or other individual to any substance or condition, or
owned or operated any property or facility in any manner that could form
the Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Target
giving rise to any Liability) for damage to any site, location, or body of
water (surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental,
Health, and Safety Law.
(iii) All properties and equipment used in the business of the
Target and its respective predecessors and Affiliates have been free of
asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins, dibensofurans, and Extremely Hazardous
Substances.
(a) CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGET. Except as expressly
disclosed in Section 4(o) of the Disclosure Schedule, none of the Seller and its
Affiliates has been involved in any business arrangement or relationship with
the Target within the past 12 months, and none of the Seller and its Affiliates
owns any asset, tangible or intangible, which is used in the business of any of
the Target.
(aa) DISCLOSURE. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 4 not misleading.
(ab) NO SUBSIDIARIES. The Target does not have any Subsidiaries or
ownership interest of any kind in any other business entity.
(ac) LIMITATIONS ON REPRESENTATIONS AND WARRANTIES. Except as expressly set
forth in this Section 4 and in Section 3(a), the Seller makes no representations
or warranties, express or implied, with respect to any matter.
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5. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its good faith reasonable efforts
to take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 7 below).
(b) NOTICES AND CONSENTS. The Seller will cause the Target to, give any
notices to third parties and use its good faith, reasonable efforts to obtain
any third-party consents, that the Buyer may reasonably request in connection
with the matters referred to in Section 4(c) above. Each of the Parties will
(and the Seller will cause the Target to) give any notices to, make any filings
with, and use its best efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies in connection with the
matters referred to in Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above.
(c) OPERATION OF BUSINESS. The Seller will not cause or permit, to the
extent reasonably within its control, the Target to, engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Seller will not
cause or permit, to the extent reasonably within its control, the Target to, (i)
declare, set aside, or pay any dividend or make any distribution with respect to
its capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, except as otherwise contemplated in Section 4(g)(xiii), or (ii) otherwise
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 4(g) above.
(d) PRESERVATION OF BUSINESS. The seller will, to the extent reasonably
within its control, cause the Target to, keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
(e) FULL ACCESS. The Seller will, to the extent reasonably within its
control, cause the Target to permit, representatives of the Buyer to have full
access at all reasonable times, and in a manner so as not to interfere with the
normal business operations of the Target, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to the Target.
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(f) NOTICE OF DEVELOPMENTS. The Seller will give prompt written notice to
the Buyer of any adverse development of which it has actual knowledge causing a
breach of any of the representations and warranties in Section 4 above. Each
Party will give prompt written notice to the others of any adverse development
of which it has actual knowledge causing a breach of any of its own
representations and warranties in Section 3 above. If the Buyer has actual
knowledge of any breach of any representation or warranty of the Seller, the
Buyer will immediately provide the Seller with a detailed notice of such breach.
No disclosure by any Party pursuant to this Section 5(f), however, shall be
deemed to amend or supplement, Annex I, or the Disclosure Schedule or to prevent
or cure any misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. The Seller will not (and the Seller will not cause or
permit the Target to) (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets of,
the Target (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. The Seller shall not vote its Target Shares in favor of
any such acquisition structured as a merger, consolidation, or share exchange.
(h) EFFORT TO RELEASE THE SELLER FROM ITS GUARANTEE OF CERTAIN
INDEBTEDNESS OF THE TARGET. Commencing promptly after the execution of this
Agreement, the Seller and the Buyer will cooperate in an attempt to obtain the
release of the Seller, effective on the Closing Date, from each of its
guarantees of obligations of the Target, as described in Section 4(o) of the
Disclosure Schedule. The Buyer will use good faith, reasonable efforts to
ensure that the Seller is so released including, without limitation, arranging
for the Buyer to undertake the guarantee in the place and stead of the Seller
effective on the Closing Date. After the Closing Date, the Seller may terminate
its guarantees at any time allowable under the provisions of the instruments of
guarantee or applicable law.
(i) CONFIDENTIALITY. The Confidential Disclosure Agreement entered into
by the Target and an Affiliate of the Buyer on August 6, 1993 shall survive the
execution of this Agreement.
6. POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing.
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(a) GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party may reasonably
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8 below).
The Seller acknowledges and agree that from and after the Closing the Buyer and
Rheochem will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort relating to
the Target; provided, however, that no such materials shall be destroyed for a
period of three years after the Closing Date.
(b) LITIGATION SUPPORT. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Target, each of the Parties will cooperate with the other and its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to its documents, books, records (including Tax
Records), agreements, and financial data of any sort, all relating in any way to
the Target to the extent it was in existence prior to the Closing Date, as shall
be necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Section 8 below).
(c) TRANSITION. The Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Target from maintaining the same
business relationships with the Target after the Closing as it maintained with
the Target prior to the Closing. The Seller will refer all customer inquiries
relating to the businesses of the Target to the Buyer and Rheochem from and
after the Closing.
(d) CONFIDENTIALITY. The Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to the Buyer or
Rheochem or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in his or
its possession. In the event that the Seller
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is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, the Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or
waive compliance with the provisions of this Section 6(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Seller is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, the Seller may
disclose the Confidential Information to the tribunal; PROVIDED, HOWEVER,
that the Seller shall use its best efforts to obtain, at the request of the
Buyer, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate. The foregoing provisions shall not
apply to any Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(a) and
Section 4 above shall be true and correct in all respects at and as of the
Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) the Seller shall have, and shall have caused the
Target to have, procured all of the third party consents specified in Section
5(b) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) affect adversely the right of
the Buyer to own the Seller's Target Shares and, together with Rheochem,
Inc., a New Jersey corporation, to control the Target, or (D) affect
adversely the right of the
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Target to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate to the
effect that each of the conditions specified above in Section 7(a)(i)-(iv)
is satisfied in all respects;
(vi) the Seller shall have caused the termination with prejudice of
that certain Shareholders' Agreement of Rheochem Manufacturing Company,
Inc. dated August 27, 1985 by and among Concorde Industries, Inc.,
Rheochem, Inc. and Rheochem Manufacturing Co., Inc., said termination
agreement to be in form and substance as set forth in Exhibit B attached
hereto;
(vii) the relevant parties shall have entered into side agreements in
form and substance as set forth in Exhibits C-1 through C-4 attached hereto
and the same shall be in full force and effect;
(viii) the Buyer shall have received from counsel to the Seller an
opinion in form and substance as set forth in Exhibit D attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
(ix) the Buyer shall have received the resignations, effective as of
the Closing, of each director and officer of the Target other than those
whom the Buyer shall have specified in writing at least five business days
prior to the Closing;
(x) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance
to the Buyer; and
(xi) the relevant parties shall have entered into that certain
Amended and Restated Service Agreement For Wastewater Use and that certain
Amended and Restated Rail Sidinq Agreement in form and substance as set
forth in Exhibits E and F, respectively, attached hereto and the same shall
be in full force and effect.
(xii) on or before June 30, 1994, Buyer shall have obtained from
Rheochem, Inc., a New Jersey corporation ("Rheochem"), such documents,
written agreements and/or other assurances which resolve, to the reasonable
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<PAGE>
satisfaction of Buyer, any and all outstanding business issues or other
matters of concern (the "Business Issues") relating to the Target
Corporation which presently exist between Buyer and Rheochem. If Buyer, in
its sole and absolute discretion, determines that all such Business Issues
have been resolved to the Buyer's satisfaction, then Buyer shall, on or
before June 24, 1994 (the "Notice Date"), so notify Seller of the same and
this condition precedent shall be satisfied. If Buyer, in its sole and
absolute discretion, determines that all Business Issues have not been
resolved to the Buyer's satisfaction, then Buyer shall, on or before the
Notice Date, so notify Seller of the same and this condition precedent
shall have failed and thereafter this Agreement shall terminate and be null
and void and of no further force or effect, and neither Buyer or Seller
shall have any further duties, liabilities or obligations to the other
party hereunder. If Buyer fails to notify Seller on or before the Notice
Date that either the Business Issues have been resolved or have not been
resolved, Buyer shall be deemed to have notified the Seller on or before
the Notice Date that said Business Issues have not been resolved and
thereafter this Agreement shall terminate and be null and void and of no
further force or effect, and neither Buyer or Seller shall have any further
duties, liabilities or obligations to the other party hereunder.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall he true and correct in all respects at and as of the Closing
Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) no action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction,
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judgment, order, decree, ruling, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a certificate to
the effect that each of the conditions specified in Section 7(b)(i)-(iii)
is satisfied in all respects;
(v) the relevant parties shall have entered into side agreements in
form and substance as set forth in Exhibits C-1, C-2, and G and the same
shall be in full force and effect;
(vi) the Seller shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit H attached hereto,
addressed to the Seller, and dated as of the Closing Date; and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
(viii) Unless, prior to the Closing Date, the Seller is released from
the guarantees of indebtedness of the Target referred to in Section 5(j)
above, the Seller shall have received an Indemnity Agreement in the form of
Exhibit I attached hereto, executed and delivered by Buyer, indemnifying
the Seller from any and all payments, liabilities, costs and
expenses,including reasonable attorneys fees, which may be incurred by the
Seller by reason of any claim or demand being made against the Seller after
the Closing under the guarantees of indebtedness of the Target referred to
in Section 5(j) above.
The Seller may waive any condition specified in this Section 7(b) if it executes
a writing so stating at or prior to the Closing.
B. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Seller contained in Section 4(a)-(i) and
Section 4(k)-(ab), together with all of the representations of the parties
contained in Section 3, shall survive the Closing hereunder (even if the damaged
party knew or had reason to know of any misrepresentation or breach of warranty
at the time of Closing) and continue in full force and effect for a period of
three years thereafter. All of the other representations and warranties of the
Parties contained in this Agreement (including the representations and
warranties of the
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Seller contained in Section 4(3) above) shall survive the Closing (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations).
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) In the event the Seller breaches (or in the event any third
party alleges facts that, if true, would mean the Seller has breached) any
of its representations, warranties, and covenants contained herein (other
than the covenants in Section 2(a) above and the representations and
warranties in Section 3(a) above), and, if there is an applicable survival
period pursuant to Section 8(a) above, provided that the Buyer makes a
written claim for indemnification against the Seller pursuant to Section
10(h) below within such survival period, then the Seller agrees, subject to
the limitation of 8(b)(iv), below, to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
(ii) In the event the Seller breaches (or in the event any third
party alleges facts that, if true, would mean the Seller has breached) any
of its covenants in Section 2(a) above or any of their representations and
warranties in Section 3(a) above, and, if there is an applicable survival
period pursuant to Section 8(a) above, provided that the Buyer makes a
written claim for indemnification against the Seller pursuant to Section
10(h) below within such survival period, then the Seller agrees, subject to
the limitation of 5 8(b)(iv), below, that the breaching (or alleged
breaching) Party shall indemnify the Buyer from and against the entirety of
any Adverse Consequences the Buyer may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences the Buyer
may suffer after the end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
(iii) The Seller agrees, subject to the limitation of Section
8(b)(iv), below, to indemnify the Buyer from and against the entirety of
any Adverse Consequences the Buyer may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any Liability of the Target
for the unpaid Taxes of any Person (other than the Target) under Treas.
Reg. Section 1.1502-6 (or any similar provision of state,
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local, or foreign law), as a transferee or successor, by contract, or otherwise.
(iv) The Seller's obligation to indemnify the Buyer pursuant to
Section 8(b)(i,ii, and iii) and Section 8(g) from and against any and all
Adverse Consequences shall not exceed $2,000,000, including any and all
court costs and attorney fees incurred by Buyer in prosecuting a claim for
indemnification.
(v) the Seller shall have no obligation under Section 8(b)(i,ii, or
iii) of this Agreement to indemnify the Buyer from and against any Adverse
Consequences unless and until the Buyer has suffered Adverse Consequences
in excess of a $200,000 aggregate threshold (at which time the Seller will
be obligated to indemnify the Buyer from and against all such Adverse
Consequences relating back to the first dollar).
(vi) The Buyer shall not be entitled to make any claim for
indemnification Section 8(b)(i,ii,iii) of this Agreement to the extent that
the matter to which it relates:
(A) has been or is made good or is otherwise compensated for
without cost to the Buyer or the Target;
(B) is made good or is otherwise compensated by insurance (or
would have been compensated under the terms of any of the Target's
claims based insurance coverage in effect as of the date of Closinq)
to the Buyer or the Target;
(C) is an alleged loss (other than one that would not have
arisen but for any matter or thing done, or omitted to be done, by
Seller on or before Closing) in respect of lost goodwill or possible
business consequential loss as a result of this Agreement or the
transactions effected by it;
(D) arises wholly or partly from an omission to act by the
Buyer required by law after the Closing;
(E) arises as result of the passing or amendment of any
legislation after the Closing Date with retrospective effect;
(F) would not have arisen b[cad 170]ut for a voluntary act which:
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(I) is carried out by the Buyer (or persons deriving title
from the Buyer) after Closing otherwise than in the Ordinary
Course of Business;
(II) is carried out at the request of or with the approval,
concurrence or assistance of the Buyer.
For purposes of this Section 8(b)(vi)(E), "voluntary" shall mean an
act other than any act which is required to be taken by law or which,
if taken, would constitute prudent business practice, including but
not limited to the execution and delivery of affidavits, certificates
and other representations.
(vii) The Seller agrees to indemnify the Buyer from and against the
entirety of any and all claims, losses, damages, liabilities, costs or
expenses including, without limitation, any interest, fines, penalties,
criminal or civil judgments or authorized settlements, court costs,
reasonable attorneys' and expert witnesses' fees, reasonable accountant's
fees, disbursements and expenses, and any indemnification or similar
payments required to be made, that the Target may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any Liability
of the Target with respect to those certain conditions disclosed in
Sections 6.1 and 13 in that certain report of the "Level I Assessment of
Three Concorde Industries Properties", dated November 15, 1990, prepared by
ERN--New England, Inc. Other than the foregoing, Buyer acknowledges and
agrees that Seller shall have no obligation to indemnify Buyer with respect
to any conditions disclosed in the above referenced report.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER. In the
event the Buyer breaches (or in the event any third party alleges facts
that, if true, would mean the Buyer has breached) any of its
representations, warranties, and covenants contained herein, and, if there
is an applicable survival period pursuant to Section 8(a) above, provided
that the Seller makes a written claim for indemnification against the Buyer
pursuant to Section 10(h) below within such survival period, then the Buyer
agrees to indemnify the Seller from and against the entirety of any Adverse
Consequences the Seller may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences the Seller may
suffer after the end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
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(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give
rise to a claim for indemnification against any other Party or Parties (the
"INDEMNIFYING PARTY OR PARTIES") under this Section 8, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
PROVIDED, HOWEVER, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party or
Parties from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party or Parties thereby is(are) prejudiced.
(ii) The Indemnifying Party or Parties(together) will have the right
to defend the Indemnified Party against the Third Party Claim with counsel
of its choice satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party or Parties notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party or Parties will indemnify the
Indemnified Party from and against the entirety of any Adverse Consequences
the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party or Parties provides the Indemnified Party with evidence
acceptable to the Indemnified Party that the Indemnifying Party or Parties
will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party
Claim involves only money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential custom or practice
adverse to the continuing business interests of the Indemnified Party, and
(E) the Indemnifying Party or Parties conducts the defense of the Third
Party Claim actively and diligently.
(iii) So long as the Indemnifying Party or Parties is(are) conducting
the defense of the Third Party Claim in accordance with Section 8(d)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party Claim,
(B) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party or Parties, and (C) the
Indemnifying Party or Parties will not consent to the entry of any
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judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party.
(iv) In the event any of the conditions in Section 8(d)(ii) above is
or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Party or Parties will reimburse the Indemnified Party promptly
and periodically for the costs of defending against the Third Party Claim
(including attorneys' fees and expenses), and (C) the Indemnifying Party or
Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 8.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this Section 8. All
indemnification payments under this Section 8 shall be deemed adjustments to the
Purchase Price.
(f) RECOUPMENT UNDER OTHER BUYER OBLIGATIONS. Once the aggregate threshold
of Adverse Consequences suffered by Buyer is reached pursuant to Section
8(b)(v) hereof, the Buyer shall have the option of recouping all or any part of
any Adverse Consequences it may suffer (in lieu of seeking any indemnification
to which it is entitled under this Section 8) by notifying the Seller that the
Buyer, its Affiliate, or the Target, as the case may be, is reducing the
principal amount outstanding to Seller under any Other Buyer Obligations. This
reduction shall affect the timing and amount of payments or other direct or
indirect monetary obligations required under the Other Buyer Obligations in the
same manner as if the Buyer, its Affiliate, or the Target had made a permitted
prepayment (without premium or penalty) or had fulfilled a direct or indirect
monetary obligation thereunder. Subsequent to Buyer's notification to Seller of
its intent to exercise its rights pursuant to this Section 8 (f), any and all
reductions in the principal amount of any Other Buyer Obligation(s) shall be
effected (and thereafter determined) by depositing in escrow with the Escrow
Agent pursuant to the terms and conditions of that certain Escrow Agreement
attached hereto as Exhibit J, to be executed on the Closing Date by the parties
thereto, any and all amounts then or thereafter becoming due to Seller as a
result of the Other Buyer Obligations.
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(g) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant. The Seller hereby agrees it will not make any claim for
indemnification against the Target by reason of the fact that any individual
associated with the Seller was a director, officer, employee, or agent of the
Seller or was serving at the request of the Seller as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim or demand brought by the Buyer
against the Seller (whether such action, suit, proceeding, complaint, claim, or
demand is pursuant to this Agreement, applicable law, or otherwise).
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this Agreement as
provided below:
(i) the Buyer and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Seller at any time prior to the Closing (A) in the event the Seller
has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, the Buyer has notified the
Seller of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if the Closing shall
not have occurred on or before May 31, 1994, by reason of the failure of
any condition precedent under Section 7(a) hereof (unless the failure
results primarily from the Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement);
(iii) the Buyer may terminate this Agreement in accordance with terms
and conditions of Section 7(a) (xii) hereof;
(iv) the Seller may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (A) in the event the Buyer
has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, the Seller has notified the
Buyer of the breach, and the breach has continued without cure for a period
of 30 days after the notice of
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breach or (B) if the Closing shall not have occurred on or before June 30,
1994, by reason of the failure of any condition precedent under Section
7(b) hereof (unless the failure results primarily from any of the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);
(v) if, prior to Closing, the Buyer notifies the Seller, in
accordance with Section 5(f), that it has, other than by reason of any
matter or condition described, disclosed or set forth in this Agreement or
in the Disclosure Schedule, acquired actual knowledge of any breach of any
representation or warranty by the Seller, the Seller, may, at its option,
(A) cure the breach, to the extent that it is possible to do so, either
before or after the Closing Date; (B) proceed with Closing, subject to the
Seller's obligation of indemnification pursuant to Section 8 ; or (C) if
the Adverse Consequences of all such breaches are reasonably likely to
aggregate more than $$50,000, terminate this Agreement.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party (except for any Liability of any Party then in breach).
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the Buyer and
the Seller; PROVIDED, HOWEVER, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
tradinq agreement concerning its publicly-traded securities (in which case
the disclosing Party will use its best efforts to advise the other Parties
prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties with
respect to the subject matter hereof and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.
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(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the Buyer and the Seller; PROVIDED, HOWEVER,
that the Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more
of its Affiliates to perform its obligations hereunder (in any or all of
which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall he deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
IF TO THE SELLER. COPY TO:
Concorde Industries, Inc. O.Y. Uponor, Ab.
1600 Stout Street Kimmeltic 3
Suite 1710 Fin -- 02110 Espoo
Denver, Colorado 80202 Attention:Corporate
Attention: Lawrence J. Ciancia Counsel
and to:
H. Gregory Austin, Esq.
Holland & Hart
555 Seventeenth Street
Suite 2900
Denver, Colorado 80202
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<PAGE>
IF TO THE BUYER: COPY TO:
ABI Corporation James F. Tenney
900 Market Street 200 Galleria Pkwy., NW
Suite 200 Suite 500
Wilmington, Delaware 19801 Atlanta, Georgia
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to he delivered by giving the other Parties
notice in the manner herein set forth.
(i) GOVERNNG LAW. This Agreement shall he governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Aqreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(1) EXPENSES. Each of the Parties (excluding the Target) will bear its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Seller agrees
that the Target has not borne or will bear any of the Seller's costs and
expenses (including any of their legal fees and expenses) in
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connection with this Agreement or any of the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity), which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. THE EXHIBITS,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction ever the
Parties and the matter (subject to the provisions set forth in Section 10(p)
below), in addition to any other remedy to which they may be entitled, at law or
in equity.
(p) SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Wilmington, Delaware, or
Denver, Colorado in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each Party also agrees not to bring
any action or proceeding arising out of or relatinq to this Agreement in any
other court. Each of the Parties waives any
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defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives, any bond, surety, or other security that might be required
of any other Party with respect thereto. Any Party may make service on any
other Party by sending or delivering a copy of the process to the Party to be
served at the address and in the manner provided for the giving of notices in
Section 10(h) above. Nothing in this Section 10(p), however, shall affect the
right of any Party to serve legal process in any other manner permitted by law
or at equity. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may he enforced by suit on the
judgment or in any other manner provided by law or at equity.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
"BUYER":
ABI Corporation
Attest:
By:
/s/Illegible /s/Illegible
- ----------------------- -----------------------
Secretary Title: President
--------------------
(CORPORATE SEAL)
"SELLER":
Concorde Industries, Inc.
Attest:
By: /s/Illegible
-----------------------
Secretary: /s/Illegible
------------------------- Title: President
--------------------
(CORPORATE SEAL)
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----------------------------
SERVICE AGREEMENT
----------------------------
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Clause Page
1. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3. Duties of Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
5. Travelling Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
6. Car. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
7. Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
8. Medical and Sickness . . . . . . . . . . . . . . . . . . . . . . . . . . .3
9. Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
10. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . .4
11. Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . .5
12. Codes of Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
13. Termination of Appointment . . . . . . . . . . . . . . . . . . . . . . . .6
14. Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
15. Protective Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . .8
16. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
17. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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THIS AGREEMENT is made as of July 1, 1995 BETWEEN:
(1) ASTOR-STAG LIMITED (Regional No. 146739) whose registered office is at
Tavistock Road, West Drayton, Middlesex UB7 7RA (the "Company");
(2) JOSEPH CHARLES HOUSSA of Troisfontaines 11, 4845 Sart-Lez Spa, Jalhay,
Belgium (the "Executive"); and
(3) MSC holdings INC. of c/o Aurora Capital Partners, 1800 Century Park East
Suite 1000, L.A., CA 90067 (the "Parent").
IT IS AGREED as follows:
1. INTERPRETATION
(1) In this agreement:
"Associated Company" means:
(a) a company which is not a Subsidiary of the Parent but whose issued
equity share capital (as defined in section 744 of the Companies Act
1985) is owned as to at least 20 per cent by the Parent or one of its
Subsidiaries; and
(b) a Subsidiary of a company within (a) above;
"Board" means the board of directors of the Company;
"Group" means the Parent and its subsidiaries and Associated Companies for
the time being and "Group Company" means any one of them;
"Recognised Investment Exchange" has the same meaning as in section 207 of
the Financial Services Act 1986;
"Subsidiary" means a subsidiary within the meaning of section 736 of the
Companies Act 1985; and
"Working Day means a day other than a Saturday, Sunday or bank or other
public holiday in England.
(2) References in this agreement to a person include a body corporate and an
unincorporated association of persons and references to a company include
any body corporate.
(3) Any reference in this agreement to a statutory provision includes any
statutory modification or re-enactment of it for the time being in force.
(4) Subclauses (1) to (3) above apply unless the contrary intention appears.
(5) The headings in this agreement do not affect its interpretation.
(6) Where appropriate, references to the Executive include his personal
representatives.
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(7) The terms set out in the Schedule in accordance with the requirements of
the Employment Protection (Consolidation) Act 1978 form part of this
agreement.
2. APPOINTMENT
The Company shall employ the Executive and the Executive shall serve the
Company as Director - Technical Operations of the Company and Petrowax PA
Inc. (a subsidiary of the Parent) or in such other capacity consistent with
his position as the Company may from time to time require, on the terms set
out in this agreement (the "Appointment").
3. DUTIES OF EXECUTIVE
(1) The Executive shall use his best endeavours to promote and protect the
interests of the Group and shall not do anything which is harmful to those
interests.
(2) The Executive shall diligently and faithfully perform such duties and
exercise such powers as may from time to time be assigned to or vested in
him in relation to the conduct and management of the affairs of the Group
by the Board.
(3) The Executive shall give to the Board such information regarding the
affairs of the Group as it shall require and shall comply with all proper
instructions of the Board.
(4) The Executive shall (unless prevented by ill-health or accident or
otherwise directed by the Board) devote such of his time during normal
business hours to the duties of the Appointment and such additional time as
is necessary for the proper fulfilment of those duties.
(5) The Executive shall not accept any appointment to any office in relation to
any body, whether corporate or not, or directly or indirectly be interested
in any manner in any other business which is or may be competitive with the
business of a Group Company except:
(a) as holder or beneficial owner (for investment purposes only) of any
class of securities in a company if those securities are listed or
dealt in on a Recognised Investment Exchange and if the Executive
(together with his spouse, children parents and parents' issue)
neither holds nor is beneficially interested in more than five per
cent of the securities of that class; or
(b) with the consent in writing of the Company which may be given subject
to any terms or conditions which the Company requires.
(6) The Executive shall not resign as an officer of any Group Company, except
at the request or direction of the Board.
(7) The duties of the Appointment shall be performed at the Company's premises
in West Drayton and elsewhere in the United Kingdom and abroad as may be
required by the Company.
4. REMUNERATION
(1) The Company shall pay or shall procure that a Group Company shall pay to
the Executive a salary at the rate of L 90,000 per annum, payable in
English and Belgian currency as agreed between the Company and the
Executive.
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(2) The Executive's salary shall be reviewed by the Board at least once in
every year, the first review to be on or about 1st July, 1996. The Company
shall not reduce the Executive's salary without his prior written consent.
(3) The Executive's salary shall accrue from day to day and be payable by equal
instalments in arrear on the last day of every month and shall be inclusive
of any fees receivable by the Executive as a director of any Group Company.
(4) In addition to the above salary the Executive shall be entitled to be paid
an annual bonus of up to 50% of the above salary which shall be dependent
on the performance of the companies for which he is responsible. The
Executive and the Company by separate agreement will agree the basis on
which such a bonus becomes payable at the commencement of each financial
year of the Company.
5. TRAVELLING EXPENSES
The Company shall reimburse the Executive (on production of such evidence
as it may reasonably require) the amount of all travelling and other
expenses properly and reasonably incurred by him in the discharge of his
duties.
6. CAR
(1) The Company shall provide the Executive with a suitable car for his use in
the performance of his duties and the Executive and his wife may use the
car for their private purposes.
(2) The Company shall pay all normal servicing, insurance and running expenses
in relation to the car and all fuel expenses incurred by the Executive.
(3) The Executive shall take good care of the car and shall observe the terms
and conditions of the insurance policy relating to it.
(4) The Executive shall inform the Company immediately if he is disqualified
from holding a driving license.
7. PENSIONS
The Company agrees to maintain for the benefit of the Executive a pension
scheme which will provide for the Executive no less than the benefits to
which the Executive is prospectively entitled under the scheme in which he
participates as at the date of this agreement.
8. MEDICAL AND SICKNESS
(1) The Executive shall be paid in full during any period of absence from work
due to sickness or injury not exceeding 6 months in any period of 12 months
subject to the provisions of clause 13 and to the production of
satisfactory evidence from a registered medical practitioner in respect of
any period of absence in excess of five consecutive Working Days. The
Executive's salary during any period of absence due to sickness or injury
shall be inclusive of any statutory sick pay to which he is entitled and
the Company may deduct from his salary the amount of any social security
benefits he may be entitled to receive.
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(3) If the Executive is incapable of performing his duties by reason of injury
sustained wholly or partly as a result of negligence, nuisance or breach of
any statutory duty on the part of a third party and the Executive recovers
any amount by way of compensation for loss of earnings from that third
party, he shall pay to the Company a sum equal to the amount recovered or,
if less, the amount paid to him by the Company under subclause (2) above in
respect of the relevant period of absence as a result of that injury.
(4) The Company shall provide permanent health insurance for the benefit of the
executive to a level that will provide the Executive (subject to the rules
of the Scheme) with at least two thirds of his salary in the event of
serious incapacity as defined by the terms of the relevant scheme. The
permanent health insurance provided by the Company to the Executive shall
offer in all respects benefits that are at least equivalent to those
enjoyed by the Executive under the Scheme in which he participates at the
date of this Agreement.
9. HOLIDAYS
(1) The Executive shall be entitled to 20 Working Days' holiday with pay (plus
one additional day's holiday for each five years' completed service since
September 1970) in every calendar year at times convenient to the Company.
(2) Any entitlement to holiday remaining at the end of any calendar year may be
carried forward to the next calendar year but no further. The entitlement
to holiday (and on termination of employment to holiday pay in lieu of
holiday) accrues pro rata throughout each calendar year (disregarding
fractions of days).
10. CONFIDENTIAL INFORMATION
(1) The Executive shall not make use of or divulge to any person, and shall use
his best endeavours to prevent the use, publication or disclosure of , any
information of a confidential or secret nature:
(a) concerning the business of the Company or any Group Company and which
comes to his knowledge during the course of or in connection with his
employment or his holding any office within the Group from any source
within the Company or any Group Company: or
(b) concerning the business of any person having dealings with the Company
or any Group Company and which is obtained from any person outside the
Company or any Group Company who has required the Company or any Group
Company to keep any such information confidential.
(2) This clause shall not apply to information which is:
(a) used or disclosed in the proper performance of the Executive's duties
or with the prior written consent of the Company; or
(b) ordered to be disclosed by a court of competent jurisdiction or
otherwise required to be disclosed by law.
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(3) This clause shall continue to apply after the termination of the
Appointment (whether terminated lawfully or not) without limit of time.
(4) Each of the restrictions in each paragraph or subclause above shall be
enforceable independently of each of the others and its validity shall not
be affected if any of the others is invalid. If any of those restrictions
is void but would be valid if some part of the restriction were deleted,
the restriction in question shall apply with such modification as may be
necessary to make it valid.
11. INTELLECTUAL PROPERTY
(1) In this clause "Intellectual Property Right" means a formula, process,
invention, improvement, utility model, trade mark, service mark, business
name, copyright, design right, patent, know-how, trade secret and any other
intellectual property right of any nature whatsoever throughout the world
(whether registered or unregistered and including all applications and
rights to apply for the same) which:
(a) relates to or is useful in connection with the business or any product
or service of a Group Company; and
(b) is invented, developed, created or acquired by the Executive (whether
alone or jointly with any other person) during the period of the
Appointment.
(2) Subject to the provisions of the Patents Act 1977, the entire interest of
the Executive in any Intellectual Property Right (whether or not it is
vested in the Company pursuant to subclause (2) above or otherwise) and the
Executive shall not use, disclose to any person or exploit any Intellectual
Property Right belonging to the Company without the prior written consent
of the Company.
(3) The Executive shall promptly communicate in confidence to the Company full
particulars of any Intellectual Property Right (whether or not it is vested
in the Company pursuant to subclause (2) above or otherwise) and the
Executive shall not use, disclose to any person or exploit any Intellectual
Property Right belonging to the Company without the prior written consent
of the Company.
(4) With respect to any Intellectual Property Right which is not vested in the
Company pursuant to subclause (2) above or otherwise, the Executive shall
negotiate in good faith with the Company with a view to the Company
acquiring all the Executive's right, title and interest in that
Intellectual Property Right and, unless the Company has declined in writing
to negotiate or acquire such Intellectual Property Right, the Executive
shall not jeopardise the grant of any registration in respect of that
Intellectual Property Right by any public or non-confidential disclosure
for a period of three months from the date on which full particulars of it
are communicated to the Company.
(5) The Executive shall, at the request and expense of the Company, prepare and
execute such instruments and do such other sets and things as may be
necessary or desirable to enable the Company or its nominee to obtain
protection of any Intellectual Property Right vested in the Company in such
parts of the world as may be specified by the Company or its nominee and to
enable the Company to exploit any Intellectual Property Right vested in the
Company to best advantage.
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(6) The Executive hereby irrevocably appoints the Company to be his attorney in
his name and on his behalf to sign, execute or do any instrument or thing
and generally to use his name for the purpose of giving to the Company or
its nominee the full benefit of the provisions of this clause and in favour
of any third party a certificate in writing signed by any director or the
secretary of the Company that any instrument or act falls within the
authority conferred by this clause shall be conclusive evidence that such
is the case.
(7) The Executive hereby waives all of his moral rights (as defined in the
Copyright Designs and Patents Act 1988) in respect of any act of the
Company and any act of a third party done with the Company's authority in
relation to any Intellectual Property Right which is or becomes the
property of the Company.
12. CODES OF CONDUCT
The Executive shall comply with all codes of conduct from time to time
adopted by the Board.
13. TERMINATION OF APPOINTMENT
(1) The appointment shall be deemed to commence on 1st July, 1995. The Company
may terminate the Appointment by giving to the Executive at least 24
months' notice in writing and the executive may terminate the Appointment
by giving to the Company at least six months' notice in writing, such
notice, whether given by the Company or the Executive expiring at any time
on or after 30th June, 1998.
(2) If the Executive:
(a) becomes of unsound mind or is, or may be, suffering from mental
disorder and either:
(i) he is admitted to hospital for treatment under the Mental Health
Act 1983; or
(ii) an order is made by any competent court for his detention or for
the appointment of a receiver, curator bonis or other person to
exercise powers with respect to his property or affairs; or
(b) is unable properly to perform his duties by reason of ill-health,
accident or otherwise for a period aggregating at least 6 months in
any period of 12 consecutive months; or
(c) commits any serious breach or after warning in writing repeats or
continues any material breach of his obligations under this agreement
(including any consent granted under it(; or
(d) is guilty of serious misconduct or any other conduct which affects or
is likely to affect prejudicially the interests of the Company or the
Group or is convicted of an arrestable offence other than a road
traffic offence for which a non-custodial penalty is imposed); or
(e) becomes bankrupt or makes any arrangement or composition with his
creditors; or
<PAGE>
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(f) is disqualified from being a director of any company by reason of an
order made by any competent court, or
(g) is guilty of any material breach or non-observance of any code of
conduct referred to in clause 12,
the Company may (whether or not any notice of termination has been given
under subclause (1) above) by written notice to the Executive terminate the
Appointment with immediate effect but a notice under paragraph (b) above
may be given by the Company to the Executive only within 90 days after the
end of any period or periods of disability referred to in that paragraph.
Provided always as regards paragraphs (a) and (b) above that if and so long
as the Executive shall be entitled (subject to his remaining in employment
with the Company) to receive benefits under the permanent health insurance
scheme referred to in Clause 8(4) hereof by virtue of the unsoundness of
mind, illness or injury which shall have given rise to the termination of
the employment of the Executive hereunder, the Company shall after such
termination offer to re-engage the Executive in such capacity and on such
terms and conditions as the Company sees fit for the purpose of allowing
the Executive either immediately or at a future date to become a claimant
under the terms and conditions of the relevant permanent health insurance
scheme for any replacement scheme) from time to time in force and to
receive benefits under the said policy at the same level as he would have
been entitled to receive had his employment not been terminated.
The Company shall be entitled to set-off and/or deduct from any sums paid
to the Executive during any absence due to ill health or incapacity the
amount of any permanent health insurance and/or statutory sick pay and/or
sickness related benefit to which the Executive is entitled under the rules
of the relevant health insurance scheme or Social Security legislation as
appropriate, pr for the time being in force.
(3) During any period of notice of termination of the Appointment (whether or
not such notice has been given by the Company or the Executive) the Company
may require the Executive to take any holiday to which the Executive is
entitled under clause 9 at such time or times as the Company may decide.
(4) The Company may during any period after notice of termination of the
Appointment has been given by the Company or the Executive suspend any of
the Executive's powers or duties for a period not exceeding six months
where the Executive leaves the Company's employment in circumstances where
it is reasonable for the Company to believe that he shall be interested or
concerned in a business, company or firm carrying on, or about to commence,
a business which is, or is likely to be, competitive with any part of the
business of any Group Company with which the Executive was engaged or
concerned in the previous 12 months before the suspension started. In
addition or alternatively, the Company may during the whole or any part of
such period require the Executive to perform duties (including any modified
duties arising from an exercise by the Company of its rights under clause
3(2) at such locations as the Company may require consistent with clause
3(7). Throughout any such period of suspension the Executive's salary and
other benefits to which he is entitled under this agreement shall continue
to be paid or provided by the Company. At any time during such period the
Executive shall, at the request of the Board, immediately resign, without
claim for compensation from office, as a director of the Company, the
Parent and any Group Company and from any other office held by him in the
Company or any Group Company.
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(5) On the termination of the Appointment in any way (whether lawfully or
otherwise) the Executive shall immediately:
(a) resign all offices held by him in any Group Company (without prejudice
to the rights of any party arising out of this agreement or the
termination of the Appointment).
(b) return the car and its keys to the Company at such place as it shall
nominate for the purpose; and
(c) deliver to the Company Secretary all property in his possession,
custody or under his control belonging to any Group Company including
(but not limited to) business cards, credit and charge cards, security
and computer passes, original and copy documents or other media on
which information is held in his possession relating to the business
or affairs of any Group Company.
(6) If the Executive does not resign any office held by him in any Group
Company when required to do so under this agreement the Company is
irrevocably authorised to appoint some person in his name and on his behalf
to do all such things and execute all such documents as may be necessary
for or incidental to giving effect to his resignation of that office.
(7) With effect from the date of termination of the Appointment, all the rights
and obligations of the parties under this agreement shall cease except for
those which are expressed to continue after that date and except in
relation to any breach of any provision of this agreement before that date.
Termination of the Appointment shall not prejudice any other rights of the
Company.
14. CHANGE OF CONTROL
If the person or persons having the right to control, directly or
indirectly, a majority of the votes which may ordinarily be cast at general
meetings of the Company or the right to control the composition of the
Board, cease to have those rights, the Executive may by three months'
written notice to the Company terminate the Appointment and in such a case
the Executive shall be entitled to be compensated for the loss of 12
months' salary and benefits at the level applicable at the time when notice
is given.
15. PROTECTIVE COVENANTS
(1) In this Clause:
(a) "Termination Date" means the date on which the Appointment terminates;
(b) "person" includes any company, firm, organisation or other entity; and
(c) references to a Group Company include its successors in business where
the succession occurs after the Termination Date.
(2) The Executive covenants with the Company (for itself and as trustee for
each Group Company) that he shall not for a period of 24 months after the
Termination Date be concerned in any business which is carried on in the
United Kingdom, Western Europe, the United States of America or any other
country in which the Company or any Group Company has conducted
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business in the 12 months prior to the Termination Date and which is
competitive or likely to be competitive with any business carried on at the
Termination Date by the Company or a Group Company and with which the
Executive was actively involved during the course of his employment during
the 12 months ending on the Termination Date. For this purpose, the
Executive is concerned in a business if:
(i) he carries it on as principal or agent; or
(ii) he is a partner, director, employee, secondee, consultant or agent
in, of or to any person who carries on the business; or
(iii) he has any direct or indirect financial interest ( as shareholder or
otherwise) in any person who carries on the business; or
(iv) he is a partner, director, employee, secondee, consultant or agent
in, of or to any person who has a direct or indirect financial
interest (as shareholder or otherwise) in any person who carries on
the business;
disregarding any financial interest of a person in securities which are
listed or dealt in on any Recognised Investment Exchange if that person,
the Executive and any person connected with him (within the meaning of
section 839 of the Income and Corporation Taxes Act 1988) are interested in
securities which amount to less than five per cent of the issued securities
of that class and which, in all circumstances, carry less than five per
cent, of the voting rights (if any) attaching to the issued securities of
that class.
(3) The executive covenants with the Company (for itself and as trustee for
each Group Company) that he shall not directly or indirectly on his own
account or on behalf of or in conjunction with any person for a period of
24 months after the Termination Date (except on behalf of the Company or a
Group Company) canvass or solicit business or custom for goods of similar
type to those being manufactured or dealt in or services similar to those
being provided by the Company or a Group Company at the Termination Date,
and with which the Executive was actively involved in the course of his
employment during the 12 months ending on the Termination Date, from any
person who has been at any time during the 12 months ending on the
Termination Date a customer of the Company or a Group Company and with whom
the Executive was actively involved in the course of his employment during
the 12 months ending on the Termination Date.
(4) The Executive covenants with the Company (for itself and as trustee for
each Group Company) that he shall not directly or indirectly on his own
account or on behalf of or in conjunction with any person for a period of
24 months after the Termination Date induce or attempt to induce any
supplier of the Company or a group Company, with whom the Executive was
actively involved in the course of his employment during the 12 months
ending on the Termination Date, to cease to supply, or to restrict or vary
the terms of supply to, the Company or the Group Company or otherwise
interfere with the relationship between such a supplier and the Company or
the Group Company.
(5) The Executive covenants with the Company (for itself and as trustee for
each Group Company) that he will not directly or indirectly on his own
account or on behalf of or in conjunction with any person for a period of
24 months after the Termination Date induce or attempt to induce any
employee of the Company or Group Company who is engaged in any business or
activity
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carried on by the Company or Group Company at the Termination Date, and
with whom the Executive during the 12 months ending on the Termination Date
had material dealings in the course of his employment, to leave the
employment of the Company or Group Company (whether or not this would be a
breach of contract by the employee).
(6) Each of the restrictions in each paragraph or subclause above shall be
enforceable independently of each of the others and its validity shall not
be affected if any of the others is invalid. If any of those restrictions
is void but would be valid if some part of the restriction were deleted,
the restriction in question shall apply with such modification as may be
necessary to make it valid.
(7) The Executive acknowledges that the provisions of this clause are no more
extensive than is reasonable to protect the Company and the Group.
16. GENERAL
(1) Save in respect of certain business related benefits enjoyed by the
Executive as a consequence of his employment at the date of this agreement,
details of which have been provided to the Company, as from the effective
date of the Appointment all other agreements or arrangements between the
Executive and any Group Company relating to the employment of the Executive
shall cease to have effect.
(2) The Parent executes this agreement for the purpose of irrevocably and
unconditionally guaranteeing to the Executive the performance of the
obligations of the Company under this agreement.
(3) This agreement shall be governed by and construed in accordance with
English law.
17. NOTICES
(1) Any notice or other document to be served under this agreement may, in the
case of the Company, be delivered or sent by first class post or telex or
facsimile process to the Company at its registered office for the time
being and, in the case of the Executive, may be delivered to him or sent by
first class post to his usual or last known place of residence.
(2) Any such notice or other document shall be deemed to have been served:
(a) if delivered, at the time of delivery;
(b) if posted, at 10:00 a.m. on the second Working Day after it was put
into the post; or
(c) if sent by telex or facsimile process, at the expiration of two hours
after the time of despatch, if despatched before 3:00 p.m. on any
Working Day, and in any other case at 10:00 a.m. on the Working Day
following the date of despatch.
(3) In providing such service it shall be sufficient to prove that delivery was
made or that the envelope containing such notice or other document was
properly addressed and posted as a pre-paid first class letter or that the
telex or facsimile message was properly addressed and despatched as the
case may be.
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AS WITNESS the hands of the Executive and the duly authorised representatives of
the Company and the Parent on the date which appears first on page 1.
<PAGE>
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THE SCHEDULE
The following constitutes the statement of the particulars of the Executive's
employment issued pursuant to the Employment Protection (Consolidation) Act
1978. The particulars are those which apply on the date of this agreement.
Name of Employer - the Company as defined on page 1 above.
Name of employee - the Executive as defined on page 1 above.
Date of commencement of continuous period of employment (if different from
above) - the Executive's previous employment with the Company shall be
treated as part of his continuous period of employment. Accordingly the
Executive's continuous period of employment commenced in September 1970.
Scale or rate of remuneration or method of calculating remuneration - see
clause 4.
Intervals at which remuneration is paid - monthly - see clause 4.
Hours of work - there are no fixed hours of work - see clause 3(4).
Holidays (including public holidays) and holiday pay - see clause 9.
Sickness or injury and sick pay - see clause 8.
Pension - see clause 7. A contracting out certificate within the meaning
of Part III of the Pension Schemes Act 1993 is in force.
Notice - see clause 13(1).
Job title - Director - Technical Operations of the Company and Vice
President - CTO of Petrowax PA Inc.
Place of work - see clause 3(7).
Collective agreements - the Company is not a party to any collective
agreement which affects the Executive's employment.
Working overseas - the Executive may be required to work overseas for
periods exceeding one month but there are currently no particulars to be
entered in this regard.
Discipline and grievance procedure - there are no specific disciplinary
rules applicable to the Executive's employment. If the Executive is
dissatisfied with any disciplinary decision or seeks to redress any
grievance relating to his employment, he should apply in writing to the
Board and the Board shall endeavour to propose a solution within 14 days.
<PAGE>
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SIGNED by /s/ C.R. SPALTON )
on behalf of ASTOR-STAG LIMITED ) /s/ C.R. Spalton
in the presence of: /s/ illegible )
/s/ illegible
SIGNED by JOSEPH CHARLES )
HOUSSA ) /s/ illegible
in the presence of: /s/ Adrian Browne )
/s/ Adrian Browne
SIGNED by RICHARD K ROEDER )
on behalf of MSC HOLDINGS INC. ) /s/ Richard K. Roeder
in the presence of: /s/ illegible )
/s/ illegible
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on July 1, 1995 by
and between John F. Gottshall, an individual ("Executive"), and Petrowax PA
Inc., a Delaware corporation (the "Company").
l. EMPLOYMENT BY THE COMPANY AND TERM.
(a) Full Time and Best Efforts. Subject to the terms set forth herein, the
Company agrees to employ Executive as Chief Financial Officer, and in such other
executive capacities as may be requested from time to time by the Board of
Directors of the Company or a duly authorized committee thereof, and Executive
hereby accepts such employment. Executive shall serve, if elected, as a member
of the Board of Directors of the Company, and shall render such other services
for the Company and corporations controlled by, under common control with or
controlling, directly or indirectly, the Company, and to successor entities and
assignees of the Company ("Company's Affiliates") as the Company may from time
to time reasonably request and as shall be consistent with the duties Executive
is to perform for the Company and with Executive's stature and experience.
During the term of his employment with the Company, Executive will devote his
full time and exclusive attention to, and use his best efforts to advance, the
business and welfare of the Company, and will not engage in any other employment
or business activities for any direct or indirect remuneration that would be
harmful or detrimental to, or that may compete with, the business and affairs of
the Company.
(b) DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then current title,
consistent with the Bylaws of the Company and as required by the Company's Board
of Directors (the "Board") and the officers to whom the Executive reports.
(c) COMPANY POLICIES. The employment relationship between the parties shall
be governed by the general employment policies and practices of the Company,
including but not limited to those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with the Company's general employment
policies or practices, this Agreement shall control.
(d) TERM. The initial term of employment of Executive under this Agreement
shall begin as of July 1, 1995 for an initial term ending on July 1, 1997 (such
two year period, the "Initial Term"), subject to the provisions for termination
set forth herein and renewal as provided in Section 1(e) below.
(e) RENEWAL. Unless the Company shall have given Executive notice that
this Agreement shall not be renewed at least ninety (90) days prior to the end
of the Initial Term, the term of this Agreement shall be automatically extended
for a period of one year, such procedure to be followed in each such successive
period. Each extended term shall continue to be subject to the provisions for
termination set forth herein.
2. COMPENSATION AND BENEFITS.
(a) SALARY. Executive shall receive for services to be rendered hereunder a
salary at the rate of Fifteen Thousand Eight Hundred Thirty-Three Dollars
($15,833) per month payable at least as frequently as monthly and subject to
payroll deductions as may
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be necessary or customary in respect of the Company's salaried employees (the
"Base Salary"). The Base Salary will be reviewed by and shall be subject to
increase at the sole discretion of the Board of Directors of the Company each
year during the term of this Agreement.
(b) PARTICIPATION IN BENEFIT PLANS. During the term hereof, Executive shall
be entitled to participate in any group insurance, hospitalization, medical,
dental, health and accident, disability, pension or similar plan or program of
the Company now existing or established hereafter to the extent that he is
eligible under the general provisions thereof. The Company may, in its sole
discretion and from time to time, establish additional senior management benefit
programs as it deems appropriate. To the maximum extent permitted under the
terms of any 401(k) or other pension plan now existing or hereafter established
by the Company, Executive shall be entitled to the immediate vesting of benefits
under such plans in which Executive participates.
(c) VACATION. Executive shall be entitled to a period of annual vacation
time equal to that generally provided to senior managers of the Company, but in
any event not more than four weeks per twelve month period, to accrue PRO RATA
during the course of each such twelve month period; provided, however, that the
parties hereto agree that Executive shall be deemed to have accrued four weeks
of vacation effective as of January 1, 1996. The days selected for Executive's
vacation must be mutually agreeable to Company and Executive. Accrued unused
vacation will expire 12 months after the date of accrual and in no event shall
Executive's total accrued vacation exceed four weeks.
(d) 401(K) PLAN. To the extent legally permitted, Executive shall be
entitled to place a portion of his Base Salary into a 401(K) or other qualified
deferred tax annuity plan of the Company or, if the Company does not have such a
plan, of any such plan of any of the Company's subsidiaries, as may be
designated by the Executive.
(e) TERM LIFE INSURANCE. During the term hereof, the Company shall procure
and pay for a $500,000 term life insurance policy covering Executive, for the
benefit of such beneficiaries as Executive shall designate.
(f) RELOCATION BENEFITS. If the Company requires Executive to relocate his
residence, the Company shall bear the following costs in connection with such
relocation:
(i) closing costs on sale of old house;
(ii) cost of movement of household goods; and
(iii) such additional relocation benefits as may be mutually agreed
to from time to time between the Company and Executive.
3. OPTION AND BONUS PLANS.
(a) OPTIONS. Within 60 days following the date of this Agreement, the
Company shall cause its indirect parent, MSC Holdings, Inc. ("MSC") to grant to
Executive options to purchase up to 10,227 shares of MSC common stock
(constituting 0.75% of the outstanding common stock of MSC on the date hereof on
a fully diluted basis) at an exercise price of $10.00 per share, with such
additional terms and conditions as MSC shall determine. Such options shall be
granted pursuant to the MSC Holdings, Inc. 1995 Stock Incentive Plan and the
stock option agreement evidencing such options
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will contain a provision providing for the accelerated vesting of such options
upon a change of control.
(b) BONUS. For each fiscal year of the Company ending March 31 that the
applicable EBITDA target set forth on Appendix A attached hereto is achieved,
and if Executive is employed by the Company pursuant to the terms of this
Agreement on the last day of such fiscal year, Executive shall receive a bonus
equal to 40% of his then annual Base Salary, to be paid on the June 30
immediately following the end of such fiscal year. Notwithstanding the
foregoing terms of this paragraph (b), (i) if the March 31, 1996 EBITDA target
set forth on Appendix A attached hereto is not achieved, Executive shall
nonetheless be entitled to a bonus equal to 20% of his then annual Base Salary
and (ii) in any fiscal year in which the applicable EBITDA target is not
achieved, the Board of Directors of the Company may nonetheless elect in its
sole discretion to award all or any part of the bonus described herein.
4. REASONABLE BUSINESS EXPENSES AND SUPPORT.
Executive shall be reimbursed for documented and reasonable business
expenses in connection with the performance of his duties hereunder. Executive
shall be furnished reasonable office space, assistance and facilities.
5. TERMINATION OF EMPLOYMENT. The date on which Executive's employment by the
Company ceases, under any of the following circumstances, shall be defined
herein as the "Termination Date."
(a) TERMINATION FOR CAUSE.
(i) TERMINATION: PAYMENT OF ACCRUED SALARY AND VACATION. The Board
may terminate Executive's employment with the Company at any time for cause,
immediately upon notice to Executive of the circumstances leading to such
termination for cause. In the event that Executive's employment is terminated
for cause, Executive shall receive payment for all accrued salary and vacation
time through the Termination Date, which in this event shall be the date upon
which notice of termination is given. The Company shall have no further
obligation to pay severance of any kind nor to make any payment in lieu of
notice.
(ii) DEFINITION OF CAUSE. "CAUSE" means the occurrence or existence
of any of the following with respect to Executive, as determined by a majority
of the disinterested directors of the Board: (a) a material breach by Executive
of any of his obligations hereunder which remains uncured after the lapse of 30
days following the date that the Company has given Executive written notice
thereof; (b) a material breach by the Executive of his duty not to engage in any
transaction that represents, directly or indirectly, self-dealing with the
Company or any of its Affiliates which has not been approved by a majority of
the disinterested directors of the Board or of the terms of his employment, if
in any such case such material breach remains uncured after the lapse of 30 days
following the date that the Company has given the Executive written notice
thereof; (c) the repeated material breach by the Executive of any duty referred
to in clause (b) above as to which at least one written notice has been given
pursuant to such clause (b); (d) any act of dishonesty, misappropriation,
embezzlement, intentional fraud or similar conduct involving the Company or any
of its Affiliates; (e) the conviction or the plea of nolo contendere or the
equivalent in respect of a felony involving moral turpitude; (f) any intentional
damage of a material nature to any property of the Company or any of its
Affiliates; (g) the repeated non-prescription use of any controlled substance or
the repeated use of alcohol or any other non-controlled substance which, in any
case described in this
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clause (g), the Board reasonably determines renders the Executive unfit to serve
in his capacity as an officer or employee of the Company or its Affiliates; or
(h) any other material misconduct on the part of Executive which remains uncured
after the lapse of 30 days following the date that the Company has given
Executive written notice thereof.
(b) TERMINATION BY EXECUTIVE. Executive shall have the right, at its
election, to terminate his employment with the Company by written notice to the
Company to that effect if the Company shall have failed to substantially perform
a material condition or covenant of this Agreement ("Company's Material
Breach"); provided, however, that termination for Company's Material Breach will
not be effective until Executive shall have given written notice specifying the
claimed breach and, provided such breach is curable, Company fails to correct
the claimed breach within thirty (30) days after the receipt of the applicable
notice or such longer time as may be reasonably required by the nature of the
claimed breach (but within ten (10) days if the failure to perform is a failure
to pay monies when due under the terms of this Agreement).
(c) TERMINATION UPON DISABILITY. Company may terminate Executive's
employment in the event Executive suffers a disability that renders Executive
unable to perform the essential functions of his position, even with reasonable
accommodation, for four (4) months within any eight (8) month period. After the
Termination Date, which in this event shall be the date upon which notice of
termination is given, no further compensation will be payable under this
Agreement except that Executive shall receive the accrued portion of any bonus
(including the bonus referenced in Section 3(b) hereof) through the Termination
Date, less standard withholdings for tax and social security purposes, payable
upon such date or over such period of time which is in accordance with the
applicable bonus plan.
(d) TERMINATION WITHOUT CAUSE.
(i) TERMINATION PAYMENTS. In the event that during the term of this
Agreement (A) Executive's employment is terminated by the Company other than
pursuant to paragraph 5(a) or 5(c), (B) Executive's employment is terminated by
Executive pursuant to paragraph 5(b), or (C) the Company elects not to renew
this Agreement in accordance with Section 1(e), then the Company shall pay
Executive as severance an amount (the "Severance Payment") equal to (W) any
accrued bonus (with any partial fiscal year to be payable on a pro rata basis),
less standard withholdings for tax and social security purposes, payable upon
such date or over such period of time which is in accordance with the applicable
bonus plan, plus (X) if Executive's employment is terminated during the Initial
Term, an amount equal to Executive's Base Salary and any bonus for the remainder
of the Initial Term as if Executive were employed for such period, less standard
withholdings for tax and social security purposes, and payable, in the case of
Base Salary, in equal monthly payments over the remainder of the Initial Term
and, in the case of bonus, in accordance with the applicable bonus plan, plus
(Y) twenty-four (24) months of Executive's Base Salary at the time of
termination or expiration, less standard withholdings for tax and social
security purposes, payable in equal monthly payments over the twenty-four (24)
month period commencing as of the later of the Termination Date (or expiration
of this Agreement upon non-renewal) and the end of the Initial Period, plus (Z)
an additional 12 months of bonus credited as if Executive were employed for the
12 month period immediately following the later of the Termination Date (or
expiration of this Agreement upon non-renewal) and the end of the Initial Term
(with any partial fiscal year to be payable on a pro rata basis), less standard
withholdings for tax and social security purposes, payable upon such date or
over such period of time which is in accordance with the applicable bonus plan.
Notwithstanding the foregoing sentence, beginning on the date 12 months
following the later of the Termination Date (or expiration
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of this Agreement upon non-renewal) and the end of the Initial Term, the Company
may discontinue payment of the Base Salary portion of the Severance Payment upon
or at any time following Executive's acceptance of new employment with another
employer. Executive agrees to use his best efforts to locate new employment
following any termination of his employment hereunder, and further agrees to
promptly provide written notice of any such new employment to the Company.
(ii) FUNDAMENTAL CHANGES. In the event that the Company
undergoes a change in control or makes a substantial change which results in
diminution in the Executive's duties, authority, responsibility or compensation
without performance or market justification, Executive may terminate his
employment; PROVIDED, HOWEVER, that Executive shall provide the Company 10 days'
notice prior to any such termination and the Company shall have a reasonable
period of time to cure. A termination in such circumstances shall be treated as
a Company termination without cause and Executive shall be entitled to the same
severance payments and benefits provided in paragraphs 5(d)(i), 5(e) and 5(g),
as applicable.
(e) BENEFITS UPON TERMINATION. All benefits (including any vesting)
provided under paragraph 2(b) hereof shall be extended, at Executive's election
and at the same cost to Executive as when employed, to the extent permitted by
the Company's insurance policies and benefit plans, for one year after
Executive's Termination Date (or, in the case of a termination described in
Section 5(d)(i), for the period during which the Company is required to make
termination payments pursuant to Section 5(d)(i)), except (a) as required by law
(e.g., COBRA health insurance continuation election) or (b) in the event of a
termination described in paragraph 5(a).
(f) TERMINATION UPON DEATH. If Executive dies prior to the expiration
of the term of this Agreement, the Company shall (i) continue coverage of
Executive's dependents (if any) under all benefit plans or programs of the type
listed above in paragraph 2(b) herein for a period of three (3) months, and (ii)
pay to Executive's estate the accrued portion of any bonus through the
Termination Date, less standard withholdings for tax and social security
purposes, payable upon such date or over such period of time which is in
accordance with the applicable bonus plan.
(g) OUTPLACEMENT SERVICES. Upon any termination of Executive's
employment pursuant to Section 5(c) or 5(d), the Company shall provide to
Executive appropriate senior executive level outplacement services as may be
mutually agreed to from time to time between the Company and Executive.
6. PROPRIETARY INFORMATION OBLIGATIONS.
During the term of employment under this Agreement, Executive will have
access to and become acquainted with the Company's confidential and proprietary
information, including but not limited to information or plans regarding the
Company's customer relationships, personnel, or sales, marketing, and financial
operations and methods; trade secrets; formulas; devices; secret inventions;
processes; and other compilations of information, records, and specifications
(collectively "Proprietary Information"). Executive shall not disclose any of
the Company's Proprietary Information directly or indirectly, or use it in any
way, either during the term of this Agreement or at any time thereafter, except
as required in the course of his employment for the Company or as authorized in
writing by the Company. All files, records, documents, computer-recorded
information, drawings, specifications, equipment and similar items relating to
the business of the Company, whether prepared by Executive or otherwise coming
into his possession, shall remain the exclusive property of the Company and
shall not be removed
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from the premises of the Company under any circumstances whatsoever without the
prior written consent of the Company, except when (and only for the period)
necessary to carry out Executive's duties hereunder, and if removed shall be
immediately returned to the Company upon any termination of his employment and
no copies thereof shall be kept by Executive; PROVIDED, HOWEVER, that Executive
shall be entitled to retain documents reasonably related to his interest as a
shareholder and any documents that were personally owned or acquired.
7. NONINTERFERENCE. While employed by the Company and until two years from
termination of this Agreement, Executive agrees not to interfere with the
business of the Company by directly or indirectly soliciting, attempting to
solicit, inducing, or otherwise causing any employee of the Company to terminate
his or her employment in order to become an employee, consultant or independent
contractor to or for any other employer.
8. NONCOMPETITION. Executive agrees that during the term of this Agreement
and for a period of two (2) years after the termination hereof, he will not,
without the prior consent of the Company, directly or indirectly, have an
interest in, be employed by, or be connected with, as an employee, consultant,
officer, director, partner, stockholder or joint venturer, in any person or
entity owning, managing, controlling, operating or otherwise participating or
assisting in any business which is similar to or in competition with the
business of the Company (i) during the term of this Agreement, in any location,
and (ii) for the two year period following the termination of this Agreement, in
any state in which the Company was conducting business at the date of
termination of Executive's employment and continues to do so thereafter;
provided, however, that the foregoing shall not prevent the Executive from being
a stockholder of less than 1% of the issued and outstanding securities of any
class of a corporation listed on a national securities exchange or designated as
national market system securities on an interdealer quotation system by the
National Association of Securities Dealers, Inc.
9. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in writing and shall be
deemed effective upon the earlier of personal delivery (including personal
delivery by telecopy or telex) or the third day after mailing by first class
mail to the recipient at the address indicated below:
To the Company:
Petrowax PA Inc.
c/o Aurora Capital Partners L.P.
1800 Century Park East
Suite 1000
Los Angeles, California 90067
Attention: Richard K. Roeder, Esq.
Facsimile: (310) 551-0101
To Executive:
John F. Gottshall
301 Cambridge Woods Way
Raleigh, North Carolina 27608
Facsimile: (919) 571-1496
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or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. Any provision of this Agreement which is deemed
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this paragraph be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable.
(c) ENTIRE AGREEMENT. This document constitutes the final, complete,
and exclusive embodiment of the entire agreement and understanding between the
parties related to the subject matter hereof and supersedes and preempts any
prior or contemporaneous understandings, agreements, or representations by or
between the parties, written or oral.
(d) COUNTERPARTS. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors and assigns, except that Executive may not assign
any of his duties hereunder and he may not assign any of his rights hereunder
without the prior written consent of the Company.
(f) ATTORNEYS FEES. If any legal proceeding is necessary to enforce or
interpret the terms of this Agreement, or to recover damages for breach
therefore, the prevailing party shall be entitled to reasonable attorney's fees,
as well as costs and disbursements, in addition to any other relief to which he
or it may be entitled.
(g) AMENDMENTS. No amendments or other modifications to this Agreement
may be made except by a writing signed by both parties. No amendment or waiver
of this Agreement requires the consent of any individual, partnership,
corporation or other entity not a party to this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any third person any
rights or remedies under or by reason of this Agreement.
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(h) CHOICE OF LAW. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the internal law, and
not the law of conflicts, of the State of New York.
IN WITNESS WHEREOF, the parties have executed this agreement effective as
of the date it is last executed below by either party.
/s/ John F. Gottshall
-------------------------
JOHN F. GOTTSHALL
PETROWAX PA INC.
By: /s/ illegible
---------------------
Title: /s/ illegible
------------------
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APPENDIX A
Fiscal Year Ending EBITDA* Target
- -------------------- ------------------
March 31, 1996 19,500,000
March 31, 1997 23,100,000
March 31, 1998 27,000,000
(applicable if Agreement renewed)
March 31, 1999 26,300,000
(applicable if Agreement renewed)
March 31, 2000 27,700,000
(applicable if Agreement renewed)
*"EBITDA" shall have the meaning ascribed thereto in the Facility Agreement,
dated as of June 16, 1995 (the "Facility Agreement"), between ABI Acquisition 2
PLC and Petrowax PA Inc. as initial borrowers, the Companies named therein as
initial guarantors, Union Bank of Switzerland as arranger, Union Bank of
Switzerland as facility agent, Union Bank of Switzerland as security trustee,
and certain others, but adjusted to subtract therefrom, without duplication, the
sum of all performance bonuses paid to employees of the Group (as such term is
defined in the Facility Agreement) with respect to the fiscal year for which
EBITDA is being computed, regardless of when such performance bonuses are
actually paid.
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on July 1,
1995 by and between David E. Hawkins, an individual ("Executive"), and Petrowax
PA Inc., a Delaware corporation (the "Company").
1. EMPLOYMENT BY THE COMPANY AND TERM.
(a) FULL TIME AND BEST EFFORTS. Subject to the terms set forth
herein, the Company agrees to employ Executive as Chief Administrative Officer,
and in such other executive capacities as may be requested from time to time by
the Board of Directors of the Company or a duly authorized committee thereof,
and Executive hereby accepts such employment. Executive shall serve, if elected,
as a member of the Board of Directors of the Company, and shall render such
other services for the Company and corporations controlled by, under common
control with or controlling, directly or indirectly, the Company, and to
successor entities and assignees of the Company ("Company's Affiliates") as the
Company may from time to time reasonably request and as shall be consistent with
the duties Executive is to perform for the Company and with Executive's stature
and experience. During the term of his employment with the Company, Executive
will devote his full time and exclusive attention to, and use his best efforts
to advance, the business and welfare of the Company, and will not engage in any
other employment or business activities for any direct or indirect remuneration
that would be harmful or detrimental to, or that may compete with, the business
and affairs of the Company.
(b) DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then current title,
consistent with the Bylaws of the Company and as required by the Company's Board
of Directors (the "Board") and the officers to whom the Executive reports.
(c) COMPANY POLICIES. The employment relationship between the parties
shall be governed by the general employment policies and practices of the
Company, including but not limited to those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement differ from or are in conflict with the Company's
general employment policies or practices, this Agreement shall control.
(d) TERM. The initial term of employment of Executive under this
Agreement shall begin as of July 1, 1995 for an initial term ending on July 1,
1996 (such one year period, the "Initial Term"), subject to the provisions for
termination set forth herein and renewal as provided in Section 1(e) below.
(e) RENEWAL. Unless the Company shall have given Executive notice
that this Agreement shall not be renewed at least ninety (90) days prior to the
end of the Initial Term, the term of this Agreement shall be automatically
extended for a period of one year, such procedure to be followed in each such
successive period. Each extended term shall continue to be subject to the
provisions for termination set forth herein.
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2. COMPENSATION AND BENEFITS.
(a) SALARY. Executive shall receive for services to be rendered
hereunder a salary at the rate of Eleven Thousand Six Hundred Sixty-Seven
Dollars ($11,667) per month payable at least as frequently as monthly and
subject to payroll deductions as may be necessary or customary in respect of the
Company's salaried employees (the "Base Salary"). The Base Salary will be
reviewed by and shall be subject to increase at the sole discretion of the Board
of Directors of the Company each year during the term of this Agreement.
(b) PARTICIPATION IN BENEFIT PLANS. During the term hereof, Executive
shall be entitled to participate in any group insurance, hospitalization,
medical, dental, health and accident, disability or similar plan or program of
the Company now existing or established hereafter to the extent that he is
eligible under the general provisions thereof. The Company may, in its sole
discretion and from time to time, establish additional senior management benefit
programs as it deems appropriate.
(c) VACATION. Executive shall be entitled to a period of annual
vacation time equal to that generally provided to senior managers of the
Company, but in any event not more than four weeks per twelve month period, to
accrue PRO RATA during the course of each such twelve month period. The days
selected for Executive's vacation must be mutually agreeable to Company and
Executive. Accrued unused vacation will expire 12 months after the date of
accrual and in no event shall Executive's total accrued vacation exceed four
weeks.
(d) 401(K) PLAN. To the extent legally permitted, Executive shall be
entitled to place a portion of his Base Salary into a 401(K) or other qualified
deferred tax annuity plan of the Company or, if the Company does not have such a
plan, of any such plan of any of the Company's subsidiaries, as may be
designated by the Executive.
(e) TERM LIFE INSURANCE. During the term hereof, the Company shall
procure and pay for a $500,000 term life insurance policy covering Executive,
for the benefit of such beneficiaries as Executive shall designate.
(f) RELOCATION BENEFITS. If the Company requires Executive to
relocate his residence, the Company shall bear the following costs in connection
with such relocation:
(i) closing costs on sale of old house;
(ii) cost of movement of household goods; and
(iii) such additional relocation benefits as may be mutually
agreed to from time to time between the Company and
Executive.
3. OPTION AND BONUS PLANS.
(a) OPTIONS. Within 60 days following the date of this Agreement, the
Company shall cause its indirect parent, MSC Holdings, Inc. ("MSC"), to grant to
Executive options to purchase up to 5,455 shares of MSC common stock
(constituting 0.40% percent of the outstanding common stock of MSC on the date
hereof on a fully diluted basis) at an exercise price of $10.00 per share, with
such additional terms and
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conditions as MSC shall determine. Such options shall be granted pursuant to the
MSC Holdings, Inc. 1995 Stock Incentive Plan.
(b) BONUSES. For each fiscal year of the Company ending March 31 that
the applicable EBITDA target set forth on Appendix A attached hereto is
achieved, and if Executive is employed by the Company pursuant to the terms of
this Agreement on the last day of such fiscal year, Executive shall receive a
bonus equal to 40% of his then annual Base Salary, to be paid on the June 30
immediately following the end of such fiscal year. Notwithstanding the
foregoing terms of this paragraph (b), the Board of Directors of the Company may
elect in its sole discretion to award all or any part of such bonus
notwithstanding any failure of the applicable EBITDA target to have been
achieved.
4. REASONABLE BUSINESS EXPENSES AND SUPPORT.
Executive shall be reimbursed for documented and reasonable business
expenses in connection with the performance of his duties hereunder. Executive
shall be furnished reasonable office space, assistance and facilities.
5. TERMINATION OF EMPLOYMENT. The date on which Executive's employment by
the Company ceases, under any of the following circumstances, shall be defined
herein as the "Termination Date."
(a) TERMINATION FOR CAUSE.
(i) TERMINATION; PAYMENT OF ACCRUED SALARY AND VACATION.
The Board may terminate Executive's employment with the Company at any time for
cause, immediately upon notice to Executive of the circumstances leading to such
termination for cause. In the event that Executive's employment is terminated
for cause, Executive shall receive payment for all accrued salary and vacation
time through the Termination Date, which in this event shall be the date upon
which notice of termination is given. The Company shall have no further
obligation to pay severance of any kind nor to make any payment in lieu of
notice.
(ii) DEFINITION OF CAUSE. "CAUSE" means the occurrence or
existence of any of the following with respect to Executive, as determined by a
majority of the disinterested directors of the Board: (a) a material breach by
Executive of any of his obligations hereunder which remains uncured after the
lapse of 30 days following the date that the Company has given Executive written
notice thereof; (b) a material breach by the Executive of his duty not to engage
in any transaction that represents, directly or indirectly, self-dealing with
the Company or any of its Affiliates which has not been approved by a majority
of the disinterested directors of the Board or of the terms of his employment,
if in any such case such material breach remains uncured after the lapse of 30
days following the date that the Company has given the Executive written notice
thereof; (c) the repeated material breach by the Executive of any duty referred
to in clause (b) above as to which at least one written notice has been given
pursuant to such clause (b); (d) any act of dishonesty, misappropriation,
embezzlement, intentional fraud or similar conduct involving the Company or any
of its Affiliates; (e) the conviction or the plea of nolo contendere or the
equivalent in respect of a felony involving moral turpitude; (f) any intentional
damage of a material nature to any property of the Company or any of its
Affiliates; (g) the repeated non-prescription use of any controlled substance or
the repeated use of alcohol or any other non-controlled substance which, in any
case described in this clause (g), the Board reasonably determines renders the
Executive unfit to serve in his capacity as an officer or employee of the
Company or its Affiliates; or (h) any other
3
<PAGE>
material misconduct on the part of Executive which remains uncured after the
lapse of 30 days following the date that the Company has given Executive written
notice thereof.
(b) TERMINATION BY EXECUTIVE. Executive shall have the right, at its
election, to terminate his employment with the Company by written notice to the
Company to that effect if the Company shall have failed to substantially perform
a material condition or covenant of this Agreement ("Company's Material
Breach"); provided, however, that termination for Company's Material Breach will
not be effective until Executive shall have given written notice specifying the
claimed breach and, provided such breach is curable, Company fails to correct
the claimed breach within thirty (30) days after the receipt of the applicable
notice or such longer time as may be reasonably required by the nature of the
claimed breach (but within ten (10) days if the failure to perform is a failure
to pay monies when due under the terms of this Agreement).
(c) TERMINATION UPON DISABILITY. Company may terminate Executive's
employment in the event Executive suffers a disability that renders Executive
unable to perform the essential functions of his position, even with reasonable
accommodation, for four (4) months within any eight (8) month period. After the
Termination Date, which in this event shall be the date upon which notice of
termination is given, no further compensation will be payable under this
Agreement except that Executive shall receive the accrued portion of any bonus
through the Termination Date, less standard withholdings for tax and social
security purposes, payable upon such date or over such period of time which is
in accordance with the applicable bonus plan.
(d) TERMINATION WITHOUT CAUSE.
(i) TERMINATION PAYMENTS. In the event that during the term
of this Agreement Executive's employment is terminated by the Company other than
pursuant to paragraph 5(a) or 5(c), or by Executive pursuant to paragraph 5(b),
the Company shall pay Executive as severance an amount equal to six (6) months
of his then Base Salary, less standard withholdings for tax and social security
purposes, payable over such six (6) month term in monthly PRO RATA payments
commencing as of the Termination Date plus the accrued portion of any bonus
through the Termination Date, less standard withholdings for tax and social
security purposes, payable upon such date or over such period of time which is
in accordance with the applicable bonus plan.
(iii) FUNDAMENTAL CHANGES. In the event that the Company
makes a substantial change which results in diminution in the Executive's
duties, authority, responsibility or compensation without performance or market
justification, Executive may terminate his employment; PROVIDED, HOWEVER, that
Executive shall provide the Company 10 days' notice prior to any such
termination and the Company shall have a reasonable period of time to cure. A
termination in such circumstances shall be treated as a Company termination
without cause and Executive shall be entitled to the same severance payments
provided in paragraphs 5(d)(i) and (5)(d)(ii), as applicable.
(e) BENEFITS UPON TERMINATION. All benefits provided under paragraph
2(b) hereof shall be extended, at Executive's election and cost, to the extent
permitted by the Company's insurance policies and benefit plans, for one year
after Executive's Termination Date, except (a) as required by law (e.g., COBRA
health insurance continuation election) or (b) in the event of a termination
described in paragraph 5(a).
4
<PAGE>
(f) TERMINATION UPON DEATH. If Executive dies prior to the expiration
of the term of this Agreement, the Company shall (i) continue coverage of
Executive's dependents (if any) under all benefit plans or programs of the type
listed above in paragraph 2(b) herein for a period of three (3) months, and (ii)
pay to Executive's estate the accrued portion of any bonus through the
Termination Date, less standard withholdings for tax and social security
purposes, payable upon such date or over such period of time which is in
accordance with the applicable bonus plan.
(g) OUTPLACEMENT SERVICES. Upon any termination of Executive's
employment pursuant to Section 5(c) or 5(d), the Company shall provide to
Executive such outplacement services as may be mutually agreed to from time to
time between the Company and Executive.
6. PROPRIETARY INFORMATION OBLIGATIONS.
During the term of employment under this Agreement, Executive will
have access to and become acquainted with the Company's confidential and
proprietary information, including but not limited to information or plans
regarding the Company's customer relationships, personnel, or sales, marketing,
and financial operations and methods; trade secrets; formulas; devices; secret
inventions; processes; and other compilations of information, records, and
specifications (collectively "Proprietary Information"). Executive shall not
disclose any of the Company's Proprietary Information directly or indirectly, or
use it in any way, either during the term of this Agreement or at any time
thereafter, except as required in the course of his employment for the Company
or as authorized in writing by the Company. All files, records, documents,
computer-recorded information, drawings, specifications, equipment and similar
items relating to the business of the Company, whether prepared by Executive or
otherwise coming into his possession, shall remain the exclusive property of the
Company and shall not be removed from the premises of the Company under any
circumstances whatsoever without the prior written consent of the Company,
except when (and only for the period) necessary to carry out Executive's duties
hereunder, and if removed shall be immediately returned to the Company upon any
termination of his employment and no copies thereof shall be kept by Executive;
PROVIDED, HOWEVER, that Executive shall be entitled to retain documents
reasonably related to his interest as a shareholder and any documents that were
personally owned or acquired.
7. NONINTERFERENCE. While employed by the Company and until two years
from termination of this Agreement, Executive agrees not to interfere with the
business of the Company by directly or indirectly soliciting, attempting to
solicit, inducing, or otherwise causing any employee of the Company to terminate
his or her employment in order to become an employee, consultant or independent
contractor to or for any other employer.
8. NONCOMPETITION. Executive agrees that during the term of this
Agreement and for a period of two (2) years after the termination hereof, he
will not, without the prior consent of the Company, directly or indirectly, have
an interest in, be employed by, or be connected with, as an employee,
consultant, officer, director, partner, stockholder or joint venturer, in any
person or entity owning, managing, controlling, operating or otherwise
participating or assisting in any business which is similar to or in competition
with the business of the Company (i) during the term of this Agreement, in any
location, and (ii) for the two year period following the termination of this
Agreement, in any state in which the Company was conducting business at the date
of termination of Executive's employment and continues to do so thereafter;
provided, however, that the foregoing shall
5
<PAGE>
not prevent the Executive from being a stockholder of less than 1% of the issued
and outstanding securities of any class of a corporation listed on a national
securities exchange or designated as national market system securities on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
9. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telecopy or telex) or the third day after mailing by first
class mail to the recipient at the address indicated below:
To the Company:
Petrowax PA Inc.
c/o Aurora Capital Partners L.P.
1800 Century Park East
Suite 1000
Los Angeles, California 90067
Attention: Richard K. Roeder, Esq.
Facsimile: (310) 551-0101
To Executive:
David E. Hawkins
c/o Astor Corporation
8521 Six Forks Road, Suite 105
Raleigh, North Carolina 27615
Facsimile: (919) 846-8283
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. Any provision of this Agreement which is deemed
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this paragraph be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable.
(c) ENTIRE AGREEMENT. This document constitutes the final, complete,
and exclusive embodiment of the entire agreement and understanding between the
parties related to the subject matter hereof and supersedes and preempts any
prior or contemporaneous understandings, agreements, or representations by or
between the parties, written or oral.
(d) COUNTERPARTS. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
6
<PAGE>
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors and assigns, except that Executive may not assign
any of his duties hereunder and he may not assign any of his rights hereunder
without the prior written consent of the Company.
(f) ATTORNEYS FEES. If any legal proceeding is necessary to enforce
or interpret the terms of this Agreement, or to recover damages for breach
therefore, the prevailing party shall be entitled to reasonable attorney's fees,
as well as costs and disbursements, in addition to any other relief to which he
or it may be entitled.
(g) AMENDMENTS. No amendments or other modifications to this
Agreement may be made except by a writing signed by both parties. No amendment
or waiver of this Agreement requires the consent of any individual, partnership,
corporation or other entity not a party to this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any third person any
rights or remedies under or by reason of this Agreement.
(h) CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts, of the State of New York.
IN WITNESS WHEREOF, the parties have executed this agreement effective as
of the date it is last executed below by either party.
/s/ David E. Hawkins
--------------------------------------------------
DAVID E. HAWKINS
PETROWAX PA INC.
By: /s/ illegible
--------------------------------------------
Title: CHAIRMAN & CEO
--------------------------------------------
7
<PAGE>
APPENDIX A
Fiscal Year Ending EBITDA* Target
- ------------------ --------------
March 31, 1996 19,500,000
March 31, 1997 23,100,000
(applicable if Agreement renewed)
March 31, 1998 27,000,000
(applicable if Agreement renewed)
March 31, 1999 26,300,000
(applicable if Agreement renewed)
March 31, 2000 27,700,000
(applicable if Agreement renewed)
*"EBITDA" shall have the meaning ascribed thereto in the Facility Agreement,
dated as of June 16, 1995 (the "Facility Agreement"), between ABI Acquisition 2
PLC and Petrowax PA Inc. as initial borrowers, the Companies named therein as
initial guarantors, Union Bank of Switzerland as arranger, Union Bank of
Switzerland as facility agent, Union Bank of Switzerland as security trustee,
and certain others, but adjusted to subtract therefrom, without duplication, the
sum of all performance bonuses paid to employees of the Group (as such term is
defined in the Facility Agreement) with respect to the fiscal year for which
EBITDA is being computed, regardless of when such performance bonuses are
actually paid.
8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
ASTOR CORPORATION
The Several Lenders
from Time to Time Parties Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of October 8, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . 23
SECTION 2. REVOLVING CREDIT COMMITMENTS . . . . . . . . . . . . . . 23
2.1 Revolving Credit Commitments. . . . . . . . . . . . . . . 23
2.2 Revolving Credit Notes. . . . . . . . . . . . . . . . . . 24
2.3 Procedure for Revolving Credit Borrowing. . . . . . . . . 24
2.4 Letter of Credit Commitment . . . . . . . . . . . . . . . 25
2.5 Procedure for Issuance of Letters of Credit . . . . . . . 25
2.6 Fees, Commissions and Other Charges . . . . . . . . . . . 26
2.7 L/C Participations. . . . . . . . . . . . . . . . . . . . 26
2.8 Reimbursement Obligation of the Borrower. . . . . . . . . 27
2.9 Obligations Absolute. . . . . . . . . . . . . . . . . . . 28
2.10 Letter of Credit Payments . . . . . . . . . . . . . . . . 28
2.11 Application . . . . . . . . . . . . . . . . . . . . . . . 28
2.12 Use of Revolving Credit Loans and the Letters of Credit . 28
SECTION 3. TERM LOAN COMMITMENTS . . . . . . . . . . . . . . . . . . 29
3.1 Term Loans . . . . . . . . . . . . . . . . . . . . . . . 29
3.2 Term Notes . . . . . . . . . . . . . . . . . . . . . . . 29
3.3 Procedure for Term Loan Borrowing . . . . . . . . . . . . 29
3.4 Use of Term Loans . . . . . . . . . . . . . . . . . . . . 30
SECTION 4. GENERAL PROVISIONS
4.1 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2 Optional Reductions of Commitments. . . . . . . . . . . . 30
4.3 Optional Prepayments. . . . . . . . . . . . . . . . . . . 30
4.4 Mandatory Prepayments and Commitment Reductions . . . . . 31
4.5 Conversion and Continuation Options . . . . . . . . . . . 33
4.6 Minimum Amounts and Maximum Number of Tranches. . . . . . 33
4.7 Interest Rates and Payment Dates. . . . . . . . . . . . . 34
4.8 Computation of Interest and Fees. . . . . . . . . . . . . 34
4.9 Inability to Determine Interest Rate. . . . . . . . . . . 35
4.10 Pro Rata Treatment and Payments . . . . . . . . . . . . . 35
4.11 Illegality. . . . . . . . . . . . . . . . . . . . . . . . 36
4.12 Requirements of Law . . . . . . . . . . . . . . . . . . . 37
4.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.14 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 39
4.15 Change of Lending Office. . . . . . . . . . . . . . . . . 39
<PAGE>
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4.16 Controls on Prepayment if Aggregate Outstanding
Revolving Credit Extensions of Credit Exceed
Aggregate Revolving Credit Commitments. . . . . . . . . . 40
4.17 Borrowing Base Compliance . . . . . . . . . . . . . . . . 41
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 41
5.1 Financial Condition . . . . . . . . . . . . . . . . . . . 41
5.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . 42
5.3 Corporate Existence; Compliance with Law. . . . . . . . . 42
5.4 Corporate Power; Authorization; Enforceable Obligations . 42
5.5 No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . 42
5.6 No Material Litigation. . . . . . . . . . . . . . . . . . 43
5.7 No Default. . . . . . . . . . . . . . . . . . . . . . . . 43
5.8 Ownership of Property; Liens. . . . . . . . . . . . . . . 43
5.9 Intellectual Property . . . . . . . . . . . . . . . . . . 43
5.10 No Burdensome Restrictions. . . . . . . . . . . . . . . . 43
5.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.12 Federal Regulations . . . . . . . . . . . . . . . . . . . 44
5.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.14 Investment Company Act; Other Regulations . . . . . . . . 44
5.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 44
5.16 Purpose of Loans. . . . . . . . . . . . . . . . . . . . . 44
5.17 Environmental Matters . . . . . . . . . . . . . . . . . . 45
5.18 Regulation H. . . . . . . . . . . . . . . . . . . . . . . 46
5.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . 46
5.20 Labor Matters . . . . . . . . . . . . . . . . . . . . . . 46
5.21 Acquisition and Capitalization Documents;
Consummation of Acquisition . . . . . . . . . . . . . . . 46
5.22 Accuracy of Information . . . . . . . . . . . . . . . . . 47
5.23 Security Documents. . . . . . . . . . . . . . . . . . . . 47
SECTION 6. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . 48
6.1 Conditions to Initial Extensions of Credit. . . . . . . . 48
6.2 Conditions to Each Extension of Credit. . . . . . . . . . 54
SECTION 7. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 55
7.1 Financial Statements. . . . . . . . . . . . . . . . . . . 55
7.2 Certificates; Other Information . . . . . . . . . . . . . 55
7.3 Payment of Obligations. . . . . . . . . . . . . . . . . . 57
7.4 Conduct of Business and Maintenance of Existence. . . . . 57
7.5 Maintenance of Property; Insurance. . . . . . . . . . . . 57
7.6 Inspection of Property; Books and Records; Discussions. . 57
7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.8 Environmental Laws. . . . . . . . . . . . . . . . . . . . 58
7.9 Further Assurances. . . . . . . . . . . . . . . . . . . . 59
- ii -
<PAGE>
Page
----
7.10 Additional Collateral . . . . . . . . . . . . . . . . . . 59
7.11 Deposit Account Agreements. . . . . . . . . . . . . . . . 60
7.12 Flood Insurance . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 61
8.1 Financial Condition Covenants . . . . . . . . . . . . . . 61
8.2 Limitation on Indebtedness. . . . . . . . . . . . . . . . 62
8.3 Limitation on Liens . . . . . . . . . . . . . . . . . . . 63
8.4 Limitation on Fundamental Changes . . . . . . . . . . . . 64
8.5 Limitation on Sale of Assets. . . . . . . . . . . . . . . 64
8.6 Limitation on Dividends . . . . . . . . . . . . . . . . . 65
8.7 Limitation on Capital Expenditures. . . . . . . . . . . . 65
8.8 Limitation on Investments, Loans and Advances . . . . . . 66
8.9 Limitation on Optional Payments and Modifications of. . . 67
8.10 Limitation on Transactions with Affiliates. . . . . . . . 68
8.11 Limitation on Sales and Leasebacks. . . . . . . . . . . . 68
8.12 Limitation on Changes in Fiscal Year. . . . . . . . . . . 68
8.13 Limitation on Negative Pledge Clauses . . . . . . . . . . 68
8.14 Limitation on Lines of Business . . . . . . . . . . . . . 69
8.15 Change in Deposit Account Locations . . . . . . . . . . . 69
SECTION 9. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 69
SECTION 10. THE ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . . . 73
10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . 73
10.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . 73
10.3 Exculpatory Provisions. . . . . . . . . . . . . . . . . . 73
10.4 Reliance by Administrative Agent. . . . . . . . . . . . . 73
10.5 Notice of Default . . . . . . . . . . . . . . . . . . . . 74
10.6 Non-Reliance on Administrative Agent and Other Lenders. . 74
10.7 Indemnification . . . . . . . . . . . . . . . . . . . . . 75
10.8 Administrative Agent in Its Individual Capacity . . . . . 75
10.9 Successor Administrative Agent. . . . . . . . . . . . . . 75
SECTION 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 75
11.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . 75
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . 77
11.4 Survival of Representations and Warranties. . . . . . . . 78
11.5 Payment of Expenses and Indemnification . . . . . . . . . 78
11.6 Successors and Assigns; Participations and Assignments. . 78
11.7 Adjustments; Set-off. . . . . . . . . . . . . . . . . . . 80
11.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 81
- iii -
<PAGE>
Page
----
11.9 Severability. . . . . . . . . . . . . . . . . . . . . . . 81
11.10 Integration . . . . . . . . . . . . . . . . . . . . . . . 81
11.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 81
11.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . 81
11.13 Acknowledgments . . . . . . . . . . . . . . . . . . . . . 82
11.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . 82
11.15 Judgment. . . . . . . . . . . . . . . . . . . . . . . . . 82
11.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . 83
SCHEDULES
A Permitted Jurisdictions
B Eligible Off-Site Locations
1.1 Lenders and Commitments
2.5 Closing Date Letters of Credit
5.22 UCC Filing Locations
6.1(o) Pro Forma Balance Sheet
6.1(p) Capital Structure
6.1(r) Consents
7.1(a) Mortgaged Properties
8.2 Existing Indebtedness
8.3 Existing Liens
8.8 Existing Investments
8.15 Deposit Accounts and Related Bank Accounts
EXHIBITS
A-1 Revolving Credit Note
A-2 Term Note
B Mortgage
C Holding Companies Pledge Agreement
D Borrower Pledge Agreement
E Subsidiaries Pledge Agreement
F Borrower Security Agreement
G Subsidiaries Security Agreement
H Holding Companies Guarantee
I Subsidiaries Guarantee
J-1 Borrower Closing Certificate
J-2 Holding Companies Closing Certificate
J-3 Subsidiaries Closing Certificate
K Officer's Certificate
L-1 Opinion of U.S. Counsel to the Borrower
L-2 Opinion of U.K. Counsel to the Borrower
L-3 Opinion of Local Counsel
M Assignment and Acceptance
N Borrowing Base Certificate
O Solvency Opinion
- iv -
<PAGE>
CREDIT AGREEMENT, dated as of October 8, 1996 among ASTOR CORPORATION,
a Delaware corporation (the "BORROWER"), the several banks and other financial
institutions from time to time parties to this Agreement (the "LENDERS") and THE
CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent
for the Lenders hereunder (in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of
July 12, 1996 (the "MERGER AGREEMENT"), by and among the Borrower and the
shareholders of ADCO Technologies Inc., a Delaware corporation ("ADCO"), on the
Closing Date a Subsidiary of the Borrower will be merged into ADCO and ADCO will
be merged into the Borrower (the "ACQUISITION");
WHEREAS, the Borrower has requested that the Administrative Agent and
the Lenders enter into this Credit Agreement to provide a portion of the funds
required to finance the Acquisition, to refinance existing indebtedness of the
Borrower and for the working capital needs of the Borrower;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties to this Agreement hereby agree as
follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ABI SHAREHOLDER INTERCOMPANY NOTES": the amended and restated notes
dated October 1, 1996 of ABI Acquisition 2 plc, ABI Acquisition 1 plc and
Astor II to ABI Acquisition 1 plc, Astor II and Astor Holdings, Inc.,
respectively, in connection with the acquisition of Astor Stag Limited and
each in a principal amount equal to L3,736,295 plus the principal amount of
all ABI Shareholder Notes issued from time to time in payment of interest
on the then outstanding ABI Shareholder Notes pursuant to the terms
thereof.
"ABI SHAREHOLDER NOTES": means the Series A L2,285,307 8% Subordinated
Notes due 2003 and the Series B L1,450,988 8% Subordinated Notes due 2003
issued by Astor Holdings, Inc. to the former shareholders of Associated
British Industries Limited, plc.
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "PRIME RATE" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as its
prime rate in effect at its principal office in New York City (the Prime
Rate not being intended to be the lowest rate of interest charged by Chase
in connection with extensions of credit to debtors); "BASE CD RATE" shall
mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate
and (ii) a fraction, the numerator of which is one and the denominator of
which is one minus the C/D Reserve Percentage and (b) the C/D Assessment
Rate; "THREE MONTH SECONDARY CD RATE" shall mean, for any day, the
<PAGE>
2
secondary market rate for three-month certificates of deposit reported as
being in effect on such day (or, if such day shall not be a Business Day,
the next preceding Business Day) by the Board of Governors of the Federal
Reserve System (the "BOARD") through the public information telephone line
of the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not
be so reported on such day or such next preceding Business Day, the average
of the secondary market quotations for three-month certificates of deposit
of major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the Administrative
Agent from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it; and "FEDERAL FUNDS EFFECTIVE RATE"
shall mean, for any day, the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by
it. Any change in the ABR due to a change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such change
in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate, respectively.
"ABR LOANS": Loans the rate of interest applicable to which is based
upon the ABR.
"ACCOUNTS": as defined in the Uniform Commercial Code as in effect in
the State of New York; and, with respect to the Borrower and its
Subsidiaries (other than Astor Stag S.A.), all such Accounts of such
Persons, whether now existing or existing in the future, including, without
limitation (i) all accounts receivable of such Person including, without
limitation, all accounts created by or arising from all of such Person's
sales of goods or rendition of services made under any of its trade names,
or through any of its divisions, (ii) all unpaid rights of such Person
(including rescission, replevin, reclamation and stopping in transit)
relating to the foregoing or arising therefrom, (iii) all rights to any
goods represented by any of the foregoing, including returned or
repossessed goods and (iv) all reserves and credit balances held by such
Person with respect to any such accounts receivable or any Obligors.
"ACQUISITION": as defined in the recitals to this Agreement.
"ACQUISITION DOCUMENTS": the collective reference to the Merger
Agreement and any other agreements, instruments and other documents
delivered in connection therewith, as amended, supplemented or otherwise
modified in accordance with the terms of this Agreement.
"ADMINISTRATIVE AGENT": as defined in the preamble to this Agreement.
<PAGE>
3
"AFFILIATE": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person
means the power, directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election of directors
of such Person or (b) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"AGGREGATE OUTSTANDING REVOLVING CREDIT EXTENSIONS OF CREDIT": as to
any Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Credit Loans made by such Lender then
outstanding and (b) such Lender's Commitment Percentage of the L/C
Obligations then outstanding.
"APPLICABLE MARGIN": for each Type of Loan, (i) until the Borrower
shall have delivered to the Administrative Agent satisfactory audited
consolidated financial statements of the Borrower and its Subsidiaries for
each of the fiscal quarters during the period from the date hereof to and
including December 31, 1997, 2.50% in the case of Eurocurrency Loans and
1.25% in the case of ABR Loans and (ii) thereafter, a percentage determined
in accordance with the following pricing grid:
Total Debt Ratio ABR Loans Eurocurrency Loans
---------------- --------- ------------------
Greater than or equal to 3.5 to 1 1.25% 2.50%
Less than 3.5 to 1 but greater 1.00 2.25
than or equal to 3.0 to 1
Less than 3.0 to 1 .75 2.00
"APPLICATION": an application, in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to open a Letter of
Credit.
"ASSIGNEE": as defined in subsection 11.6(c).
"ASTOR II": Astor Holdings II, Inc.
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Lender, at any
time, an amount equal to the excess, if any, of (a) such Lender's Revolving
Credit Commitment over (b) the Dollar Equivalent of such Lender's Aggregate
Outstanding Revolving Credit Extensions of Credit at such time.
"BORROWER DEPOSIT ACCOUNT AGREEMENT": the Deposit Account Agreement to
be executed and delivered by the Borrower, in form and substance
satisfactory to the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time.
<PAGE>
4
"BORROWER PLEDGE AGREEMENT": the Pledge Agreement to be executed and
delivered by the Borrower, substantially in the form of Exhibit D, as the
same may be amended, supplemented or otherwise modified from time to time.
"BORROWER SECURITY AGREEMENT": the Security Agreement to be executed
and delivered by the Borrower, substantially in the form of Exhibit F, as
the same may be amended, supplemented or otherwise modified from time to
time.
"BORROWER SECURITY DOCUMENTS": the collective reference to the
Borrower Deposit Account Agreement, the Borrower Pledge Agreement and the
Borrower Security Agreement.
"BORROWING BASE": an amount equal to the sum (without duplication) of
(a) 85% of Eligible Accounts Receivable PLUS (b) 50% of Eligible Inventory;
PROVIDED that no more than 50% of the Borrowing Base at any time may be
attributable to Eligible Inventory. All determinations in connection with
the Borrowing Base shall be made by the Borrower and certified to the
Administrative Agent by a Responsible Officer of the Borrower; PROVIDED
HOWEVER, that the Administrative Agent shall have the final right to review
and adjust, in its reasonable judgment, any such determination to the
extent such determination is not in accordance with this Agreement.
"BORROWING BASE CERTIFICATE": a Certificate of a Responsible Officer
of the Borrower substantially in the form of Exhibit N hereto and
appropriately completed.
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.3 or 3.3 as a date on which the Borrower requests the Lenders
to make Loans hereunder.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City and London are authorized or
required by law to close.
"CAPITAL EXPENDITURES" shall mean, for any period, the aggregate of
all expenditures (whether paid in cash or accrued as liabilities and
including in all events Capital Lease Obligations incurred in such period,
but excluding (i) expenditures constituting the purchase price for
Permitted Acquisitions and (ii) amounts constituting Net Proceeds of asset
sales and property and casualty insurance policies which are reinvested in
the business of the Borrower in accordance with Section 4.4 by the Borrower
and its Subsidiaries during such period) that, in conformity with GAAP, are
or are required to be included as additions during such period to property,
plant or equipment reflected in the consolidated balance sheet of the
Borrower and its Subsidiaries.
"CAPITAL LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"CAPITAL LEASE OBLIGATIONS": of any Person as of the date of
determination, the aggregate liability of such Person under Capital Leases
reflected on a balance sheet of such Person under GAAP.
<PAGE>
5
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"CAPITALIZATION DOCUMENTS": the collective reference to the
organizational or governing documents of each Loan Party and each of the
subscription agreements, stockholders' agreements, certificates of
designation and other agreements governing the issuance of or setting forth
the terms of any Capital Stock issued or to be issued by the Borrower or
any Subsidiary.
"CASH EQUIVALENTS": (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the
date of acquisition and overnight bank deposits of any Lender or of any
commercial bank having capital and surplus in excess of $500,000,000, (c)
repurchase obligations of any Lender or of any commercial bank satisfying
the requirements of clause (b) of this definition, having a term of not
more than 30 days with respect to securities issued or fully guaranteed or
insured by the United States Government, (d) commercial paper of a domestic
issuer rated at least A-2 by Standard and Poor's Ratings Services ("S&P")
or P-2 by Moody's Investors Service, Inc. ("MOODY'S"), (e) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by
any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of
which state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's, (f) securities with maturities of one year or less
from the date of acquisition backed by standby letters of credit issued by
any Lender or any commercial bank satisfying the requirements of clause (b)
of this definition or (g) shares of money market mutual or similar funds
which invest exclusively in assets satisfying the requirements of clauses
(a) through (f) of this definition.
"C/D ASSESSMENT RATE": for any day as applied to any ABR Loan, the
annual assessment rate in effect on such day which is payable by a member
of the Bank Insurance Fund maintained by the Federal Deposit Insurance
Corporation (the "FDIC") classified as well-capitalized and within
supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. Section 327.4 (or any
successor provision) to the FDIC (or any successor) for the FDIC's (or such
successor's) insuring time deposits at offices of such institution in the
United States.
"C/D RESERVE PERCENTAGE": for any day as applied to any ABR Loan,
that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement
for a Depositary Institution (as defined in Regulation D of the Board) in
respect of new non-personal time deposits in Dollars having a maturity of
30 days or more.
<PAGE>
6
"CHANGE OF CONTROL": shall be deemed to have occurred if (a) Century
City 1800 Partners L.P., any investment fund managed by Aurora Capital
Partners, Gerald L. Parsky or any Person controlled by Gerald L. Parsky or
any Related Person collectively shall at any time not own directly or
indirectly, beneficially and of record, at least 51% (on a fully diluted
basis) of the economic interest in, or outstanding Voting Stock of, the
Borrower unless Century City 1800 Partners L.P., any investment fund
managed by Aurora Capital Partners, Gerald L. Parsky or any Person
controlled by Gerald L. Parsky or any Related Person collectively (i) hold,
directly or indirectly, at least 35% of the outstanding Voting Stock of the
Borrower, (ii) constitute, directly or indirectly, the largest holder of
outstanding Voting Stock of the Borrower and (iii) have the power to elect
a majority of the members of the board of directors of the Borrower or (b)
if a majority of the members of the board of directors of the Borrower are
not Continuing Directors.
"CHASE": The Chase Manhattan Bank.
"CLOSING DATE": the date on which each of the conditions precedent set
forth in subsection 6.1 shall be satisfied.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": all assets of the Loan Parties, now owned or hereinafter
acquired, upon which a Lien is purported to be created by any Security
Document.
"COMMITMENT": as to any Lender, the Revolving Credit Commitment and
the Term Loan Commitment of such Lender; collectively, as to all the
Lenders, the "COMMITMENTS".
"COMMITMENT PERCENTAGE": as to any Lender, the percentage of the
aggregate Commitments constituted by such Lender's Commitment.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"CONSOLIDATED CASH INTEREST EXPENSE": for any fiscal period, the
aggregate amount of interest in respect of Consolidated Total Debt payable
in cash during such period as determined on a consolidated basis in
accordance with GAAP, MINUS the aggregate amount of interest income of
Astor II and its Subsidiaries during such period payable in cash.
"CONSOLIDATED DEBT SERVICE": for any fiscal period, the sum, for
Astor II and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of (a) all regularly scheduled
payments of principal of Indebtedness (including, without limitation, the
principal component of any payments in respect of Capital Leases) during
such period PLUS (b) Consolidated Cash Interest Expense for such period.
"CONSOLIDATED EBITDA": for any fiscal period,
(A) Consolidated Net Income for such period
<PAGE>
7
PLUS
(B) to the extent deducted in computing such Consolidated Net Income,
the sum of (i) consolidated income tax expense of Astor II, (ii)
consolidated interest expense of Astor II, (iii) consolidated
depreciation and amortization expense of Astor II,
MINUS
(C) to the extent added in computing such consolidated net income, (i)
any interest income and (ii) any extraordinary gains (or plus
extraordinary losses) during such period, all as determined on a
consolidated basis, of Astor II and its Subsidiaries in accordance
with GAAP.
"CONSOLIDATED FIXED CHARGES": for any fiscal period, the sum, without
duplication, of (a) Consolidated Debt Service for such period, (b) taxes
paid in cash by Astor II and its Subsidiaries during such period, (c)
Capital Expenditures other than to the extent financed by incurrence of
Indebtedness permitted pursuant to Section 8.2(c) during such period and
(d) any dividends paid pursuant to clause (iii) of subsection 8.6.
"CONSOLIDATED NET INCOME": for any fiscal period, the consolidated net
income (or loss) of Astor II and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL DEBT": at any date, all consolidated Indebtedness
of Astor II and its Subsidiaries outstanding on such date.
"CONSOLIDATED WORKING CAPITAL": at any date, the excess of (a) the sum
of all amounts (other than cash and cash equivalents) that would, in
conformity with GAAP, be set forth opposite the caption "total current
assets" (or any like caption) on a consolidated balance sheet of Astor II
and its Subsidiaries at such date over (b) the sum of all amounts that
would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance sheet
of Astor II and its Subsidiaries on such date, but excluding the current
portion of any Indebtedness for borrowed money.
"CONTINUING DIRECTORS": as of any date of determination, any member of
the board of directors of the Borrower who (i) was a member of such board
of directors on the date hereof or (ii) was nominated for election or
elected to such board of directors with the approval of a majority of the
Continuing Directors who were members of such board at the time of such
nomination or election.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"DEBENTURE": the Debenture made on October 8, 1996 by Astor Stag
Limited in favor of the Borrower.
<PAGE>
8
"DEFAULT": any of the events specified in Section 9, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"DEFAULTED RECEIVABLE": any Account which:
(i) has been or should have been charged-off as not
creditworthy in conformity with the accounting policies of the
Borrower and its Subsidiaries as in effect on the Closing Date; or
(ii) is owed by an account debtor described in clause (k) of
the definition of Eligible Accounts Receivable.
"DEPOSIT ACCOUNT AGREEMENTS": the collective reference to the Borrower
Deposit Account Agreement and the Subsidiaries Deposit Account Agreement.
"DOLLAR EQUIVALENT": shall mean, with respect to any monetary amount
denominated in (i) Dollars, such amount, and (ii) any other currency, at
any time for the determination thereof, the amount of Dollars obtained by
converting such other currency into Dollars at the average of the spot
rates for the purchase of Dollars with such other currency, as quoted by
the Administrative Agent at approximately 11:00 A.M. (New York City time),
on the date of determination thereof specified herein or if the date of
determination thereof is not otherwise specified herein, in each case on
the date two Business Days prior to such determination.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
"DOMESTIC SUBSIDIARY": any Subsidiary of the Borrower which is not a
Foreign Subsidiary and shall in any event include ABI Acquisition 1 plc.
"ELIGIBLE ACCOUNTS RECEIVABLE": at any time, an amount equal to the
aggregate outstanding balance of all Accounts of the Borrower and its
Subsidiaries (other than Astor Stag S.A.) payable in the United States of
America or the United Kingdom in Dollars or Sterling as set forth in the
aging reports of billed Accounts for the Borrower and its Subsidiaries
(other than Astor Stag S.A.) as of such time, PROVIDED that, unless
otherwise approved in writing by the Administrative Agent, no Account shall
be deemed to be an Eligible Account Receivable if:
(a) such Account was, at the date of the original issuance of the
respective invoice therefor, payable more than 60 days after such
date;
(b) the Obligor thereon has been the obligor in respect of
Defaulted Receivables at any time during the immediately preceding
12-month period (other than Defaulted Receivables described in clause
(ii) of the definition of Defaulted Receivables if the respective
dispute, claim or defense has been resolved or if such dispute, claim,
defense or right of set-off is neither applicable to nor asserted with
respect to any Account other than the Defaulted Receivables);
<PAGE>
9
(c) such Account is not a bona fide, valid and legally
enforceable obligation of the account debtor in respect thereof
arising from the actual sale and delivery of goods or rendition and
acceptance of services in the ordinary course of business to such
account debtor;
(d) such Account remains unpaid for more than 60 days after the
date set forth for payment in the invoice originally issued therefor;
(e) it is from the same Obligor (or any Affiliate thereof) and
50% or more, in face amount, of all Accounts from such Obligor (and
its known Affiliates) are ineligible pursuant to (a) or (c) above;
(f) the Obligor is the Borrower or any Subsidiary or other
Affiliate thereof (other than Rheochem);
(g) the sale giving rise thereto is to an Obligor outside the
United States, the United Kingdom or any of the other jurisdictions
specified on Schedule A or to an Obligor in any other jurisdiction if
the obligation thereunder is backed by a letter of credit acceptable
to the Administrative Agent, unless the Administrative Agent shall
have notified the Borrower to the contrary;
(h) such Account is the result of a charge-back or a reinvoice of
a disputed Receivable or Defaulted Receivable;
(i) such Account has been or should have been charged off as not
creditworthy in conformity with the accounting policies of the
Borrower and such Subsidiaries as in effect on the Closing Date;
(j) it is an Account which may be set off or charged against (i)
any adverse security deposit or other similar deposit made by or for
the benefit of the applicable Obligor or (ii) any trade payable,
rebate obligation or other similar liability owing to the applicable
Obligor; PROVIDED that any Account deemed ineligible pursuant to this
clause (j) shall only be ineligible to the extent of such set-off or
charge against such adverse security deposit, trade payable, rebate
obligation or other similar deposit or liability;
(k) it arises from the sale to the Obligor on a bill-and-hold,
guarantied sale, sale-and-return, sale on approval or consignment
basis or made pursuant to any other written agreement providing for
repurchase or return; PROVIDED, HOWEVER, that no Account shall be
excluded pursuant to this clause (k) solely as a result of customary
quality warranties or the general right to return goods provided by
the Borrower or its Subsidiaries;
(l)(i) the Obligor thereon has disputed its liability on, or the
Obligor thereon has made any claim or defense with respect to, such
Account or any other Account due from such Obligor to any Loan Party,
which has not been resolved or (ii) such Account otherwise is or may
become subject to any right of set-off by the Obligor thereon;
PROVIDED that any Account deemed ineligible pursuant to this clause
(1) shall
<PAGE>
10
only be ineligible to the extent of the amount owed by such Loan Party
to the Obligor thereon, the amount of such dispute, claim or defense,
or the maximum amount at any time of such right of set-off, as
applicable;
(m) such Account is not owned solely by such Person free and
clear of all Liens or other rights or claims of any other Person
(except in favor of the Administrative Agent or the Borrower securing
amounts owing under the Intercompany Note);
(n) a proceeding under bankruptcy or similar laws has occurred
and is continuing with respect to the Obligor thereon;
(o) the Obligor thereon is any Governmental Authority;
(p) the goods giving rise to such Account have not been shipped
and delivered to the Obligor thereon or the services giving rise to
such Account have not been performed or such Account otherwise does
not represent a final sale or transfer of title to such Obligor;
(q) such Account does not comply in all material respects with
all applicable legal requirements;
(r) if the Accounts due from any Obligor exceed an amount equal
to 20% of the aggregate of all Accounts at said time, an amount of
such Accounts equal to such excess;
(s) such Account is subject to any material restrictions on the
transfer, assignability or sale thereof, enforceable against the
assignee, except (i) as described in clause (m) above or (ii) pursuant
to any Loan Document;
(t) the Administrative Agent does not have a valid and perfected
first priority security interest in such Account for the benefit of
the Lenders (or in favor of the Borrower securing amounts owing under
the Intercompany Note) or such Account does not otherwise conform in
all material respects to the representations and warranties contained
in this Agreement or any of the Security Documents; or
(u) such Account has otherwise been determined by the
Administrative Agent, exercising its reasonable discretion, to be
unacceptable;
PROVIDED that no more than 50% of the Eligible Accounts Receivable
shall be attributable to Accounts, the sales giving rise to which are
to Obligors outside the United States, unless such Accounts are
guaranteed by a third party acceptable to the Administrative Agent.
"ELIGIBLE INVENTORY": all Inventory (other than discontinued or
obsolete Inventory and work-in-process not saleable by the Borrower and its
Subsidiaries in its then current form) of the Borrower and its Subsidiaries
(other than Astor Stag S.A.) for sale to customers not excluded pursuant to
clauses (a) through (h) below. In determining the
<PAGE>
11
amount to be so included, the amount of such Inventory shall be valued at
the lower of cost or market on a basis consistent with the Borrower's or
the relevant Subsidiary's current and historical accounting practice LESS
reserves taken, if any, on account of physical inventory adjustments as
recorded in the Borrower's or such Subsidiary's accounting records and
goods in transit to third parties that are not excluded pursuant to clauses
(a) through (h) below. Unless otherwise approved in writing by the
Administrative Agent, no Inventory shall be deemed Eligible Inventory of
the Borrower or any of its Subsidiaries (other than Astor Stag S.A.) if
such Inventory:
(a) is not owned solely by such Person free and clear of all
Liens or other rights or claims of any other Person (except in favor
of the Administrative Agent for the benefit of the Lenders or in favor
of the Borrower securing amounts owing under the Intercompany Note) or
is leased or on consignment or such Person does not have good and
valid title thereto;
(b) is damaged or has been returned or rejected by any
prospective buyer thereof;
(c) is allocable to contracts with Governmental Authorities,
(d) is located at any location other than (i) a warehouse or
plant owned or leased by the Borrower or any of its Subsidiaries;
PROVIDED, HOWEVER, that no Inventory which is located at a storage or
manufacturing facility leased by the Borrower or any of its
Subsidiaries shall be considered "Eligible Inventory" unless the
Borrower or any of its Subsidiaries shall have obtained a written
waiver from the lessor of such property of any statutory or common law
landlord's lien with respect to such Inventory; PROVIDED, FURTHER,
that up to $5,000,000 of such Inventory may be included as Eligible
Inventory without such a waiver or (ii) any of the sites described in
Schedule B (other than inventory in transit in possession of a bailee
who has issued a negotiable document therefor and a perfected security
interest in favor of the Administrative Agent has been created in
respect thereof; PROVIDED that such amounts included as Eligible
Inventory shall not exceed $1,000,000);
(e) is not subject to a perfected first priority Lien in favor of
the Administrative Agent for the benefit of the Lenders or in favor of
the Borrower in connection with the Intercompany Note;
(f) is not located in the United States or the United Kingdom;
(g) does not conform in all material respects to the
representations and warranties contained in this Agreement or any of
the Security Documents; or
(h) has otherwise been determined by the Administrative Agent,
exercising its reasonable discretion, to be unacceptable.
"EMPLOYER REVERSION": the amount of cash and the fair market value of
other property received (directly or indirectly) by the Borrower or any
Commonly Controlled
<PAGE>
12
Entity from any Plan, whether or not the receipt of such amounts is subject
to Section 4980 of Code.
"ENVIRONMENTAL LAWS": any and all laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, or other legally enforceable
requirement (including, without limitation, common law) of any foreign
government, the United States, or any state, local, municipal or other
Governmental Authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or of human
health, as has been, is now, or may at any time hereafter be, in effect.
"ENVIRONMENTAL PERMITS": any and all permits, licenses, registrations,
notifications, exemptions and any other authorization required under any
Environmental Law.
"ENVIRONMENTAL REPORT": as defined in Section 6.1(ah).
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY LOAN": the individual or collective reference to a
Eurodollar Loan and/or a Eurosterling Loan, as the context requires.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by a member bank of such System.
"EURODOLLAR BASE RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the
rate at which Chase is offered Dollar deposits at or about 10:00 A.M., New
York City time, two Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Eurodollar Loans are
then being conducted for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to the
amount of its Eurodollar Loan to be outstanding during such Interest
Period.
"EURODOLLAR LOANS": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
EURODOLLAR BASE RATE
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
<PAGE>
13
"EUROSTERLING BASE RATE": with respect to each day during each
Interest Period pertaining to a Eurosterling Loan, the rate per annum equal
to the rate at which Chase is offered Sterling deposits at or about 11:00
A.M. London time, or 10:00 A.M., New York City time, two Business Days
prior to the beginning of such Interest Period in the interbank
eurosterling market where the eurosterling and foreign currency and
exchange operations in respect of its Eurosterling Loans are then being
conducted for delivery on the first day of such Interest Period for the
number of days comprised therein and in an amount comparable to the amount
of its Eurosterling Loan to be outstanding during such Interest Period.
"EUROSTERLING LOANS": Loans the rate of interest applicable to which
is based upon the Eurosterling Rate.
"EUROSTERLING RATE": with respect to each day during each Interest
Period pertaining to a Eurosterling Loan, a rate per annum equal to the sum
of (a) the Eurosterling Base Rate and (b) the rate per annum calculated by
the Administrative Agent on the Sterling Quotation Date for such Interest
Period to be that which expresses the prevailing cost to the Administrative
Agent of complying with the requirements for the time being of the Bank of
England in respect of monetary control and liquidity in respect of such
Eurosterling Loan and such Interest Period.
"EVENT OF DEFAULT": any of the events specified in Section 9; PROVIDED
that any requirement for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
"EXCESS CASH FLOW": for any fiscal period, an amount equal to the
excess of
(a) the sum, without duplication, of (i) Consolidated Net Income for such
period, (ii) an amount equal to the amount of all non-cash charges,
including losses from asset sales, to the extent deducted in arriving at
such Consolidated Net Income and (iii) decreases in Consolidated Working
Capital for such period.
OVER
(b) the sum, without duplication, of (i) an amount equal to the amount of
all non-cash credits included in arriving at such Consolidated Net Income,
(ii) the aggregate amount actually paid by the Borrower and its
Subsidiaries in cash during such period on account of Capital Expenditures
(excluding the principal amount of Indebtedness incurred in connection with
such Capital Expenditures, whether incurred in such period or in a
subsequent period), (iii) gains from asset sales during such period, (iv)
scheduled principal payments in such period in respect of all outstanding
Indebtedness permitted under Section 8.2 (including without limitation all
amounts expended in respect of Capital Leases), (v) the aggregate amount of
all prepayments of Revolving Credit Loans made during such period to the
extent accompanying permanent reductions of the Revolving Credit
Commitments are made, (vi) the aggregate amount of all scheduled principal
payments and optional prepayments of principal of Term Loans, (vii)
increases in Consolidated Working Capital for such period and (viii) the
amount set forth in clauses (ii) and (iii) of subsection 8.6.
<PAGE>
14
"FOREIGN SUBSIDIARY": any Subsidiary of the Borrower which is
organized and existing under the laws of any jurisdiction outside of the
United States of America (other than ABI Acquisition 1 plc).
"FRANCS": francs in lawful currency of Belgium.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "PRIMARY OBLIGATIONS") of any other third Person
(the "PRIMARY obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; PROVIDED
that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business.
The amount of any Guarantee Obligation of any guaranteeing person shall be
deemed to be the lower of (a) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing
person may be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum amount
for which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation shall
be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"HEDGING ARRANGEMENT": (a) any transaction which is a rate swap
transaction, basis swap, forward rate transaction, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any commodity
swap or other agreement designed to protect against fluctuations in the
price of oil or oil-related products and (c) any combination of these
transactions.
<PAGE>
15
"HOLDING COMPANIES": Astor II and Astor Holdings, Inc.
"HOLDING COMPANIES GUARANTEES": each Guarantee to be executed and
delivered by the Holding Companies, substantially in the form of Exhibit H,
as the same may be amended, supplemented or otherwise modified from time to
time.
"HOLDING COMPANIES PLEDGE AGREEMENT": the Pledge Agreement to be
executed and delivered by each Holding Company, substantially in the form
of Exhibit C, as the same may be amended, supplemented or otherwise
modified from time to time.
"INDEBTEDNESS": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (excluding current liabilities in
respect of trade payables incurred in the ordinary course of business and
payable in accordance with customary practices), (b) any other indebtedness
of such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under Capital Leases, (d)
all obligations of such Person in respect of letters of credit, acceptances
or similar instruments issued or created for the account of such Person,
(e) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable
for the payment thereof and (f) all Guarantee Obligations of such Person
and shall in any event (except, to the extent of Hedging Arrangements for
legitimate hedging purposes related to the business of the Borrower and its
Subsidiaries and not for speculative purposes, for purposes of calculating
the ratios set forth in subsection 8.1) include the Borrower's or any of
its Subsidiaries' net exposure under any Hedging Arrangements.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTERCOMPANY NOTE": the note payable by Astor Stag Ltd. to the
Borrower, substantially in the form of Exhibit P, as amended, supplemented
or otherwise modified in accordance with the terms hereof.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the first day of each
October, January, April and July, (b) as to any Eurocurrency Loan having an
Interest Period of three months or less, the last day of such Interest
Period and (c) as to any Eurocurrency Loan having an Interest Period longer
than three months, each day which is three months, or a whole multiple
thereof, after the first day of such Interest Period and the last day of
such Interest Period.
"INTEREST PERIOD": with respect to any Eurocurrency Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurocurrency
Loan and ending one, three or six months (or, to the extent available
to all the Lenders, nine or twelve months) thereafter, as selected by
the Borrower in its notice of borrowing or notice of conversion, as
the case may be, given with respect thereto; and
<PAGE>
16
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Eurocurrency
Loan and ending one, three or six months (or, to the extent available
to all the Lenders, nine or twelve months) thereafter, as selected by
the Borrower by irrevocable notice to the Administrative Agent not
less than three Business Days prior to the last day of the then
current Interest Period with respect thereto;
PROVIDED that all of the foregoing provisions relating to Interest Periods
are subject to the following:
(1) if any Interest Period pertaining to a Eurocurrency Loan
would otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(2) no Interest Period applicable to Revolving Credit Loans or
Term Loans shall extend beyond the Revolving Credit Termination Date
or beyond the date final payment is due on the Term Loans, as the case
may be;
(3) any Interest Period pertaining to a Eurocurrency Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of a calendar month; and
(4) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurocurrency Loan during an
Interest Period for such Loan.
"INVENTORY": as defined in the Uniform Commercial Code as in effect in
the State of New York; and, with respect to the Borrower and its
Subsidiaries (other than Astor Stag S.A.), all such Inventory of the
Borrower and such Subsidiaries.
"ISSUING BANK": Chase, in its capacity as issuer of any Letter of
Credit.
"L/C FEE PAYMENT DATE": with respect to any Letter of Credit, the last
day of each March, June, September and December to occur after the date of
issuance thereof.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit (including, without limitation, in the case of outstanding
Subsidiary Backstop Letters of Credit, the Dollar Equivalent of the
aggregate then undrawn and unexpired amount thereof) and (b) the aggregate
amount of drawings under Letters of Credit which have not then been
reimbursed pursuant to subsection 2.8(a) (including, without limitation, in
the case of Subsidiary Backstop Letters of Credit, the Dollar Equivalent of
the unreimbursed aggregate amount of drawings thereunder, to the extent
that such amount has not been converted into Dollars in accordance with
subsection 2.8(a)).
<PAGE>
17
"L/C PARTICIPANTS": the collective reference to all the Lenders other
than the Issuing Bank.
"LETTERS OF CREDIT": as defined in paragraph 2.4(a).
"LIEN": any mortgage, pledge, hypothecation, collateral assignment,
deposit arrangement intended for security, encumbrance, lien (statutory or
other), charge or other security interest or any preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement and any Capital Lease having substantially the
same economic effect as any of the foregoing).
"LOAN": any loan made by any Lender pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, any Notes, the Applications, the
Subsidiaries Guarantees, the Holding Companies Guarantees and the Security
Documents.
"LOAN PARTIES": the Borrower and each Subsidiary of the Borrower and
each Holding Company which is a party to a Loan Document.
"MAJORITY LENDERS": at any time, Lenders the Commitment Percentages of
which aggregate more than 50%.
"MANAGEMENT SERVICES AGREEMENT" means the Management Services
Agreement dated June 8, 1995 among Astor Holdings, Inc., UBS Capital
Corporation and Century City 1800 Partners, L.P., a Delaware limited
partnership.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of the Borrower and its Subsidiaries to consummate the Acquisition
or to perform their obligations under this Agreement or any of the other
Loan Documents or (c) the validity or enforceability of this Agreement or
any of the other Loan Documents or the rights or remedies of the Lenders
hereunder or thereunder.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos,
pollutants, contaminants, radioactivity, and any other substances or forces
of any kind, whether or not any such substance or force is defined as
hazardous or toxic under any Environmental Law, that is regulated pursuant
to or could give rise to liability under any Environmental Law.
"MERGER AGREEMENT": as defined in the recitals to this Agreement.
"MORTGAGES": the collective reference to the mortgages and deeds of
trust to be executed and delivered by the Borrower or the appropriate
Subsidiary, in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified from time to time.
<PAGE>
18
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NET PROCEEDS": (a) with respect to the sale or other disposition of
any asset by the Borrower or any of its Subsidiaries (including, without
limitation, in connection with any sale-leaseback or as a result of any
casualty or condemnation), the excess, if any, of (i) the aggregate amount
received in cash (including any cash received by way of deferred payment
pursuant to a note receivable, other non-cash consideration or otherwise,
but only as and when such cash is so received) in connection with such sale
or other disposition over (ii) the sum of (A) the principal amount of any
Indebtedness which is secured by any such asset (other than Indebtedness
assumed by the purchaser of such asset) or which is required to be, and is,
repaid in connection with the sale or other disposition thereof (other than
Indebtedness outstanding hereunder), (B) the reasonable fees, commissions
and other out-of-pocket expenses incurred by the Borrower or such
Subsidiary in connection with such sale or other disposition and (C)
federal and state taxes incurred (and, in the case of any disposition by
any Foreign Subsidiary, taxes of relevant foreign jurisdictions) in
connection with such sale;
(b) with respect to the sale or other disposition of any Capital Stock
by the Borrower or any of its Subsidiaries, the excess of (i) the aggregate
amount received in cash (including any cash received by way of deferred
payment pursuant to a note receivable, other non-cash consideration or
otherwise, but only as and when such cash is so received) in connection
with such sale or other disposition over (ii) the sum of (A) the principal
amount of any Indebtedness which is secured by any such Capital Stock
(other than Indebtedness assumed by the purchaser of such Capital Stock) or
which is required to be, and is, repaid in connection with the sale or
other disposition thereof (other than Indebtedness outstanding hereunder),
(B) the reasonable fees, commissions and other out-of-pocket expenses
incurred by the Borrower or such Subsidiary in connection with such sale or
other disposition and (C) federal and state taxes incurred (and, in the
case of any disposition by any Foreign Subsidiary, taxes of relevant
foreign jurisdictions) in connection with such sale; and
(c) with respect to the incurrence of any additional Indebtedness by
the Borrower or any of its Subsidiaries (other than Indebtedness permitted
pursuant to subsection 8.2), the excess of (i) the aggregate amount of such
Indebtedness over (ii) the reasonable fees, commissions and other
out-of-pocket expenses incurred by the Borrower or such Subsidiary in
connection with incurring such Indebtedness.
"NON-EXCLUDED TAXES": as defined in subsection 4.13.
"NOTES": the collective reference to the Revolving Credit Notes and
the Term Notes.
"OBLIGOR": any purchaser of goods or services or other Person
obligated to make payment to the Borrower or a Subsidiary in respect of a
purchase of such goods or services.
"PARTICIPANT": as defined in subsection 11.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
<PAGE>
19
"PERMITTED ACQUISITIONS": as defined in subsection 8.8(c).
"PERMITTED L/C SUBSIDIARY": Astor Stag S.A. or any Subsidiary of the
Borrower organized under the laws of the United Kingdom.
"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGE AGREEMENTS": the collective reference to the Borrower Pledge
Agreement, each Subsidiaries Pledge Agreement and each Holding Companies
Pledge Agreement.
"PREFERRED STOCK": the Capital Stock of Astor Holdings, Inc. issued
pursuant to the Certificate of Designations attached to the certificate
delivered pursuant to Section 6.1(c) having a liquidation preference over
the common stock of Astor Holdings, Inc.
"PRO FORMA BALANCE SHEET": as defined in subsection 5.1(a).
"REGISTER": as defined in subsection 11.6(d).
"REGULATION U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to
reimburse the Issuing Bank pursuant to subsection 2.8(a) for amounts drawn
under Letters of Credit.
"RELATED PERSON" means as to any natural person, (i) such Person's
spouse, parents and descendants (whether by blood or adoption, and
including stepchildren) and the spouses of any of such natural persons and
(ii) any corporation, partnership, trust or other Person in which no one
has any interest (directly or indirectly) except for any of such natural
person, such spouse, parents and descendants (whether by blood or adoption,
and including stepchildren) and the spouses of any such natural persons.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 2615.
<PAGE>
20
"REQUIREMENT OF LAW": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer or the chief
administrative officer of the Borrower or, with respect to financial
matters, the chief financial officer of the Borrower.
"REVOLVING CREDIT COMMITMENT": with respect to each Lender its
obligation to make Revolving Credit Loans pursuant to subsection 2.1 in an
amount not to exceed the amount set forth under the heading "Revolving
Credit Commitment" opposite such Lender's name on Schedule 1.1, as such
amount may be reduced from time to time pursuant to this Agreement.
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and including
the date hereof to but not including the Revolving Credit Termination Date
or such earlier date on which the Revolving Credit Commitments shall
terminate as provided herein.
"REVOLVING CREDIT LOANS": as defined in subsection 2.1.
"REVOLVING CREDIT NOTE": as defined in subsection 2.2.
"REVOLVING CREDIT TERMINATION DATE": October 1, 2002, or such earlier
date on which the Revolving Credit Commitments shall terminate as provided
herein.
"RHEOCHEM": Rheochem Technologies, Inc., a Delaware corporation.
"SECURITY AGREEMENTS": the collective reference to the Borrower
Security Agreement and the Subsidiaries Security Agreements.
"SECURITY DOCUMENTS": the collective reference to the Deposit Account
Agreements, the Mortgages, the Pledge Agreements, the Security Agreements
and all other security documents hereafter delivered to the Administrative
Agent granting a Lien on any asset or assets of any Person to secure the
obligations and liabilities of the Borrower hereunder and under any of the
other Loan Documents or to secure any guarantee of any such obligations and
liabilities.
"SIGNIFICANT SUBSIDIARY": with respect to any Person, any Subsidiary
of such Person that would be a "significant subsidiary" as defined in
Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the
Securities Act of 1933, as amended, as such Regulation is in effect on the
date hereof and in any event shall include Astor Stag Limited.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
<PAGE>
21
"SOLVENT": when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount that
will be required to pay all "liabilities of such Person, contingent or
otherwise", as of such date (as such quoted terms are determined in
accordance with applicable federal and state laws governing determinations
of the insolvency of debtors) as such debts become absolute and matured,
(b) such Person will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business and (c) such Person
will be able to pay its debts as they mature, taking into account the
timing of and amounts of cash to be received by such Person and the timing
of and amounts of cash to be payable on or in respect of indebtedness of
such Person; in each case after giving effect to (A) as of the Closing Date
the making of the extensions of credit to be made on the Closing Date and
to the application of the proceeds of such extensions of credit and (B) on
any date after the Closing Date, the making of any extension of credit to
be made on such date, and to the application of the proceeds of such
extension of credit. For purposes of this definition, (i) "debt" means
liability on a "claim" and (ii) "claim" means any right to payment, whether
or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured or unsecured.
"STERLING" and "L": pounds sterling in lawful currency of the United
Kingdom.
"STERLING QUOTATION DATE": for any Interest Period for which the
Eurosterling Rate is to be determined hereunder, the Business Day on which
quotations would ordinarily be given by banks in the London interbank
market for deposits in Sterling for delivery on the first day of that
Interest Period which date shall be two Business Days prior to the
commencement of such Interest Period; PROVIDED that if, for any such
Interest Period, quotations are not given on that date, the Sterling
Quotation Date for that Interest Period shall be the next Business Day.
"SUBORDINATED NOTES": the Borrower's 10.5% Senior Subordinated Notes
due 2006.
"SUBSIDIARIES DEPOSIT ACCOUNT AGREEMENTS": the Deposit Account
Agreements to be executed and delivered by each Domestic Subsidiary
specified by the Administrative Agent, in form satisfactory to the Lenders,
as the same may be amended, supplemented or otherwise modified from time to
time.
"SUBSIDIARIES GUARANTEES": each Guarantee to be executed and delivered
by each Domestic Subsidiary, substantially in the form of Exhibit I, as the
same may be amended, supplemented or otherwise modified from time to time.
"SUBSIDIARIES PLEDGE AGREEMENT": the Pledge Agreement to be executed
and delivered by each Domestic Subsidiary, substantially in the form of
Exhibit E, as the same may be amended, supplemented or otherwise modified
from time to time.
"SUBSIDIARIES SECURITY AGREEMENTS": each Security Agreement to be
executed and delivered by each Domestic Subsidiary in favor of the
Administrative Agent, substantially in the form of Exhibit G, as the same
may be amended, supplemented or otherwise modified from time to time.
<PAGE>
22
"SUBSIDIARIES SECURITY DOCUMENTS": the collective reference to the
Subsidiaries Deposit Account Agreement, the Subsidiaries Pledge Agreement
and the Subsidiaries Security Agreements.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. ABI
Acquisition 1 plc, a corporation dually incorporated in England and
Delaware, shall be deemed to be a Subsidiary of the Borrower for all
purposes of this Agreement at any time if it is a Subsidiary (as determined
above) of the Borrower and/or Astor II. Because on the date of this
Agreement, the Borrower owns, directly or indirectly, no more than 50% of
the Voting Stock of Rheochem, and the Borrower does not control the
management of Rheochem, on the date of this Agreement Rheochem is not a
Subsidiary of the Borrower.
"SUBSIDIARY BACKSTOP LETTERS OF CREDIT": any Letter of Credit issued
to any Person for the account of the Borrower to provide credit support for
Indebtedness of any Permitted L/C Subsidiary to such Person which is
permitted under subsection 8.2.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement dated June 28,
1995 among Astor Holdings, Inc., Astor II and the Borrower.
"TERM LOAN": as defined in subsection 3.1.
"TERM LOAN COMMITMENT": with respect to each Lender, the obligation of
such Lender to make Term Loans pursuant to subsection 3.1 in an amount not
to exceed the product of (i) the amount set forth under the heading "Term
Loan Commitment" opposite such Lender's name on Schedule 1.1 and (ii) a
Dollar/Sterling exchange rate of 1.565 Dollars per Sterling, as such amount
may be reduced from time to time pursuant to this Agreement.
"TERM NOTE": as defined in subsection 3.2(a).
"TOTAL DEBT RATIO": at any date of determination, the ratio of
Consolidated Total Debt at such time to Consolidated EBITDA for the period
of determination.
"TRANCHE": the collective reference to Eurocurrency Loans the then
current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall
originally have been made on the same day and whether such Loans are
Revolving Credit Loans or Term Loans or any combination thereof); Tranches
may be identified as "EUROCURRENCY TRANCHES".
"TRANSFEREE": as defined in subsection 11.6(f).
<PAGE>
23
"TYPE": as to any Loan, its nature as an ABR Loan, a Eurodollar Loan
or a Eurosterling Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
"VOTING STOCK": any class or classes of stock or other ownership
interests pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the
board of directors, managers or trustees of any Person (irrespective of
whether or not, at the time, stock or ownership interests of any other
class or classes have or might have voting power by reason of the happening
of any contingency).
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1 and accounting terms
partly defined in subsection 1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. REVOLVING CREDIT COMMITMENTS
2.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
denominated in Dollars or Sterling ("REVOLVING CREDIT LOANS") to the Borrower
from time to time during the Revolving Credit Commitment Period in an aggregate
unpaid principal amount the Dollar Equivalent of which, when added to such
Lender's Commitment Percentage of the Dollar Equivalent of the then outstanding
L/C Obligations, does not exceed the lesser of (i) such Lender's Revolving
Credit Commitment and (ii) such Lender's Revolving Credit Commitment Percentage
of the Dollar Equivalent of the Borrowing Base then in effect (it being
understood and agreed that the Administrative Agent shall calculate the Dollar
Equivalent of the then outstanding Revolving Credit Loans and the Dollar
Equivalent of the then outstanding L/C Obligations on the date on which the
Borrower has given the Administrative Agent a notice of borrowing with respect
to any Revolving Credit Loan for purposes of determining compliance with this
subsection). During the Revolving Credit Commitment Period, the Borrower may use
the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit
Loans in whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
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24
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) Eurosterling Loans, (iii) ABR Loans or (iv) a combination thereof,
as determined by the Borrower and notified to the Administrative Agent in
accordance with subsections 2.3 and 4.5; PROVIDED that no Revolving Credit Loan
shall be made as a Eurodollar Loan or Eurosterling Loan after the day that is
one month prior to the Revolving Credit Termination Date.
2.2 REVOLVING CREDIT NOTES. The Revolving Credit Loans made by each
Lender shall be evidenced by a promissory note of the Borrower, substantially in
the form of Exhibit A-1, with appropriate insertions as to payee, date and
principal amount (each, as amended, supplemented, replaced or otherwise modified
from time to time, a "REVOLVING CREDIT NOTE"), payable to the order of such
Lender and in a principal amount equal to the lesser of (a) the amount set forth
opposite such Lender's name in Schedule 1.1 under the heading "Revolving Credit
Commitment" and (b) the aggregate unpaid principal amount of all Revolving
Credit Loans made by such Lender. Each Revolving Credit Lender is hereby
authorized to record the date, Type and amount of each Revolving Credit Loan
made by such Lender, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof and, in the case of Eurocurrency Loans, the
length of each Interest Period and Eurodollar Rate or Eurosterling Rate, as
applicable, with respect thereto, on its internal books and records and/or on
the schedule annexed to and constituting a part of its Revolving Credit Note,
and any such recordation on such schedule shall constitute PRIMA FACIE evidence
of the accuracy of the information so recorded; PROVIDED that the failure by any
Lender to make any such recordation shall not affect the obligations of the
Borrower under this Agreement or the Revolving Credit Notes. Each Revolving
Credit Note shall (i) be dated the Closing Date, (ii) be stated to mature on the
Revolving Credit Termination Date and (iii) provide for the payment of interest
in accordance with subsection 4.7.
2.3 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day; PROVIDED that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, (a) three Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Revolving Credit Loans are to be initially Eurocurrency Loans or (b) on the
requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed,
(ii) the requested Borrowing Date, (iii) whether the borrowing is to be of
Eurodollar Loans, Eurosterling Loans or ABR Loans or a combination thereof and
(iv) if the borrowing is to be entirely or partly of Eurodollar Loans or
Eurosterling Loans, the amounts of such Type of Loan and the lengths of the
initial Interest Periods therefor. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$500,000 or a whole multiple thereof (or, if the then Available Revolving Credit
Commitments or the Dollar Equivalent of the then available Borrowing Base are
less than $500,000, such lesser amount) and (y) in the case of Eurocurrency
Loans, $1,000,000 or a whole multiple of $500,000 (or, in the case of
Eurocurrency Loans made in Sterling, the Dollar Equivalent thereof) in excess
thereof (or, if the then Available Revolving Credit Commitments or the Dollar
Equivalent of the then available Borrowing Base are less than $1,000,000, such
lesser amount). Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Lender thereof. Each Lender will
make the amount of its PRO RATA share of each borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in subsection 11.2 prior to 12:00 noon, New York
City time, on the Borrowing Date requested by the Borrower in funds immediately
available to the
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25
Administrative Agent. Such borrowing will then be made available to the Borrower
by the Administrative Agent crediting the account of the Borrower on the books
of such office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
2.4 LETTER OF CREDIT COMMITMENT. (a) Subject to the terms and
conditions hereof, the Issuing Bank, in reliance on the agreements of the other
Lenders set forth in subsection 2.7(a), agrees to issue standby letters of
credit ("LETTERS OF CREDIT") for the account of the Borrower on any Business Day
during the Revolving Credit Commitment Period in such form as may be approved
from time to time by the Issuing Bank and in an aggregate amount not exceeding
the Dollar Equivalent of $10,000,000; PROVIDED that the Issuing Bank shall have
no obligation to issue any Letter of Credit if, after giving effect to such
issuance, the Available Revolving Credit Commitment or the Dollar Equivalent of
the then available Borrowing Base would be less than zero; and PROVIDED FURTHER
that the Issuing Bank shall have no obligation to issue any Subsidiary Backstop
Letter of Credit to provide credit support for Indebtedness of Astor Stag S.A.
if, after giving effect to such issuance, the Dollar Equivalent of the aggregate
amount of Subsidiary Backstop Letters of Credit issued to provide credit support
for Indebtedness of Astor Stag S.A. would exceed $3,500,000 (it being understood
and agreed that the Administrative Agent shall calculate the Dollar Equivalent
of the then outstanding Revolving Credit Loans and the Dollar Equivalent of the
then outstanding L/C Obligations on the date on which the Borrower has requested
that the Issuing Lender issue a Letter of Credit for purposes of determining
compliance with this subsection).
(b) Each Letter of Credit shall be denominated in Dollars or, in the
case of Subsidiary Backstop Letters of Credit, in Sterling or Francs, and shall
expire no later than the earlier of (i) one year after the date of issuance and
(ii) ten business days prior to the Revolving Credit Termination Date; PROVIDED
that any Letter of Credit with a one-year tenor may provide for the renewal or
extension thereof for additional one-year periods (which shall in no event
extend beyond the date referred to in clause (ii) above).
(c) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.
(d) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
2.5 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower may from
time to time request that the Issuing Bank issue a Letter of Credit for its own
account by delivering to the Issuing Bank at its address for notices specified
herein an Application therefor, completed to the satisfaction of the Issuing
Bank, and such other certificates, documents and other papers and information as
the Issuing Bank may request. Upon receipt of any Application, the Issuing Bank
will process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event, other than those Letters of Credit set forth on
Schedule 2.5 to be issued on the Closing Date, shall the Issuing Bank be
required to issue any Letter of Credit earlier than three Business Days after
its receipt of the Application therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as
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26
otherwise may be agreed by the Issuing Bank and the Borrower. The Issuing Bank
shall furnish a copy of such Letter of Credit to the Borrower promptly following
the issuance thereof.
2.6 FEES, COMMISSIONS AND OTHER CHARGES. (a) The Borrower shall pay to
the Issuing Bank a fronting fee with respect to each Letter of Credit in an
amount equal to 1/4% per annum on the undrawn face amount of such Letter of
Credit. Such fronting fee shall be payable quarterly in arrears to the Issuing
Bank for its own account.
(b) The Borrower shall pay to the Administrative Agent, for the
account of the Issuing Bank and the L/C Participants, a letter of credit
commission with respect to each Letter of Credit, computed for the period from
the date of such payment to the date upon which the next such payment is due
hereunder at a rate per annum equal to the Applicable Margin then in effect with
respect to Eurodollar Loans on the undrawn face amount of each such Letter of
Credit. Such commissions shall be shared ratably among the Lenders participating
in the Revolving Credit Commitments, shall be payable quarterly in arrears on
the first L/C Fee Payment Date to occur after the date of issuance of each
Letter of Credit and on each L/C Fee Payment Date to occur thereafter and shall
be nonrefundable. Such fees and commissions shall be payable in Dollars,
notwithstanding that a Letter of Credit may be denominated in Sterling or
Francs. In respect of a Letter of Credit denominated in Sterling or Francs, such
fees and commissions shall be converted into Dollars in accordance with the
definition of "Dollar Equivalent" on the date on which they are paid (or, if
such date is not a Business Day, on the Business Day next preceding such date).
(c) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by the Issuing Bank in issuing, effecting
payment under, amending or otherwise administering any Letter of Credit.
(d) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Bank and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
2.7 L/C PARTICIPATIONS. (a) The Issuing Bank irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank
to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to
accept and purchase and hereby accepts and purchases from the Issuing Bank, on
the terms and conditions hereinafter stated, for such L/C Participant's own
account and risk an undivided interest equal to such L/C Participant's
Commitment Percentage in the Issuing Bank's obligations and rights under each
Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Bank thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit
for which the Issuing Bank is not reimbursed in full by the Borrower in
accordance with the terms of this Agreement, such L/C Participant shall pay to
the Issuing Bank upon demand (which demand, in the case of any demand made in
respect of any draft under a Subsidiary Backstop Letter of Credit, shall not be
made prior to the date that the amount of such draft shall be converted into
Dollars in accordance with subsection 2.8(a)) at the Issuing Bank's address for
notices specified herein an amount equal to such L/C Participant's Commitment
Percentage of the amount of such draft, or any part thereof, which is not so
reimbursed.
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27
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to paragraph 2.7(a) in respect of any unreimbursed portion
of any payment made by the Issuing Bank under any Letter of Credit is paid to
the Issuing Bank within three Business Days after the date such payment is due,
such L/C Participant shall pay to the Issuing Bank on demand an amount equal to
the product of (i) such amount, times (ii) the daily average Federal funds rate,
as quoted by the Issuing Bank, during the period from and including the date
such payment is required to the date on which such payment is immediately
available to the Issuing Bank, times (iii) a fraction the numerator of which is
the number of days that elapse during such period and the denominator of which
is 360. If any such amount required to be paid by any L/C Participant pursuant
to subsection 2.7(a) is not in fact made available to the Issuing Bank by such
L/C Participant within three Business Days after the date such payment is due,
the Issuing Bank shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to ABR Loans hereunder. A certificate of the Issuing
Bank submitted to any L/C Participant with respect to any amounts owing under
this subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit and has received from any L/C Participant its PRO
RATA share of such payment in accordance with subsection 2.7(a), the Issuing
Bank receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Bank), or any payment of interest on account thereof, the Issuing
Bank will distribute to such L/C Participant its PRO RATA share thereof;
PROVIDED that in the event that any such payment received by the Issuing Bank
shall be required to be returned by the Issuing Bank, such L/C Participant shall
return to the Issuing Bank the portion thereof previously distributed by the
Issuing Bank to it.
2.8 REIMBURSEMENT OBLIGATION OF THE BORROWER. (a) The Borrower
unconditionally agrees to reimburse the Issuing Bank (on behalf of itself and
each of the Permitted L/C Subsidiaries) on each date on which the Issuing Bank
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Bank for the amount of (i) such draft
so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Bank in connection with such payment. Each such payment shall be
made to the Issuing Bank at its address for notices specified herein in the
currency in which such Letter of Credit is denominated (except that, in the case
of any Subsidiary Backstop Letter of Credit denominated in Sterling or Francs,
in the event that such payment is not made to the Issuing Lender within three
Business Days of the date of receipt by the Borrower of such notice, upon notice
by the Issuing Lender to the Borrower, such payment shall be made in Dollars, in
an amount equal to the Dollar Equivalent of the amount of such payment converted
on the date of such notice into Dollars in accordance with the definition of
"Dollar Equivalent") and in immediately available funds. Any conversion by the
Issuing Lender of any payment to be made by the Borrower in respect of any
Letter of Credit denominated in Sterling or Francs into Dollars in accordance
with this subsection 2.8(a) shall be conclusive and binding upon the Borrower
and the Lenders in the absence of manifest error.
(b) Interest shall be payable on any and all amounts remaining unpaid
by the Borrower under this subsection from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment in full
at the rate which would be payable on any outstanding ABR Loans which were then
overdue.
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28
(c) Each drawing under any Letter of Credit shall constitute a timely
request by the Borrower to the Administrative Agent for a borrowing pursuant to
subsection 2.3 of ABR Loans in the amount of such drawing. The Borrowing Date
with respect to such borrowing shall be the date of such drawing.
2.9 OBLIGATIONS ABSOLUTE. (a) The Borrower's obligations under this
Section 2 shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Bank or any beneficiary of a
Letter of Credit.
(b) The Borrower also agrees with the Issuing Bank that the Issuing
Bank shall not be responsible for, and the Borrower's Reimbursement Obligations
under subsection 2.8(a) shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or (ii)
any dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
(iii) any claims whatsoever of the Borrower against any beneficiary of such
Letter of Credit or any such transferee.
(c) The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Bank's gross negligence or willful
misconduct.
(d) The Borrower agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Bank to the Borrower.
2.10 LETTER OF CREDIT PAYMENTS. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Bank shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing Bank
to the Borrower in connection with any draft presented for payment under any
Letter of Credit shall, in addition to any payment obligation expressly provided
for in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit.
2.11 APPLICATION. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 2, the provisions of this Section 2 shall apply.
2.12 USE OF REVOLVING CREDIT LOANS AND THE LETTERS OF CREDIT. The
proceeds of the Revolving Credit Loans and the Letters of Credit shall be used
by the Borrower to (i) finance the Acquisition and Permitted Acquisitions and to
pay related fees and expenses, (ii) refinance certain existing indebtedness of
the Borrower, ABI Acquisition 2 plc and Astor Stag Limited and (iii) finance
working capital needs of the Borrower and its Subsidiaries in the ordinary
course of business and other general corporate purposes of the Borrower.
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29
SECTION 3. TERM LOAN COMMITMENTS
3.1 TERM LOANS. Subject to the terms and conditions hereof, each
Lender severally agrees to make a term loan denominated in Sterling (a "TERM
LOAN") to the Borrower on the Closing Date in an amount not to exceed the Term
Loan Commitment of such Lender then in effect. The Term Loans shall at all times
unless otherwise provided in this Agreement be Eurosterling Loans.
3.2 TERM NOTES. (a) The Term Loan made by each Lender shall be
evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A-2 (each, as amended, supplemented, replaced or otherwise modified from
time to time, a "TERM NOTE"), with appropriate insertions therein as to payee,
date and principal amount, payable to the order of such Lender and in a
principal amount equal to the amount set forth opposite such Lender's name in
Schedule 1.1 under the heading "Term Loan Commitment" (or the Sterling
equivalent computed based on the exchange rate specified in the definition of
Term Loan Commitment). Each Lender is hereby authorized to record the date and
amount of the Term Loan made by such Lender, the date and amount of each payment
or prepayment of principal of its Term Loan, and the length of each Interest
Period and Eurosterling Rate with respect thereto, on its internal books and
records and/or on the schedule annexed to and constituting a part of its Term
Note, and any such recordation on such schedule shall constitute PRIMA FACIE
evidence of the accuracy of the information so recorded; PROVIDED that the
failure by any Lender to make any such recordation shall not affect the
obligations of the Borrower under this Agreement and the Term Notes. The Term
Note of each Lender shall (i) be dated the Closing Date, (ii) be payable as
provided in subsection 3.2(b) and (iii) provide for the payment of interest in
accordance with subsection 4.7.
(b) The Term Loans shall be repayable in consecutive quarterly
installments on the first day of each October, January, April and July, and on
October 1, 2002, each such quarterly installment to be in an amount equal to the
amount set forth below opposite October, 1997 and one-quarter of the amount set
forth below opposite the period during which such installment comes due:
Period Amount
------ ------
October, 1997 L 638,977.60
November, 1997 through October, 1998 958,466.40
November, 1998 through October, 1999 1,597,444.72
November, 1999 through October, 2000 2,875,399.20
November, 2000 through October, 2001 2,875,399.20
November, 2001 through October, 2002 3,833,865.60
------------
L 12,779,552.72
3.3 PROCEDURE FOR TERM LOAN BORROWING. The Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, three Business
Days prior to the Closing Date) requesting that the Lenders make the Term Loans
on the Closing Date. Upon receipt of such notice the Administrative Agent shall
promptly notify each Lender thereof. Not later than 12:00 noon on the Closing
Date each Lender shall make available to the Administrative Agent at its office
specified in subsection 11.2 the amount of such Lender's PRO RATA share of such
request in
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30
immediately available funds. The Administrative Agent shall on such date credit
the account of the Borrower on the books of such office of the Administrative
Agent with the aggregate of the amounts made available to the Administrative
Agent by the Lenders and in like funds as received by the Administrative Agent.
3.4 USE OF TERM LOANS. The proceeds of the Term Loans shall be used by
the Borrower to (i) finance the Acquisition and to pay related fees and expenses
and (ii) refinance certain existing indebtedness of the Borrower, ABI
Acquisition 2 plc and Astor Stag Limited.
SECTION 4. GENERAL PROVISIONS
4.1 FEES. (a) The Borrower agrees to pay to the Administrative Agent
for the account of each Lender a commitment fee for the period from and
including the Closing Date, computed at the rate of 1/2 of 1% per annum on the
average daily amount of the Available Revolving Credit Commitment of such Lender
during the period for which payment is made, payable quarterly in arrears on the
last day of each March, June, September and December and on the Revolving Credit
Termination Date or such earlier date as the Commitments shall terminate as
provided herein.
(b) The Borrower shall pay to the Administrative Agent an
administration fee in the amounts and at the times as separately agreed between
the Borrower and the Administrative Agent.
(c) The Borrower shall pay the Administrative Agent its customary per
diem collateral and Borrowing Base examination fee for each day the
Administrative Agent conducts a field examination of the collateral or Borrowing
Base in accordance with subsection 7.6(b), which fee shall be payable promptly
after invoice therefor.
4.2 OPTIONAL REDUCTIONS OF COMMITMENTS. The Borrower shall have the
right, upon not less than three Business Days notice to the Administrative
Agent, from time to time, to reduce the unutilized amount of the Revolving
Credit Commitments; PROVIDED that no such termination or reduction shall be
permitted if, after giving effect thereto and to any prepayments of the Loans
made on the effective date thereof, the Dollar Equivalent of the Aggregate
Outstanding Revolving Extensions of Credit would exceed the Revolving Credit
Commitments then in effect. Any such reduction shall be in an amount equal to
$500,000 or a whole multiple thereof and shall reduce permanently the Revolving
Credit Commitments then in effect.
4.3 OPTIONAL PREPAYMENTS. The Borrower may on the last day of any
Interest Period with respect thereto, in the case of Eurocurrency Loans, or at
any time and from time to time, in the case of ABR Loans, prepay the Loans, in
whole or in part, without premium or penalty, upon at least three Business Days'
irrevocable notice to the Administrative Agent, in the case of Eurocurrency
Loans, and 1 Business Day's irrevocable notice to the Administrative Agent, in
the case of ABR Loans, specifying the date and amount of prepayment and whether
the prepayment is of Eurodollar Loans, Eurosterling Loans, ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each. The Borrower may also, upon at least three Business Days' irrevocable
notice to the Administrative Agent, prepay Eurocurrency Loans on a day which is
not the last day of the Interest Period with respect thereto, together with any
payment required pursuant to Section 4.14. Upon receipt of any such notice, the
Administrative Agent shall
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31
promptly notify each Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein,
together with any amounts payable pursuant to subsection 4.14 and, in the case
of prepayments of the Term Loans, accrued interest to such date on the amount
prepaid. Partial prepayments of the Term Loans shall be applied FIRST to the
unpaid installments thereof maturing in the next six months and SECOND to the
remaining installments of principal thereof on a PRO RATA basis. Amounts prepaid
on account of the Term Loans may not be reborrowed. Partial prepayments shall be
in an aggregate principal amount of $500,000 or a whole multiple of $100,000 in
excess thereof (or, in the case of Eurocurrency Loans made in Sterling, the
Dollar Equivalent thereof).
4.4 MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS. (a) On the first
Business Day after receipt by the Borrower or any Subsidiary of any Net Proceeds
from the sale, lease, assignment, exchange or other disposition of any assets of
the Borrower or any Subsidiary (including, without limitation, as a result of
any casualty or condemnation occurring after the date hereof but not including
sales or dispositions of assets permitted pursuant to subsection 8.5), the
Borrower shall make a prepayment of the Loans (and collateralize or replace
Letters of Credit in accordance with subsection 4.4(h)) in an amount equal to
the amount of such Net Proceeds; PROVIDED that the Borrower shall not be
required to make such a prepayment to the extent that it delivers to the
Administrative Agent a certificate, signed by a Responsible Officer of the
Borrower, that it intends to reinvest such Net Proceeds in the business of the
Borrower within 360 days of receipt thereof, it being expressly understood that
any Net Proceeds not so reinvested shall be applied to prepay the Loans on the
date 360 days after receipt thereof (or, unless the Borrower or any Subsidiary
has, by the date which is 300 days after receipt thereof, made a binding
commitment to make such reinvestment, subject only to reasonable and customary
closing conditions, then such prepayment shall be made on the date which is 300
days after the receipt thereof).
(b) On the first Business Day after receipt by the Borrower or any
Subsidiary of any Net Proceeds from the issuance and sale of any Capital Stock
of the Borrower or any Subsidiary (other than an issuance and sale by such
Subsidiary to the Borrower or another Subsidiary), the Borrower shall make a
prepayment of the Loans (and collateralize or replace Letters of Credit in
accordance with subsection 4.4(h)) in an amount equal to the amount of such Net
Proceeds; PROVIDED that if (i) no Default or Event of Default has occurred and
is continuing or would result therefrom, and (ii) Astor Holdings, Inc. redeems
Preferred Stock with proceeds of the issuance and sale in an initial public
offering of common stock of the Borrower distributed to the Holding Companies in
an aggregate amount not exceeding 50% of the Net Proceeds of such initial public
offering after the Closing Date, then the "Net Proceeds" of such initial public
offering shall be deemed to be reduced by the aggregate amount distributed and
applied in respect of such redemption of Preferred Stock.
(c) On the first Business Day after receipt by the Borrower or any
Subsidiary of any Net Proceeds from the incurrence of any Indebtedness by the
Borrower or any Subsidiary (other than Indebtedness permitted pursuant to
subsection 8.2), the Borrower shall make a prepayment of the Loans (and
collateralize or replace Letters of Credit in accordance with subsection 4.4(h))
in an amount equal to the amount of such Net Proceeds.
(d) On or before the earlier of the date on which the financial
statements referred to in subsection 7.1(a) are required to be delivered in
respect of a fiscal year of the Borrower and the date on which such financial
statements are actually delivered, the Borrower shall, commencing
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32
with the fiscal year ended March 31, 1999, prepay the Loans (and collateralize
or replace Letters of Credit in accordance with subsection 4.4(h)) in an amount
equal to 50% of Excess Cash Flow for such fiscal years.
(e) On the first Business Day after receipt by the Borrower or any
Subsidiary of any Employer Reversion in the event that the Borrower or any
Commonly Controlled Entity terminates, amends, merges, spins-off, reorganizes or
engages in any other transaction involving any Plan (including, without
limitation, any transaction which would result in any excise tax under Section
4980 of the Code), the Borrower shall make a prepayment of the Loans (and
collateralize or replace Letters of Credit in accordance with subsection 4.4(h))
in an amount equal to such Employer Reversion net of any reasonable expenses or
federal or state taxes incurred in connection with such termination, amendment,
merger, spin-off, reorganization or other transaction.
(f) All mandatory prepayments pursuant to this subsection 4.4 shall be
applied FIRST to the then outstanding installments of the Term Loans on a PRO
RATA basis and SECOND to the permanent reduction of the Revolving Credit
Commitments.
(g) If, at any time during the Revolving Credit Commitment Period, the
Aggregate Outstanding Revolving Credit Extensions of Credit with respect to all
of the Lenders exceeds the lesser of (i) the Dollar Equivalent of the Borrowing
Base then in effect and (ii) the aggregate Revolving Credit Commitments then in
effect, the Borrower shall, without notice or demand, immediately repay the
Revolving Credit Loans in an aggregate principal amount equal to such excess,
together with interest accrued to the date of such payment or prepayment and any
amounts payable under subsection 4.14; PROVIDED that if such excess results
solely from a change in exchange rates, the Borrower shall be required to make
repayments in the event, at the times and in the amounts specified in Subsection
4.16(c).
(h) Each prepayment of the Loans pursuant to this subsection 4.4 shall
be accompanied by payment in full of all accrued interest on the amount prepaid
to and including the date of such prepayment, together with any additional
amounts owing pursuant to subsection 4.14. Each reduction of the Revolving
Credit Commitments pursuant to this subsection 4.4 shall be accompanied by a
prepayment of the Revolving Credit Loans outstanding in an amount equal to the
excess, if any, of the aggregate principal amount of Aggregate Outstanding
Revolving Extensions of Credit outstanding over the lesser of the Dollar
Equivalent of the Borrowing Base then in effect and the Revolving Credit
Commitments, as so reduced. To the extent that the Aggregate Outstanding
Revolving Extensions of Credit exceed the lesser of the Dollar Equivalent of the
Borrowing Base then in effect and the Revolving Credit Commitments, as reduced,
after Revolving Credit Loans have been prepaid in accordance with the
immediately preceding sentence, the Borrower shall (i) replace outstanding
Letters of Credit such that, after giving effect to such replacement, the
Aggregate Outstanding Revolving Extensions of Credit are less than or equal to
the lesser of the Dollar Equivalent of the Borrowing Base then in effect and the
Revolving Credit Commitments, as reduced, and/or (ii) deposit in a cash
collateral account with the Agent on terms and conditions satisfactory to the
Agent and as cash collateral for the liability of the Issuing Bank (whether
direct or contingent) under any Letter of Credit outstanding, an amount equal to
the amount by which the Aggregate Outstanding Revolving Extensions of Credit
exceed the Revolving Credit Commitments, as reduced. Any amounts deposited in
any cash collateral account may be withdrawn by the Administrative Agent at any
time to pay obligations owing under this Agreement or any other Loan Document
when due. The unused portion of any amounts deposited by the Borrower in any
such
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33
cash collateral account pursuant to this paragraph (h) and any earnings from
investments of amounts on deposit therein, shall be paid to the Borrower after
sufficient Letters of Credit have expired undrawn so that the Aggregate
Outstanding Revolving Extensions of Credit shall no longer exceed the Revolving
Credit Commitments as then reduced; PROVIDED that no Default or Event of Default
has occurred and is continuing.
4.5 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election; PROVIDED that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans and ABR
Loans may be converted as provided herein; PROVIDED that (i) no Loan may be
converted into a Eurodollar Loan when any Default or Event of Default has
occurred and is continuing and the Administrative Agent has or the Majority
Lenders have determined that such a conversion is not appropriate and (ii) no
Loan may be converted into a Eurodollar Loan after the date that is one month
prior to the Revolving Credit Termination Date (in the case of conversions of
Revolving Credit Loans) or the date of the final installment of principal of the
Term Loans (in the case of conversions of Term Loans, as the case may be).
(b) Any Eurocurrency Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1,
of the length of the next Interest Period to be applicable to such Loans;
PROVIDED that no Eurocurrency Loan may be continued as such (i) when any Default
or Event of Default has occurred and is continuing and the Administrative Agent
has or the Majority Lenders have; determined that such a continuation is not
appropriate or (ii) after the date that is one month prior to the Revolving
Credit Termination Date (in the case of continuations of Revolving Credit Loans)
or the date of the final installment of principal of the Term Loans (in the case
of continuations of Term Loans) and; PROVIDED FURTHER that if the Borrower shall
fail to give such notice or if such continuation is not permitted, such Loans
shall be automatically converted to ABR Loans on the last day of such then
expiring Interest Period (except, in the case of a failure to give such notice
with respect to Term Loans, such Loans will be continued for the shortest
available Interest Period as determined by the Administrative Agent).
4.6 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the Dollar Equivalent of the
aggregate principal amount of the Loans comprising each Eurocurrency Tranche
shall be equal to $1,000,000 (or an approximately comparable amount in the case
of borrowings denominated in Sterling) or a whole multiple of $500,000 (or an
approximately comparable amount in the case of borrowings denominated in
Sterling) in excess thereof. In no event shall there be more than eight
Eurocurrency Tranches outstanding at any time.
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4.7 INTEREST RATES AND PAYMENT DATES.
(a) Each Eurocurrency Loan made in Dollars shall bear interest for
each day during each Interest Period with respect thereto, from and including
the first day thereof to but excluding the last day thereof, at a rate per annum
equal to the Eurodollar Rate determined for such day plus the Applicable Margin.
(b) Each Eurocurrency Loan made in Sterling shall bear interest for
each day during each Interest Period with respect thereto, from and including
the first day thereof to but excluding the last day thereof, at a rate per annum
equal to the Eurosterling Rate determined for such day plus the Applicable
Margin.
(c) Each ABR Loan shall bear interest at a rate per annum equal to the
ABR plus the Applicable Margin.
(d) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), any such overdue principal, interest, commitment fee
or other amount shall bear interest at a rate per annum which is (x) in the case
of principal, the rate that would otherwise be applicable thereto pursuant to
the foregoing provisions of this subsection plus 2% or (y) in the case of any
such overdue interest, commitment fee or other amount, the rate described in
paragraph (c) of this subsection plus 2%, in each case from the date of such
non-payment until such overdue principal, interest, commitment fee or other
amount is paid in full (as well after as before judgment).
(e) During such time as the Borrower shall not be in compliance with
subsection 7.2(d) following notice from the Administrative Agent, outstanding
Loans shall bear interest at the rate per annum equal to the ABR, Eurodollar
Rate or Eurosterling Rate, as the case may be, plus the highest Applicable
Margin applicable to such Type of Loans (regardless of the Total Debt Ratio at
such time).
(f) Interest shall be payable in arrears on each Interest Payment
Date; PROVIDED that interest accruing pursuant to paragraph (d) of this
subsection shall be payable from time to time on demand.
4.8 COMPUTATION OF INTEREST AND FEES. (a) Commitment fees and,
whenever it is calculated on the basis of the Prime Rate, interest shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for the
actual days elapsed; and, otherwise, interest shall be calculated on the basis
of a 360-day year for the actual days elapsed. The Administrative Agent shall as
soon as practicable notify the Borrower and the Lenders of each determination of
a Eurocurrency Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR, the Eurocurrency Reserve Requirements or the Eurosterling
Rate shall become effective as of the opening of business on the day on which
such change becomes effective.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower,
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35
deliver to the Borrower a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to subsection
4.7(a), (b) or (d).
4.9 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day of
any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate or
Eurosterling Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Lenders that the Eurodollar Rate or Eurosterling Rate determined
or to be determined for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during such Interest
Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurocurrency Loans requested to be made on the first day of such
Interest Period shall be made as ABR Loans and (y) any Loans that were to have
been converted to or continued as Eurocurrency Loans on the first day of such
Interest Period shall be converted to or continued as ABR Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurocurrency
Loans shall be made or continued as such, nor shall the Borrower have the right
to convert Loans to Eurocurrency Loans.
4.10 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by the
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee hereunder and any reduction of the Commitments of the Lenders
shall be made PRO RATA according to the respective Commitment Percentages of the
Lenders. Each payment (including each prepayment) by the Borrower on account of
principal of and interest on the Loans shall be made PRO RATA according to the
respective outstanding principal amounts of the Loans then held by the Lenders.
All payments (including prepayments) to be made by the Borrower hereunder,
whether on account of principal, interest, fees or otherwise, shall be made
without set off or counterclaim and shall be made prior to 12:00 Noon, New York
City time, on the due date thereof to the Administrative Agent, for the account
of the Lenders, at the Administrative Agent's office specified in subsection
11.2, in Dollars (or in Sterling with respect to Eurosterling Loans or in
Sterling or Francs, as appropriate, with respect to L/C Obligations in Sterling
or Francs) and whether in Dollars, Sterling or Francs in immediately available
funds. The Administrative Agent shall distribute such payments to the Lenders
promptly upon receipt in like funds as received. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension.
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36
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Commitment Percentage of such borrowing
available to the Administrative Agent, the Administrative Agent may assume that
such Lender is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate or in the case of Eurosterling Loans, the rate customary in Sterling for
settlement of similar inter-bank obligations, as quoted by the Administrative
Agent, in each case for the period until such Lender makes such amount
immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest error. If
such Lender's Commitment Percentage of such borrowing is not made available to
the Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the rate per annum applicable to, in the case of
any Loans made in Dollars, ABR Loans hereunder or, in the case of Loans to be
made in Sterling, the rate customary in Sterling for settlement of similar
inter-bank obligations plus the Applicable Margin hereunder, on demand, from
the Borrower.
(c) Notwithstanding any other provision contained herein, in the event
that any Lender gives notice to the Administrative Agent that it is unable to
fund Loans in Sterling at a reasonable cost to it, the Administrative Agent
shall, until such notice is withdrawn and to the extent necessary in order to
excuse such Lender from making any Loans in Sterling and to continue to make
available to the Borrower the full aggregate amount of the Commitments,
reallocate from time to time among the Lenders the outstanding Loans denominated
in Dollars and the Loans in Sterling; PROVIDED that, in the event that the
Lenders the Commitment Percentage of which aggregate at least 51% give such
notice to the Administrative Agent, the Lenders shall not be required to make
any Loans in Sterling until any such notices have been withdrawn so that the
Lenders the Commitment Percentage of which aggregate at least 51% have either
not given any such notice or have withdrawn any such notice.
4.11 ILLEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurocurrency Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurocurrency Loans, continue Eurocurrency Loans as such
and convert ABR Loans to Eurocurrency Loans shall forthwith be cancelled
(without affecting such Lender's obligations to make ABR Loans hereunder) and
(b) such Lender's Loans then outstanding as Eurocurrency Loans, if any, shall be
converted automatically to ABR Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law and any notice of borrowing given pursuant to Sections
2.3 and 3.3 thereafter shall automatically be deemed a notice of borrowing for
ABR Loans. If any such conversion of a Eurocurrency Loan occurs on a day which
is not the last day of the then current Interest Period with respect thereto,
the Borrower shall pay to such Lender such amounts, if any, as may be required
pursuant to subsection 4.14.
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37
4.12 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurocurrency Loan made by
it, or change the basis of taxation of payments to such Lender in respect
thereof (except for Non-Excluded Taxes covered by subsection 4.13 and
changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement (not already included in
the calculation of the Eurodollar Rate or Eurosterling Rate) against assets
held by, deposits or other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other acquisition of funds
by, any office of such Lender which is not otherwise included in the
determination of the Eurodollar Rate or Eurosterling Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurocurrency Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Lender such additional amount or amounts as will compensate
such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, the Borrower shall promptly pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall, no later than 270 days after acquiring
knowledge thereof, notify the Borrower (with a copy to the Administrative Agent)
of the event by reason of which it has become so entitled. A certificate setting
forth in reasonable detail any additional amounts payable pursuant to this
subsection submitted by such Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
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38
4.13 TAXES. (a) All payments made by the Borrower under this Agreement
and any Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent or any Lender
as a result of a present or former connection between the Administrative Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Administrative Agent or such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any Note). If any such
non-excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("NON-EXCLUDED TAXES") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Note,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement; PROVIDED that the Borrower shall not be required to increase any such
amounts payable to any Lender that is not organized under the laws of the United
States of America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection. Whenever any Non-Excluded
Taxes are payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Administrative Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Borrower and the Administrative Agent (A) two
duly completed copies of United States Internal Revenue Service Form 1001
or 4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form, as
the case may be;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower or
the Administrative Agent;
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39
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred after the date hereof (in the case of a
Lender that is a Lender on the Closing Date) or after the date on which such
Lender becomes a Lender hereunder (in the case of a Lender that becomes a Lender
after the Closing Date) prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender so advises the Borrower and the Administrative
Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it
is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 11.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
4.14 INDEMNITY. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in payment when due of
the principal amount of or interest on any Eurocurrency Loan, (b) default by the
Borrower in making a borrowing of, conversion into or continuation of
Eurocurrency Loans after the Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (c) default by the Borrower in
making any prepayment after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (d) the making of a
prepayment of Eurocurrency Loans on a day which is not the last day of an
Interest Period with respect thereto including, without limitation, in each
case, any such loss (excluding loss of margin) or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained and any costs associated with the
termination by any Lender of any foreign currency exchange arrangements made in
connection with any Loan in Sterling. Such indemnification may include but is
not limited to an amount equal to the excess, if any, of (i) the amount of
interest which would have accrued on the amount so prepaid, or not so borrowed,
converted or continued, for the period from the date of such prepayment or of
such failure to borrow, convert or continue to the last day of such Interest
Period (or, in the case of a failure to borrow, convert or continue, the
Interest Period that would have commenced on the date of such failure) in each
case at the applicable Eurodollar Base Rate or Eurosterling Base Rate, as the
case may be, for such Loans provided for herein (excluding the Applicable
Margin) over (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Bank on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
eurocurrency markets. This covenant shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
4.15 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes any
demand for payment under subsection 4.12 or 4.13(a), or if any adoption or
change of the type described in subsection 5.11 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make
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40
payments under subsection 4.12 or 4.13(a), or would eliminate or reduce the
effect of any adoption or change described in subsection 4.11.
4.16 CONTROLS ON PREPAYMENT IF AGGREGATE OUTSTANDING REVOLVING CREDIT
EXTENSIONS OF CREDIT EXCEED AGGREGATE REVOLVING CREDIT COMMITMENTS. (a) The
Borrower will implement and maintain internal controls to monitor the borrowings
and repayments of Revolving Credit Loans by the Borrower and the issuance of and
drawings under Letters of Credit, with the object of preventing any request for
a Revolving Credit Loan or Letter of Credit that would result in the Dollar
Equivalent of the Aggregate Outstanding Revolving Credit Extensions of Credit
(whether made in Dollars and/or Sterling) with respect to all of the Lenders
being in excess of the lesser of (x) the Borrowing Base and (y) the aggregate
Revolving Credit Commitments then in effect, and of promptly identifying and
remedying any circumstance where, by reason of changes in exchange rates, the
Dollar Equivalent of the Aggregate Outstanding Revolving Credit Extensions of
Credit (made in Dollars or Sterling) with respect to all of the Lenders exceeds
the lesser of (x) the Dollar Equivalent of the Borrowing Base and (y) the
aggregate Revolving Credit Commitments then in effect. In the event that at any
time the Borrower determines that the Dollar Equivalent of the Aggregate
Outstanding Revolving Credit Extensions of Credit (whether made in Dollars
and/or Sterling) with respect to all of the Lenders exceeds the lesser of (x)
the Borrowing Base and (y) the aggregate Revolving Credit Commitments then in
effect, in each case, by more than 5% of such lesser amount, the Borrower will
promptly notify the Administrative Agent.
(b) The Administrative Agent will calculate the Dollar Equivalent of
the Aggregate Outstanding Revolving Credit Extensions of Credit (including any
portion made in Sterling) with respect to all of the Lenders from time to time,
and in any event not less frequently than once during each calendar month. In
making such calculations, the Administrative Agent will rely on the information
most recently received by it from the Issuing Lender in respect of outstanding
L/C Obligations.
(c) In the event that on any date the Administrative Agent
calculates that the Dollar Equivalent of the Aggregate Outstanding Revolving
Credit Extensions of Credit (whether made in Dollars and/or Sterling) with
respect to all of the Lenders exceeds the lesser of (x) the Borrowing Base
and (y) the aggregate Revolving Credit Commitments then in effect, in each
case, by more than 5% of such lesser amount, the Administrative Agent will
give notice to such effect to the Borrower. Within five Business Days of
receipt of any such notice, the Borrower will, as soon as practicable but in
any event within five Business Days, FIRST, make such repayments or
prepayments of Loans (together with interest accrued to the date of such
repayment or prepayment), SECOND, pay any Reimbursement Obligations then
outstanding and, THIRD, cash collateralize any outstanding L/C Obligations on
terms reasonably satisfactory to the Administrative Agent as shall be
necessary to cause the Dollar Equivalent of the Aggregate Outstanding
Revolving Credit Extensions of Credit (whether made in Dollars and/or
Sterling), as the case may be, with respect to all of the Lenders to no
longer exceed the lesser of (x) the Borrowing Base and (y) the Revolving
Credit Commitments then in effect, as the case may be. If any such repayment
or prepayment of a Eurocurrency Loan pursuant to this subsection occurs on a
day which is not the last day of the then current Interest Period with
respect thereto, the Borrower shall pay to the Lenders such amounts, if any,
as may be required pursuant to subsection 4.14.
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41
4.17 BORROWING BASE COMPLIANCE. The Administrative Agent or another
financial institution satisfactory to the Administrative Agent (including any
Affiliate of the Administrative Agent) shall, as it reasonably deems to be
necessary but no more frequently than once during each fiscal year (except
during the occurrence of a Default or an Event of Default as frequently as the
Administrative Agent deems necessary) from time to time during the Revolving
Credit Commitment Period, review and confirm the information set forth in each
Borrowing Base Certificate delivered by the Borrower in order to determine
whether, at such time, the Borrower is in compliance with the requirements in
respect of the Borrowing Base under this Agreement, and the Borrower shall
reimburse the Administrative Agent for its reasonable out-of-pocket expenses
(excluding fees, which are addressed separately in subsection 4.1(c)) in respect
thereof. If the Borrower is not in compliance with such requirements, the
Administrative Agent shall promptly notify the Borrower and the Lenders of such
noncompliance and the Borrower shall promptly (and in any event within five
Business Days of receipt of such notice) make all mandatory prepayments required
pursuant to subsection 4.4(g) (and, if applicable, 4.4(h)).
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Administrative Agent
and each Lender, unless otherwise provided, after giving effect to the
Acquisition, that:
5.1 FINANCIAL CONDITION. (a) The PRO FORMA balance sheet of Astor II
and its Subsidiaries (the "PRO FORMA BALANCE SHEET"), as of June 30, 1996
certified by the chief financial officer of the Borrower, copies of which have
heretofore been furnished to each Lender, is the unaudited balance sheet of
Astor II and its Subsidiaries, adjusted to give effect (as if such events had
occurred on such date) to (i) the incurrence of any Term Loans and other
Indebtedness to be incurred in connection with the Acquisition, (ii) the
application of the proceeds thereof as contemplated hereby, (iii) the
capitalization of Astor II as described in subsection 6.1(k) and (iv) each of
the transactions contemplated by the Acquisition Documents to occur on or prior
to the Closing Date. Such Pro Forma Balance Sheet, together with the notes
thereto, was prepared based on good faith assumptions and on the best
information available to the Borrower as of the date of delivery thereof, and
reflects on a PRO FORMA basis the financial position of Astor II and its
Subsidiaries as of the date thereof, as adjusted, as described above, assuming
that the events and assumptions specified in the preceding sentence had actually
occurred or had been true, as the case may be, at such date.
(b) On the Closing Date, after giving effect to the Acquisition,
neither the Borrower nor any of its Subsidiaries has any material Guarantee
Obligation, contingent liability or liability for taxes, or any long-term lease
or unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction, which is not
reflected on the Pro Forma Balance Sheet or in the notes thereto. During the
period from March 31, 1996 to and including the date hereof, there has been no
sale, transfer or other disposition by the Borrower or any of its consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any Capital Stock of
any other Person but excluding the Acquisition) material to the consolidated
financial condition of the Borrower and its Subsidiaries.
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5.2 NO CHANGE. Since March 31, 1996, there has been no development or
event which has had or could reasonably be expected to have a Material Adverse
Effect, and during the period from March 31, 1996 to and including the Closing
Date, no dividends or other distributions have been declared, paid or made upon
the Capital Stock of the Borrower other than dividends set forth in clause (iii)
of Subsection 8.6 nor has any of the Capital Stock of the Borrower been
redeemed, retired, purchased or otherwise acquired for value by the Borrower or
any of its Subsidiaries.
5.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Borrower and each of
its Subsidiaries and Holding Companies (a) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has the corporate power and authority, and the legal right, to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law and Contractual Obligations except to the extent that the failure to comply
therewith could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
5.4 CORPORATE POWER: AUTHORIZATION: ENFORCEABLE OBLIGATIONS. The
Borrower and each of the other Loan Parties has the corporate power and
authority, and the legal right, to make, deliver and perform the Loan Documents
to which it is a party and to borrow hereunder and has taken all necessary
corporate action to authorize the borrowings on the terms and conditions of this
Agreement, any Notes and any Applications and to authorize the execution,
delivery and performance of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents to which the
Borrower or any of the other Loan Parties is a party, except for filings
necessary for perfection of Liens in favor of the Lenders. This Agreement has
been, and each other Loan Document to which it is a party will be, duly executed
and delivered on behalf of the Borrower or the other Loan Parties, as the case
may be. This Agreement constitutes, and each other Loan Document to which it is
a party when executed and delivered will constitute, a legal, valid and binding
obligation of the Borrower, or the other Loan Parties party thereto, enforceable
against the Borrower, or the other Loan Parties party thereto, in accordance
with its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
5.5 NO LEGAL BAR. The execution, delivery and performance of the Loan
Documents to which the Borrower or any of the other Loan Parties is a party, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or Contractual Obligation of the Borrower or of any of its
Subsidiaries, except for such violations that would not, individually or in the
aggregate, have a Material Adverse Effect, and will not result in, or require,
the creation or imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation, except for Liens in favor of the Lenders.
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43
5.6 NO MATERIAL LITIGATION. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or Holding Companies or against any of its or their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) which could reasonably
be expected to have a Material Adverse Effect.
5.7 NO DEFAULT. Neither the Borrower nor any of its Subsidiaries or
Holding Companies is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
5.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and its
Subsidiaries has good record and marketable title in fee simple to (or, in the
case of Foreign Subsidiaries, an analogous ownership interest in) or a valid
leasehold interest in or a valid license for, all its real property, and good
title to, or a valid leasehold interest in, all its other material property (and
to its best knowledge all its other property), and none of such property is
subject to any Lien except as permitted by subsection 8.3.
5.9 INTELLECTUAL PROPERTY. The Borrower and each of its Subsidiaries
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which could not
reasonably be expected to have a Material Adverse Effect (the "INTELLECTUAL
PROPERTY"). No claim which could reasonably be expected to have a Material
Adverse Effect has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Borrower know of
any valid basis for any such claim. The use of such Intellectual Property by the
Borrower and its Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
5.10 NO BURDENSOME RESTRICTIONS. No Requirement of Law or Contractual
Obligation of the Borrower or any of its Subsidiaries or Holding Companies has a
Material Adverse Effect.
5.11 TAXES. Each of the Borrower and its Subsidiaries and Holding
Companies has filed or caused to be filed all tax returns which, to the
knowledge of the Borrower, are required to be filed and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority (other than any the amount or
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Borrower or its Subsidiaries or Holding Companies,
as the case may be); no tax Lien has been filed, and, to the knowledge of the
Borrower, no claim is being asserted (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries or Holding Companies, as the case may
be), with respect to any such tax, fee or other charge.
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44
5.12 FEDERAL REGULATIONS. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. If requested by any Lender or the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form G-l or FR
Form U-1 referred to in said Regulation G or Regulation U, as the case may be.
5.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and, except for
the failure of the ADCO union pension plan to be timely amended for purposes of
the Tax Reform Act of 1986 and related legislation (which failure is currently
being remedied through the IRS Closing Agreement Program and is not expected to
result in any material liability to the Borrower), each Plan has complied in all
material respects with the applicable provisions of ERISA and the Code. No
termination of a Single Employer Plan has occurred (except as set forth in the
Merger Agreement), and no Lien in favor of the PBGC or a Plan has arisen, during
such five-year period. Except for the ADCO union pension plan, the present value
of all accrued benefits under each Plan (based on those assumptions used to fund
such Plans) did not, as of the last annual valuation date prior to the date on
which this representation is made or deemed made, exceed the value of the assets
of such Plan allocable to such accrued benefits by an amount in excess of
$100,000. Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither the
Borrower nor any Commonly Controlled Entity would become subject to any
liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.
5.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. Neither the Borrower
nor any of its Subsidiaries or Holding Companies is an "investment company", or
a company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended. The Borrower is not subject to
regulation under any Federal or State statute or regulation (other than
Regulation X of the Board of Governors of the Federal Reserve System) which
limits its ability to incur Indebtedness.
5.15 SUBSIDIARIES. At the date hereof, Astor Holdings II, Inc. is the
only direct Subsidiary of Astor Holdings, Inc., the Borrower and ABI Acquisition
1 plc are the only direct Subsidiaries of Astor Holdings II, Inc., ABI
Acquisition 1 plc is the only direct Subsidiary of the Borrower, ABI Corporation
and ABI Acquisition 2 plc are the only direct Subsidiaries of ABI Acquisition 1
plc, Astor Stag Limited is the only direct Subsidiary of ABI Acquisition 2 plc
(except for dormant Subsidiaries in the process of liquidation, none of which
own any assets except, as relevant, the stock of each other and certain
intercompany accounts) and Astor Stag S.A. is the only direct Subsidiary of
Astor Stag Ltd. (except for dormant Subsidiaries in the process of liquidation,
none of which own any assets except, as relevant, the stock of each other and
certain intercompany accounts). Astor Stag S.A. has no Subsidiaries.
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45
5.16 PURPOSE OF LOANS. The proceeds of the Revolving Credit Loans
shall be used by the Borrower for the purposes described in subsection 2.12. The
proceeds of the Term Loans shall be used by the Borrower for the purposes
described in subsection 3.4.
5.17 ENVIRONMENTAL MATTERS. Except to the extent any exception to any
of the following would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect:
(a) the Borrower and its Subsidiaries: (i) are, and within the period
of all applicable statutes of limitation have been, in compliance with all
applicable Environmental Laws; (ii) hold all Environmental Permits (each of
which is in full force and effect) required for any of their current or
intended operations or for any property owned, leased, or otherwise
operated by any of them; (iii) are, and within the period of all applicable
statutes of limitation have been, in compliance with all of their
Environmental Permits; and (iv) have no information as of the date hereof
that would give rise to a reasonable belief that: any of their
Environmental Permits will not be timely renewed and complied with, or
would require material expense to so renew or comply; any additional
Environmental Permits that may be required of any of them will not be
timely obtained and complied with, or would require material expense to so
obtain or comply; and compliance with any Environmental Law that is or is
expected to become applicable to any of them will not be timely attained
and maintained, or would require material expense to so attain and
maintain.
(b) Materials of Environmental Concern have not been transported,
disposed of, emitted, discharged, or otherwise released or threatened to be
released, to or at any real property presently or formerly owned, leased or
operated by the Borrower or any of its Subsidiaries or at any other
location, which in light of indemnity rights drawn upon by the Borrower and
its Subsidiaries to date with respect to groundwater remediation (which
indemnity rights Borrower and its Subsidiaries have no information as of
the date hereof that would give rise to a reasonable belief that such
rights are not likely to continue being satisfied in materially the same
manner as they have been through the date hereof) could reasonably be
expected to (i) give rise to liability of the Borrower or any of its
Subsidiaries under any applicable Environmental Law, or (ii) interfere with
the Borrower's or any of its Subsidiaries' operations, or (iii) impair the
fair saleable value for continuation in its existing use of any real
property owned or leased by the Borrower or any of its Subsidiaries in
which the Lender will take a security interest.
(c) there is no judicial, administrative, or arbitral proceeding
(including any notice of violation or alleged violation) under or relating
to any Environmental Law to which the Borrower or any of its Subsidiaries
is, or to the knowledge of the Borrower or any of its Subsidiaries will be,
named as a party that is pending or, to the knowledge of the Borrower or
any of its Subsidiaries, threatened.
(d) neither the Borrower nor any of its Subsidiaries has received any
written request for information, or received any written claim from a third
party that it is a potentially responsible party under or relating to the
federal Comprehensive Environmental Response, Compensation, and Liability
Act or any similar Environmental Law, or with respect to any Materials of
Environmental Concern.
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46
(e) neither the Borrower nor any of its Subsidiaries has entered into
or agreed to any consent decree, order, or settlement or other agreement,
or is subject to any judgment, decree, or order or other agreement, in any
judicial, administrative, arbitral, or other forum, relating to compliance
with or liability under any Environmental Law.
(f) in light of indemnity rights drawn upon by the Borrower and its
Subsidiaries to date with respect to groundwater remediation (which
indemnity rights Borrower and its Subsidiaries have no information as of
the date hereof that would give rise to a reasonable belief that such
rights are not likely to continue being satisfied in materially the same
manner as they have been through the date hereof), neither the Borrower nor
any of its Subsidiaries has assumed or retained, by contract or operation
of law, any liabilities of any kind, fixed or contingent, known or unknown,
under any Environmental Law or with respect to any Materials of
Environmental Concern.
(g) The Environmental Report contains no material inaccuracies, and
does not omit any material facts, concerning the environmental hazards,
conditions and liabilities (contingent or otherwise) to which the Borrower
or any of its Subsidiaries may be subject.
5.18 SOLVENCY. As of the Closing Date, after giving effect to the
transactions contemplated to occur on the Closing Date, each Loan Party is
Solvent.
5.19 LABOR MATTERS. There are no pending strikes against the Borrower
or any of its Subsidiaries. The hours worked and payments made to employees of
the Borrower and each of its Subsidiaries have not been in violation in any
material respect of the Fair Labor Standards Act or any other applicable law
dealing with such matters. All material payments due from the Borrower or any of
its Subsidiaries, or for which any claim may be made against the Borrower or any
of its Subsidiaries, on account of wages and employee health and welfare
insurance and other benefits have been paid or accrued as a liability on the
books of the Borrower or such Subsidiary. The consummation of the Acquisition
will not give rise to a right of termination or right of renegotiation on the
part of any union under any collective bargaining agreement to which the
Borrower or any of its Subsidiaries (or any predecessor) is a party or by which
the Borrower or any of its Subsidiaries (or any predecessor) is bound.
5.20 ACQUISITION AND CAPITALIZATION DOCUMENTS; CONSUMMATION OF
ACQUISITION. Each Lender has received complete copies of each of the material
Acquisition Documents and Capitalization Documents (including all exhibits,
schedules and disclosure letters referred to therein or delivered pursuant
thereto) and all amendments thereto, waivers relating thereto and other side
letters or agreements affecting the terms thereof and any other Acquisition
Documents or Capitalization Documents reasonably requested by the Administrative
Agent. None of such documents and agreements has been amended or supplemented,
nor have any of the provisions thereof been waived in any material respect,
except pursuant to a written agreement or instrument which has heretofore been
consented to by the Lenders. Each Acquisition Document and Capitalization
Document has been duly executed and delivered by the parties thereto and is in
full force and effect, and the Acquisition has been, or on the Closing Date will
be, duly consummated in accordance with the terms and conditions of the
Acquisition Documents. The representations and warranties of each party to each
Acquisition Document and Capitalization Document are true and correct on the
Closing Date as if made on and as of the Closing Date, except for matters which
would not reasonably be expected to have a Material Adverse Effect and each
Lender shall be
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47
entitled to rely on such representations and warranties with the same force and
effect as if they were incorporated in this Agreement and made to each Lender
directly.
5.21 ACCURACY OF INFORMATION. All written information, reports and
other papers and data with respect to the Borrower, its Subsidiaries and Holding
Companies and the Acquisition (other than projections and estimates) furnished
to the Lenders by or on behalf of the Borrower and taken as a whole were, at the
time the same were so furnished, correct in all material respects. All
projections and estimates with respect to the Borrower, its Subsidiaries and
Holding Companies and the Acquisition so furnished by or on behalf of the
Borrower were prepared and presented in good faith by the Borrower and its
Subsidiaries and Holding Companies, it being recognized by the Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. The factual statements contained in the financial
statements referred to in subsection 5.1(a), the Loan Documents, the Acquisition
Document and any other agreements, certificates or documents furnished or to be
furnished to the Administrative Agent or the Lenders from time to time in
connection with this Agreement, and to the best of the Borrower's knowledge the
factual statements contained in the financial statements referred to in
subsection 5.1(b), taken as a whole, do not and will not, as of the date when
made, contain any untrue statement of a material fact, or omit to state any such
material fact necessary in order to make the statements contained therein not
misleading.
5.22 SECURITY DOCUMENTS. (a) The provisions of the Pledge Agreements
will be effective to create in favor of the Administrative Agent, for the
ratable benefit of the Lenders, a legal, valid and enforceable security interest
in the pledged securities described therein and proceeds thereof and, when stock
certificates and notes representing or constituting such pledged securities are
delivered to the Administrative Agent, each of the Pledge Agreements shall
constitute a perfected first lien on, and security interest in, all right, title
and interest of the pledgor party therein in the pledged securities described
therein.
(b) The provisions of the Mortgages will be effective to grant to the
Administrative Agent, for the ratable benefit of the Lenders, legal, valid and
enforceable mortgage liens on all of the right, title and interest of the
Borrower in the mortgaged property described therein. Such Mortgages, when
recorded in the appropriate recording office, will constitute perfected first
liens on, and security interest in, such mortgaged property (subject to
exceptions in the relevant title insurance policy delivered on the Closing
Date).
(c) The provisions of the Security Agreements will be effective to
create in favor of the Administrative Agent a legal and valid security interest
in all right, title and interest of the Borrower and each of the Borrower's
Subsidiaries in the Collateral described therein, and when the financing
statements referred to in Schedule 5.22 have been filed and recorded in the
offices in the jurisdictions listed in Schedule 5.22 under the names set forth
in Schedule 5.22, the Administrative Agent, for the ratable benefit of the
Lenders, shall have a fully perfected first priority security interest in all
right, title and interest of the Borrower and each of its Subsidiaries in such
Collateral to the extent such security interests can be perfected by filing of
financing statements and subject to Liens permitted under subsection 8.3(f),
(g), (h) and (j).
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48
SECTION 6. CONDITIONS PRECEDENT
6.1 CONDITIONS TO INITIAL EXTENSIONS OF CREDIT. The agreement of each
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, immediately prior to or concurrently with the
making of such extension of credit on the Closing Date, of the following
conditions precedent:
(a) LOAN DOCUMENTS. The Administrative Agent shall have received:
(i) this Agreement, executed and delivered by a duly authorized
officer of the Borrower, with a counterpart for each Lender,
(ii) each of the Security Agreements, each executed and delivered
by a duly authorized officer of the party thereto, with a counterpart or a
conformed copy for each Lender,
(iii) each of the Pledge Agreements, each executed and delivered by
a duly authorized officer of the party thereto, with a counterpart or a
conformed copy for each Lender,
(iv) each Subsidiaries Guarantee and each Holding Companies
Guarantee, each executed and delivered by a duly authorized officer of the
party thereto, with a counterpart or a conformed copy for each Lender, and
(v) each of the Mortgages in respect of the properties listed on
Schedule 7.1(a), executed and delivered by a duly authorized officer of the
party thereto, with a counterpart or a conformed copy for each Lender;
PROVIDED that, within 30 days of the Closing Date, (i) a duly executed
Mortgage encumbering the Michigan Center, Michigan property, (ii) local
counsel opinions covering each of the Pennsylvania, Texas and Michigan
properties, as required by subsection 6.1(ab)(iii) hereof, (iii) title
insurance for the Farmers Valley, Pennsylvania and Titusville, Pennsylvania
properties, as required by subsection 6.1(z) hereof, and (iv) within 45
days of the Closing Date, flood insurance for the Farmers Valley,
Pennsylvania and Titusville, Pennsylvania properties, if necessary, as
required by subsection 7.12 hereof shall each be delivered to the
Administrative Agent.
(b) CLOSING CERTIFICATE. The Administrative Agent shall have received,
with a counterpart for each Lender, a certificate of the Borrower and its
Subsidiaries party to any Loan Document and the Holding Companies, dated
the Closing Date, substantially in the form of Exhibits J-l, J-2 and J-3,
with appropriate insertions and attachments, satisfactory in form and
substance to the Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of the
Borrower, such Subsidiaries and the Holding Companies.
(c) CORPORATE PROCEEDINGS OF THE BORROWER. The Administrative Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of the Borrower authorizing (i) the
execution, delivery and performance of this Agreement and the other Loan
Documents to which it is a party, (ii) the borrowings contemplated
hereunder
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and (iii) the granting by it of the Liens created pursuant to the Borrower
Security Documents, certified by the Secretary or an Assistant Secretary of
the Borrower as of the Closing Date, which certificate shall be in form and
substance satisfactory to the Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.
(d) BORROWER INCUMBENCY CERTIFICATE. The Administrative Agent shall
have received, with a counterpart for each Lender, a Certificate of the
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of the Borrower executing any Loan Document satisfactory in form
and substance to the Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of the
Borrower.
(e) CORPORATE PROCEEDINGS OF SUBSIDIARIES. The Administrative Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of each Subsidiary of the Borrower which
is a party to a Loan Document authorizing (i) the execution, delivery and
performance of the Loan Documents to which it is a party and (ii) the
granting by it of the Liens created pursuant to the Subsidiaries Security
Documents to which it is a party, certified by the Secretary or an
Assistant Secretary of each such Subsidiary as of the Closing Date, which
certificate shall be in form and substance satisfactory to the
Administrative Agent and shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded.
(f) SUBSIDIARIES INCUMBENCY CERTIFICATES. The Administrative Agent
shall have received, with a counterpart for each Lender, a certificate of
each Subsidiary of the Borrower which is a Loan Party, dated the Closing
Date, as to the incumbency and signature of the officers of such
Subsidiaries executing any Loan Document, satisfactory in form and
substance to the Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of each such
Subsidiary.
(g) CORPORATE PROCEEDINGS OF HOLDING COMPANIES. The Administrative
Agent shall have received, with a counterpart for each Lender, a copy of
the resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of each of the Holding Companies of the
Borrower which is a party to a Loan Document authorizing (i) the execution,
delivery and performance of the Loan Documents to which it is a party and
(ii) the granting by it of the Liens created pursuant to the Holding
Companies Pledge Agreement to which it is a party, certified by the
Secretary or an Assistant Secretary of each such Holding Company as of the
Closing Date, which certificate shall be in form and substance satisfactory
to the Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(h) HOLDING COMPANIES INCUMBENCY CERTIFICATES. The Administrative
Agent shall have received, with a counterpart for each Lender, a
certificate of each of the Holding Companies of the Borrower which is a
Loan Party, dated the Closing Date, as to the incumbency and signature of
the officers of such Holding Companies executing any Loan Document,
satisfactory in form and substance to the Administrative Agent, executed by
the
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50
President or any Vice President and the Secretary or any Assistant
Secretary of each such Holding Company.
(i) CORPORATE DOCUMENTS. The Administrative Agent shall have received,
with a counterpart for each Lender, true and complete copies of the
certificate of incorporation and by-laws of the Borrower and each of the
other Loan Parties, certified as of the Closing Date as complete and
correct copies thereof by the Secretary or an Assistant Secretary of the
Borrower or such other Loan Party, as the case may be.
(j) INTERCOMPANY LOAN. The Intercompany Note and the Debenture shall
have been executed and delivered by a duly authorized officer of the
parties thereto and within 5 Business Days of the Closing Date all actions
required to create a perfected, first priority security interest in all of
the assets of Astor Stag Limited described in the Debenture in favor of the
Borrower shall have been taken.
(k) ACQUISITION. (i) The Administrative Agent shall have received,
with a copy for each Lender, true and correct copies, certified as to
authenticity by the Borrower, of each material Acquisition Document, and
such other documents or instruments as may be reasonably requested by the
Administrative Agent, including, without limitation, a copy of any debt
instrument or security agreement involving over $1,000,000 or other
material contract to which the Borrower, ADCO or their Subsidiaries may be
a party upon the consummation of the Acquisition and all such documentation
shall be in form and substance satisfactory to the Lenders, (ii) no
material term of the Acquisition Documents shall have been amended, waived
or otherwise modified without the consent of the Lenders and (iii) the
Acquisition shall have been (or shall contemporaneously be) consummated for
a cash purchase price (excluding fees and expenses and working capital
advances, if any) not exceeding $55,000,000 subject to normal closing
adjustments, in accordance with the Acquisition Documents.
(l) CAPITALIZATION. On or prior to the Closing Date, the Borrower
shall have received at least $110,000,000 (less fees, expenses and
discounts) in cash from the issuance of the Subordinated Notes on terms and
conditions, and pursuant to documentation, in form and substance
satisfactory to the Lenders.
(m) FINANCIAL STATEMENTS. The Lenders shall have received audited
combined financial statements of Astor II and its Subsidiaries and ADCO and
its Subsidiaries for the fiscal years ended March 31, 1996 and December 31,
1995, respectively, accompanied by an unqualified report thereon prepared
by an independent accounting firm acceptable to the Lenders, which shall be
in form and substance satisfactory to the Lenders.
(n) UNAUDITED FINANCIAL STATEMENTS. The Lenders shall have received
unaudited interim income statements and balance sheets of Astor II and its
Subsidiaries and ADCO and its Subsidiaries for (i) each fiscal quarterly
period ending March 31, 1996 and June 30, 1996 and (ii) the period ending
July 31, 1996, and such financial statements shall not, in the judgment of
the Lenders, reflect any material adverse change in the consolidated
financial condition of the Borrower and its Subsidiaries or ADCO and its
Subsidiaries as reflected in the financial statements or projections
previously delivered to the Lenders.
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(o) PRO FORMA BALANCE SHEET. The Lenders shall have received the Pro
Forma Balance Sheet of Astor II and its Subsidiaries as at June 30, 1996,
which Pro Forma Balance Sheet shall be in the form attached hereto as
Schedule 6.1(o) and otherwise satisfactory to the Lenders.
(p) CORPORATE AND CAPITAL STRUCTURE. The corporate and capital
structure of the Borrower and each of its Subsidiaries after the
Acquisition shall be as specified on Schedule 6.1(p) or otherwise as shall
be satisfactory to the Lenders.
(q) NO LITIGATION. No litigation, inquiry, injunction or restraining
order shall be pending, entered or threatened (including any proposed
statute, rule or regulation) which, in the opinion of the Lenders, could
reasonably be expected to have a Material Adverse Effect.
(r) CONSENTS, LICENSES AND APPROVALS. The Lenders shall have received
a certificate of a Responsible Officer of the Borrower (i) attaching a true
and correct copy of each governmental and third party approval (including
landlords' and other consents) necessary in connection with the Acquisition
and the financings contemplated hereby, or (ii) certifying that true and
correct copies of all such approvals have been delivered by the Borrower to
the Administrative Agent, with a copy for each of the Lenders, except, in
either case, such approvals as are set forth on Schedule 6.1(r), and that
such approvals have not been rescinded, amended or modified in any manner.
Each such approval shall have been obtained, be in full force and effect
and no longer be subject to appeal or challenge, and all applicable waiting
periods shall have expired without any action being taken or threatened by
any competent authority which would restrain, prevent or otherwise impose
adverse conditions on the Acquisition or the financing thereof.
(s) NO CHANGE. There shall not have occurred any change, or
development or event involving a prospective change, which in either case
in the opinion of the Lenders could reasonably be expected to have a
Material Adverse Effect.
(t) NO ADVERSE INFORMATION. The Lenders shall not have become aware of
any previously undisclosed materially adverse information with respect to
(i) the Acquisition or the business, assets, operations, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries
taken as a whole or ADCO and its Subsidiaries taken as a whole, (ii) their
ability to perform their obligations under the Loan Documents or (iii) the
rights and remedies of the Lenders.
(u) NO DEFAULT. There shall exist no event of default (or condition
which would constitute an event of default with the giving of notice or the
passage of time) under any capital stock, financing agreements, material
lease agreements or other material contracts of the Borrower or any of its
Subsidiaries or ADCO or any of its Subsidiaries.
(v) FILINGS. All filings and other actions required to create and
perfect a first priority security interest in favor of the Administrative
Agent for the benefit of the Lenders on all Collateral owned by the
Borrower or any of its Subsidiaries or to be owned by the Borrower and its
Subsidiaries as a result of the Acquisition shall have been duly made or
taken and all such Collateral shall be free and clear of other Liens except
Liens permitted under the Loan Documents.
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52
(w) LIEN SEARCHES. The Administrative Agent shall have received the
results of recent searches by a Person satisfactory to the Administrative
Agent, of the Uniform Commercial Code, judgement and tax lien filings which
may have been filed with respect to personal property of the Borrower and
each of its Subsidiaries (including, without limitation, ADCO) and Holding
Companies in each jurisdiction where their assets are located, and the
results of such searches shall be satisfactory to the Administrative Agent.
In the event the results of such searches in certain jurisdictions are not
available on the Closing Date, the Borrower shall as soon as practicable
but in any event within 5 Business Days of the Closing Date take all steps
reasonably requested by the Administrative Agent to release any liens which
such searches reveal.
(x) PLEDGED STOCK; STOCK POWERS; PLEDGED NOTES. The Administrative
Agent shall have received the certificates representing the shares pledged
pursuant to each of the Pledge Agreements, together with an undated stock
power for each such certificate executed in blank by a duly authorized
officer of the pledgor thereof.
(y) SURVEYS. The Administrative Agent shall have received, and the
title insurance company issuing the policy referred to in subsection 6.1(z)
(the "TITLE INSURANCE COMPANY") shall have received, maps or plats of an
as-built survey of the sites of the property covered by each Mortgage
certified to the Administrative Agent and the Title Insurance Company in a
manner satisfactory to them, dated a date satisfactory to the
Administrative Agent and the Title Insurance Company by an independent
professional licensed land surveyor satisfactory to the Administrative
Agent and the Title Insurance Company, which maps or plats and the surveys
on which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1962, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps, plats or surveys
the following: (i) the locations on such sites of all the buildings,
structures and other improvements and the established building setback
lines; (ii) the lines of streets abutting the sites and width thereof;
(iii) all access and other easements appurtenant to the sites or necessary
or desirable to use the sites; (iv) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar
encumbrances affecting the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (v) any
encroachments on any adjoining property by the building structures and
improvements on the sites; and (vi) if the site is described as being on a
filed map, a legend relating the survey to said map. Notwithstanding the
foregoing, provided the Borrower executes and delivers any and all
agreements, affidavits or other documents required by the Title Insurance
Company in order to cause the Title Insurance Company to issue a standard
survey endorsement and delete the so-called "survey exemption" for each of
the properties located in Texas and Pennsylvania which is being encumbered
by a Mortgage, the ALTA Surveys prepared by E&M Engineers and Surveyors,
P.C. in 1995 (with respect to the real property in the Commonwealth of
Pennsylvania) and prepared by Griffith Surveying Co. in 1995 (with respect
to the real property in the State of Texas) are hereby approved by the
Administrative Agent.
(z) TITLE INSURANCE POLICY. The Administrative Agent shall have
received in respect of each parcel covered by each Mortgage a mortgagee's
title policy (or policies) or marked up unconditional binder for such
insurance dated the Closing Date. Each such policy shall
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53
(i) be in an amount satisfactory to the Administrative Agent; (ii) be
issued at ordinary rates; (iii) insure that the Mortgage insured thereby
creates a valid first Lien on such parcel free and clear of all defects and
encumbrances, except such as may be approved by the Administrative Agent;
(iv) name the Administrative Agent for the benefit of the Lenders as the
insured thereunder; (v) be in the form of ALTA Loan Policy - 1970 (Amended
10/17/70); (vi) contain such endorsements and affirmative coverage as the
Administrative Agent may request and (vii) be issued by title companies
satisfactory to the Administrative Agent (including any such title
companies acting as co-insurers or reinsurers, at the option of the
Administrative Agent). The Administrative Agent shall have received
evidence satisfactory to it that all premiums in respect of each such
policy, and all charges for mortgage recording tax, if any, have been paid.
(aa) OFFICER'S CERTIFICATE. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of the
Borrower, dated the Closing Date, substantially in the form of Exhibit K,
setting forth (i) the financial statements referred to in subsection
6.1(n), certified, in each case, by a Responsible Officer as being, to the
knowledge of such Responsible Officer, accurate in all material respects
(subject to normal year-end adjustments); and (ii) a statement that since
the respective dates of the items referred to in clause (i), there has been
no development or event which has had or could reasonably be expected to
have a Material Adverse Effect.
(ab) LEGAL OPINIONS. The Administrative Agent shall have received,
with a counterpart for each Lender, the executed legal opinions of (i)
Gibson, Dunn & Crutcher, U.S. counsel to the Borrower and the other Loan
Parties, substantially in the form of Exhibit L-l, (ii) Clifford Chance,
U.K. counsel to the Administrative Agent, substantially in the form of
Exhibit L-2, which legal opinions shall cover such other matters incident
to the transactions contemplated by this Agreement as the Administrative
Agent may reasonably require and (iii) local counsel to the Borrower or the
appropriate Subsidiary in each jurisdiction in which a Mortgage will be
filed, substantially in the form of Exhibit L-3.
(ac) LENDER'S FEES. The Lenders shall have received all fees, expenses
and other consideration required to be paid or delivered on or before the
Closing Date.
(ad) COPIES OF DOCUMENTS. The Administrative Agent shall have received
a copy of all recorded documents referred to, or listed as exceptions to
title in, the title policy or policies referred to in subsection 6.1(z) and
a copy, certified by such parties as the Administrative Agent may deem
appropriate, of all other documents affecting the property covered by each
Mortgage.
(ae) INSURANCE. The Administrative Agent shall have received evidence
in form and substance satisfactory to it that all of the requirements of
the Security Documents requiring the maintenance of insurance shall have
been satisfied.
(af) SOLVENCY CERTIFICATE. The Administrative Agent shall have
received, with a copy for each Lender, a certificate from the chief
financial officer of the Borrower, in the form of Exhibit 0, dated the
Closing Date, as to the Solvency of the Borrower and its Subsidiaries,
including, without limitation, ADCO, immediately after giving effect to the
Acquisition and the Loans and other extensions of credit to be made on the
Closing Date.
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53
(ag) BORROWING BASE CERTIFICATE. The Administrative Agent shall have
received, with a copy for each Lender, a Borrowing Base Certificate as of a
recent date approved by the Administrative Agent.
(ah) OTHER. The Lenders shall be satisfied with the status of all
labor, tax, employee benefit and health and safety matters involving the
Borrower and its Subsidiaries (including, without limitation, ADCO).
(ai) ENVIRONMENTAL REPORT. The Administrative Agent shall have
received a report in form and substance satisfactory to it evaluating the
environmental hazards, conditions and liabilities (contingent or otherwise)
to which the Borrower or any of its Subsidiaries (including, without
limitation, ADCO) may be subject (the "ENVIRONMENTAL REPORT").
(aj) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, the other Loan Documents and
the Acquisition Documents shall be satisfactory in form and substance to
the Administrative Agent, and the Administrative Agent shall have received
such other documents, financial statements and legal opinions in respect of
any aspect or consequence of the transactions contemplated hereby or
thereby as it shall reasonably request.
6.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Borrower and each of the other Loan Parties in or
pursuant to the Loan Documents shall be true and correct in all material
respects on and as of such date as if made on and as of such date (except
to the extent such representations and warranties were expressly made only
as of a specific date).
(b) NO DEFAULT. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
(c) LETTER OF CREDIT APPLICATION. With respect to the issuance of any
Letter of Credit, the relevant Issuing Bank shall have received a Letter of
Credit Application, completed to the satisfaction of such Issuing Bank, and
such other certificates, documents and other papers and information as such
Issuing Bank may reasonably request.
(d) BORROWING BASE. After giving effect to the extensions of credit
requested to be made on such date and repayments made on such date, the
Aggregate Outstanding Revolving Credit Extensions of Credit of all the
Lenders shall not exceed the Dollar Equivalent of the Borrowing Base then
in effect.
Each borrowing by and Letter of Credit issued on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date thereof that the conditions contained in this subsection have been
satisfied.
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55
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document or any Letter of Credit remains
outstanding, the Borrower shall and (except in the case of delivery of financial
information, reports and notices) shall cause each of its Subsidiaries and
Holding Companies to:
7.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of Astor II, a copy of the consolidated and
consolidating balance sheet of Astor II and its Subsidiaries as at the end
of such year and the related consolidated and consolidating statements of
income and retained earnings and of cash flows for such year, setting forth
in each case in comparative form the figures for the previous year,
reported on without a "going concern" or like qualification or exception,
or qualification arising out of the scope of the audit, by Ernst & Young or
other independent certified public accountants of nationally recognized
standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of Astor II, the unaudited consolidated balance sheet of Astor II and
its Subsidiaries as at the end of such quarter and the related unaudited
consolidated statements of income and retained earnings and of cash flows
of Astor II and its Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments); and
(c) as soon as practicable, but in any event within 30 days after the
end of each calendar month, commencing with the month ended November 30,
1996, (other than any calendar month ending on the last day of any fiscal
quarter), a copy of the unaudited consolidated statements of income and
retained earnings and cash flows of Astor II and its Subsidiaries for such
month and the portion of the fiscal year of Astor II through the end of
such month.
all such financial statements shall be complete and correct and shall be
prepared in reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except as
approved by such accountants or officer, as the case may be, and disclosed
therein).
7.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default in respect of Section 8.1,
except as specified in such certificate;
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56
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a Responsible
Officer stating that, to the best of such officer's knowledge, during such
period (i) no Subsidiary has been formed or acquired (or, if any such
Subsidiary has been formed or acquired, the Borrower has complied with the
requirements of subsection 7.10 with respect thereto), (ii) neither the
Borrower nor any of its Subsidiaries has changed its name, its principal
place of business, its chief executive office or the location of any
material item of tangible Collateral without complying with the
requirements of this Agreement and the Security Documents with respect
thereto and (iii) the Borrower has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in
this Agreement and the other Loan Documents to be observed, performed or
satisfied by it other than with respect to those matters which have been
cured within the grace periods specified herein or expressly waived by the
Lenders or the Majority Lenders as appropriate, and that such officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate;
(c) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate duly executed by
the chief financial officer of the Borrower setting forth (i) the aggregate
amount of Net Proceeds (other than Net Proceeds of asset dispositions,
sales of Capital Stock and incurrence of Indebtedness excluded under
subsection 4.4) received during the 360-day period immediately preceding
the date of such certificate, (ii) the date of receipt of each portion of
such Net Proceeds; (iii) the amount of such Net Proceeds applied to prepay
Loans and collateralize Letters of Credit pursuant to subsection 4.4(b),
(iv) the amount of such Net Proceeds reinvested in the business of the
Borrower and a description of the application thereof; (v) the amount of
such Net Proceeds being held for reinvestment and the date of receipt
thereof; and (vi) a statement confirming the Borrower's compliance with
subsection 4.4(b);
(d) on or prior to the fifteenth Business Day following the end of
each fiscal month, a certificate substantially in the form of Exhibit N (a
"BORROWING BASE CERTIFICATE"), certified by a Responsible Officer of the
Borrower as true and correct, and setting forth the amount of Accounts,
Eligible Accounts Receivable, Inventory and Eligible Inventory of the
Borrower, its Subsidiaries (other than Astor Stag S.A.), in each case as of
the last day of such month, accompanied by the applicable reports and other
supporting documents described in Exhibit N;
(e) not later than 45 days after the end of each fiscal year of the
Borrower, a copy of the projections by the Borrower of the operating budget
and cash flow budget of the Borrower and its Subsidiaries for the
succeeding fiscal year, such projections to be accompanied by a certificate
of a Responsible Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice and that such
officer has no reason to believe they are incorrect or misleading in any
material respect;
(f) within five days after the same are filed, copies of all financial
statements and reports which the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority; and
(g) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
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57
7.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or its Subsidiaries or Holding Companies, as the case may be,
except to the extent that the aggregate amount of such past-due unpaid
obligations does not exceed $750,000.
7.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as conducted on the Closing Date by
the Borrower and its Subsidiaries or ADCO and its Subsidiaries and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 8.4 or in connection with the dormant subsidiaries
referred to in subsection 5.15; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.
7.5 MAINTENANCE OF PROPERTY: INSURANCE. Keep all property useful and
necessary in its business in good working order and condition; maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in the same or a
similar business; and furnish to each Lender, upon written request, full
information as to the insurance carried.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. (a) Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired, upon reasonable notice,
including, without limitation, in connection with any audit or appraisal
described in paragraph (b) below, and to discuss the business, operations,
properties and financial and other condition of the Borrower and its
Subsidiaries and Holding Companies with officers and employees of the Borrower
and its Subsidiaries and Holding Companies and with its independent certified
public accountants.
(b) Reimburse the Administrative Agent for any reasonable expenses
(excluding fees, which are addressed in subsection 4.1(c)) incurred by it in
connection with its ongoing collateral and Borrowing Base monitoring duties and
with any collateral or Borrowing Base examination which it reasonably deems
necessary; PROVIDED that, unless a Default or Event of Default shall have
occurred and is continuing, the Borrower shall be obligated to pay for only one
such report during any fiscal year.
7.7 NOTICES. Promptly give notice to the Administrative Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
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(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or Holding Companies
or (ii) litigation, investigation or proceeding which may exist at any time
between the Borrower or any of its Subsidiaries or Holding Companies and
any Governmental Authority, which in either case, if not cured or if
adversely determined, as the case may be, could reasonably be expected to
have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries or Holding Companies in which the amount involved is $250,000
or more and not covered by insurance or in which injunctive or similar
relief is sought or which otherwise could, if adversely determined, have a
Material Adverse Effect;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower or any of its Subsidiaries or Holding Companies
knows or has reason to know thereof: (i) the occurrence or expected
occurrence of any Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC or
the Borrower or any of its Subsidiaries or Holding Companies or any
Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of, any
Plan; and
(e) any Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
7.8 ENVIRONMENTAL LAWS. (a)(i) Comply with all Environmental Laws
applicable to it, and obtain, comply with and maintain any and all Environmental
Permits necessary for its operations as conducted and as planned; and (ii) take
reasonable efforts to ensure that all of its tenants, subtenants, contractors,
subcontractors, and invitees comply with all Environmental Laws, and obtain,
comply with and maintain any and all Environmental Permits, applicable to any of
them insofar as any failure to so comply, obtain or maintain could adversely
affect the Borrower or any of its Subsidiaries. Noncompliance by the Borrower or
any of its Subsidiaries with any applicable Environmental Law or Environmental
Permit shall be deemed not to constitute a breach of this 7.8(a); PROVIDED that,
upon learning of any such noncompliance, the Borrower and its Subsidiaries shall
promptly undertake reasonable efforts to achieve compliance, and PROVIDED
FURTHER that, in any case, such noncompliance, and any other noncompliance with
Environmental Law, individually or in the aggregate, could not reasonably be
expected to give rise to a Material Adverse Effect.
(b) Comply in a timely manner with all orders and directives regarding
Environmental Laws issued to the Borrower or any of its Subsidiaries by any
Governmental Authority, other than such orders and directives as to which an
appeal or other challenge has been timely and properly taken in good faith and
the pendency of any and all such appeals and other challenges does not give rise
to a Material Adverse Effect.
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59
(c) Maintain, update as appropriate, and implement in all material
respects an environmental program reasonably designed to (i) ensure that the
Borrower, its Subsidiaries, any of their respective operations (including,
without limitation, disposal), and any properties owned, leased or operated by
any of them, attain and remain in substantial compliance with all applicable
Environmental Laws; (ii) reasonably and prudently manage any liabilities or
potential liabilities that the Borrower, any of the other Loan Parties, any of
their respective operations (including, without limitation, disposal), and any
properties owned or leased by any of them, may have under all applicable
Environmental Laws; and (iii) ensure that the Borrower and its Subsidiaries
undertake reasonable efforts to identify, and reasonably evaluate, issues of
compliance with and liability under Environmental Laws prior to acquiring,
directly or indirectly, any ownership or leasehold interest in real property, or
other interest in any real property that could give rise to Borrower or any of
its Subsidiaries being subjected to liability under any Environmental Law as a
result of such acquisition.
(d) Upon (i) the Administrative Agent's written request no more than
once during the term of this Agreement unless, within 5 Business Days the
Borrower does not accede to such request and within 90 days of such request the
Borrower refinances the Loans to the reasonable satisfaction of the Lenders and
(ii) in any case upon the Administrative Agent's request (A) upon the occurrence
and during the continuance of an Event of Default under subsection 9.1(a) or
9.1(b) or (B) during the period of effectiveness of any payment blockage notice
delivered with respect to the Subordinated Notes upon the occurrence and during
the continuance of any other Event of Default, permit an environmental
consultant whom the Administrative Agent in its discretion designates to perform
an environmental assessment (including, without limitation: reviewing documents;
interviewing knowledgeable persons; and sampling and analyzing soil, air,
surface water, groundwater, and/or other media in or about property owned or
leased by the Borrower or any of its Subsidiaries, or on which operations of the
Borrower or any of its Subsidiaries otherwise take place). Such environmental
assessment shall be in form and substance satisfactory to the Administrative
Agent. The Borrower and its Subsidiaries shall cooperate fully in the conduct of
such environmental assessment, and shall pay the costs of such environmental
assessment promptly upon written demand by the Administrative Agent. Pursuant to
this subsection 7.8(d), the Administrative Agent shall have the right, but shall
not have any duty, to request and/or obtain such environmental assessment.
7.9 FURTHER ASSURANCES. Upon the request of the Administrative Agent,
promptly perform or cause to be performed any and all acts and execute or cause
to be executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which are necessary or
advisable to maintain in favor of the Administrative Agent, for the benefit of
the Lenders, Liens on the Collateral that are duly perfected in accordance with
all applicable Requirements of Law.
7.10 ADDITIONAL COLLATERAL. (a) With respect to any assets acquired
after the Closing Date by the Borrower or any of its Subsidiaries that are
intended to be subject to the Lien created by any of the Security Documents but
which are not so subject (other than any assets described in paragraph (b) of
this subsection), promptly (and in any event within 30 days after the
acquisition thereof): (i) execute and deliver to the Administrative Agent such
amendments to the relevant Security Documents or such other documents as the
Administrative Agent shall deem necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a Lien
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on such assets, (ii) take all actions necessary or advisable to cause such Lien
to be duly perfected in accordance with all applicable Requirements of Law,
including, without limitation, the filing of financing statements in such
jurisdictions as may be requested by the Administrative Agent, and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clauses (i) and (ii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a Subsidiary (other than a Subsidiary of a Foreign Subsidiary), promptly
upon the request of the Administrative Agent: (i) execute and deliver to the
Administrative Agent, for the benefit of the Lenders, a new pledge agreement or
such amendments to the relevant Pledge Agreement as the Administrative Agent
shall deem necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is
owned by the Borrower or any of its Subsidiaries (not exceeding 65% of the
voting stock in the case of a Foreign Subsidiary), (ii) deliver to the
Administrative Agent the certificates representing such Capital Stock, together
with undated stock powers executed and delivered in blank by a duly authorized
officer of the Borrower or such Subsidiary, as the case may be, (iii) cause such
new Subsidiary (other than a Foreign Subsidiary) (A) to become a party to the
Subsidiary Guarantee and the Subsidiary Security Agreement, in each case
pursuant to documentation which is in form and substance satisfactory to the
Administrative Agent, and (B) to take all actions necessary or advisable to
cause the Lien created by the Subsidiary Security Agreement to be duly perfected
in accordance with all applicable Requirements of Law, including, without
limitation, the filing of financing statements in such jurisdictions as may be
requested by the Administrative Agent and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i), (ii) and (iii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
7.11 DEPOSIT ACCOUNT AGREEMENTS. If and to the extent required by
law, within 30 days after the Closing Date, the Borrower and each Subsidiary
(other than a Foreign Subsidiary) specified by the Administrative Agent shall
have executed and delivered Deposit Account Agreements satisfactory in form and
substance to the Administrative Agent and the Borrower and its Subsidiaries
shall direct their respective account debtors to make all payments to the bank
accounts identified in the Deposit Account Agreements.
7.12 FLOOD INSURANCE. Within 45 days after the Closing Date or the
closing date of the purchase of improved real property, as the case may be, the
Administrative Agent shall have received (i) a policy of flood insurance which
(A) covers any parcel of improved real property which is encumbered or required
to be encumbered by any Mortgage, which is in a "special flood zone" (as defined
in Regulation H of the Board of Governors of the Federal Reserve System) and as
to which flood insurance is available under the Flood Insurance Act of 1968, (B)
is written in an amount not less than the outstanding principal amount of the
indebtedness secured by such Mortgage which is reasonably allocable to such real
property or the maximum limit of coverage made available with respect to the
particular type of property under the National Flood Insurance Act of 1968,
whichever is less, and (C) is in existence during the term of the indebtedness
secured by such Mortgage and (ii) confirmation that the Borrower or the relevant
Subsidiary has received the notice required pursuant to Section 208(e)(3) of
Regulation H of the Board of Governors of the Federal Reserve System.
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61
7.13 MAINTENANCE OF INTERCOMPANY LOAN. Maintain the principal balance
of the Intercompany Note in an amount not less than the outstanding principal
balance of the Term Loan, after giving effect to any repayment of the Term Loan
made concurrently with a payment under the Intercompany Note. If any payment of
principal under the Intercompany Note is made by Astor Stag Limited to the
Borrower, the Borrower will pay, concurrently with its receipt of such payment,
an amount equal to the lesser of such payment and the balance of Revolving
Credit Loans outstanding at such time, to repay either the Term Loan or
outstanding Revolving Credit Loans, at the Borrower's election.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document or any Letter of Credit remains
outstanding, the Borrower shall not, and shall not permit any of its
Subsidiaries or Holding Companies to, directly or indirectly:
8.1 FINANCIAL CONDITION COVENANTS. Consolidated EBITDA for any fiscal
quarter commencing prior to the Closing Date shall be calculated based on
Consolidated EBITDA of Astor II and its Subsidiaries including Consolidated
EBITDA of ADCO and its Subsidiaries as if they were then Subsidiaries of Astor
II. For purposes of calculating the ratios set forth below in respect of the
first four fiscal quarters ending after the Closing Date, Consolidated Cash
Interest Expense and Consolidated Fixed Charges (other than the portion thereof
constituting Capital Expenditures) for the first four fiscal quarters ending
after the Closing Date shall be calculated by analyzing results in the following
manner:
first fiscal quarter actual figure for such quarter
multiplied by four.
second fiscal quarter: actual figures for each of first and
second fiscal quarters multiplied by
two.
third fiscal quarter: actual figures for each of first, second
and third fiscal quarters multiplied by
4/3.
(a) LEVERAGE RATIO. At any time during any period set forth below,
permit the ratio of (i) Consolidated Total Debt at such time to (ii)
Consolidated EBITDA for the period of four consecutive fiscal quarters of
the Borrower most recently ended to exceed the ratio set forth below
opposite such period:
Period Ratio
------ -----
Closing Date through 3/31/97 5.50 to 1
4/1/97 through 3/31/98 5.25 to 1
4/1/98 through 3/31/99 5.00 to 1
4/1/99 through 3/31/00 4.75 to 1
Thereafter 4.50 to 1
(b) CASH INTEREST EXPENSE RATIO. At the end of any fiscal quarter
ended during any period set forth below, permit the ratio of (i)
Consolidated EBITDA for the four consecutive
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62
fiscal quarters then ended to (ii) Consolidated Cash Interest Expense for such
period to be less than the ratio set forth below opposite such period:
Period Ratio
------ -----
Closing Date through 3/31/97 1.70 to 1
4/1/97 through 3/31/98 1.80 to 1
4/1/98 through 3/31/99 1.90 to 1
4/1/99 through 3/31/00 2.10 to 1
Thereafter 2.25 to 1
(c) FIXED CHARGE COVERAGE RATIO. At any time during the term of this
Agreement, permit the ratio of (i) Consolidated EBITDA for the four
consecutive fiscal quarters of the Borrower then ended to (ii) Consolidated
Fixed Charges for such period to be less than 1.05 to 1.
8.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of (i) the Borrower under this Agreement and the
other Loan Documents, (ii) the Subsidiaries under the Subsidiaries
Guarantees and the other Loan Documents and (iii) the Holding Companies
under the Holding Companies Guarantees and the other Loan Documents;
(b) Indebtedness of (i) the Borrower to any Subsidiary, (ii) any
Domestic Subsidiary to the Borrower or any other Domestic Subsidiary, (iii)
any Foreign Subsidiary to any other Foreign Subsidiary or (iv) any Foreign
Subsidiary to the Borrower or any other Domestic Subsidiary; PROVIDED that
in the case of Indebtedness referred to in clause (iv), such Indebtedness
shall (A) be evidenced by a promissory note pledged in favor of the
Administrative Agent for the benefit of the Lenders pursuant to the
Borrower Pledge Agreement or a supplement to the Subsidiaries Pledge
Agreement, (B) be secured by substantially all of the assets of the obligor
thereunder and (C) at no time exceed an aggregate principal amount of
$50,000,000;
(c) Indebtedness of the Borrower and any of its Subsidiaries incurred
to finance the acquisition of fixed or capital assets (whether pursuant to a
loan, a Capital Lease or otherwise) in an aggregate principal amount not
exceeding as to the Borrower and its Subsidiaries $1,000,000 at any time
outstanding and any refinancings, renewals or extensions thereof; PROVIDED
that the amount of such Indebtedness outstanding at the time of such
refinancing, refunding, renewal or extension is not increased;
(d) Indebtedness outstanding on the date hereof and listed on Schedule
8.2 and any refinancings, refundings, renewals or extensions thereof;
(e) Indebtedness in respect of the Subordinated Notes in an aggregate
principal amount not exceeding $110,000,000;
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63
(f) Indebtedness of the Holding Companies to the Borrower incurred to
pay obligations described in subsection 8.6(ii) or (iii);
(g) Indebtedness of Astor Holdings, Inc. under the ABI Shareholder
Notes;
(h) Indebtedness of Astor II, ABI Acquisition 1 plc and ABI
Acquisition 2 plc under the ABI Shareholder Intercompany Notes;
(i) Indebtedness in respect of the subordinated promissory notes
issued in favor of Quaker State Company in respect of certain environmental
liabilities of the Borrower under the Asset Purchase and Sale Agreement
dated as of March 30, 1990, as amended by the Amendment Agreement and Joint
Release dated April 22, 1994 in an aggregate principal amount not to exceed
$2,750,000 at any one time outstanding;
(j) Indebtedness in respect of Hedging Arrangements not exceeding
$5,000,000 in aggregate net exposure at any one time outstanding; PROVIDED
that such Hedging Arrangement are entered into for legitimate hedging
purposes related to the business of the Borrower and its Subsidiaries and
not for speculative purposes;
(k) Indebtedness fully supported on the date of the incurrence thereof
by a Letter of Credit; PROVIDED that any such Indebtedness of Astor Stag
S.A. shall at no time exceed an aggregate principal amount of the Dollar
Equivalent of $3,500,000; or
(l) Additional Indebtedness of the Borrower or any Subsidiary or
Holding Company not exceeding $3,000,000 in aggregate principal amount at
any one time outstanding.
8.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings; PROVIDED that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
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64
materially interfere with the ordinary conduct of the business of the
Borrower or such Subsidiary;
(f) Liens in existence on the date hereof listed on Schedule 8.3;
PROVIDED that no such Lien is spread to cover any additional property after
the Closing Date and that the amount of Indebtedness secured thereby is not
increased;
(g) Liens securing Indebtedness of the Borrower and its Subsidiaries
permitted by subsection 8.2(c) incurred to finance or refinance the
acquisition of fixed or capital assets; PROVIDED that (i) such Liens shall
be created substantially contemporaneously with the acquisition of such
fixed or capital assets, (ii) such Liens do not at any time encumber any
property other than the property financed by such Indebtedness, (iii) the
amount of Indebtedness secured thereby is not increased after it has been
incurred and (iv) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed 100% of the original purchase price of such
property of such property at the time it was acquired;
(h) Liens on the property or assets of a corporation which becomes a
Subsidiary after the date hereof; PROVIDED that (i) such Liens existed at
the time such corporation became a Subsidiary and were not created in
anticipation thereof, (ii) any such Lien is not spread to cover any
additional property or assets of such corporation after the time such
corporation becomes a Subsidiary, (iii) the obligations secured thereby are
not increased and (iv) the aggregate obligations secured thereby shall at
no time exceed $4,000,000;
(i) Liens created pursuant to the Security Documents; or
(j) at any time prior to November 8, 1996, purchase money Liens on raw
materials securing trade payables incurred under the Agreement dated as of
October 1, 1996 between Lube & Wax Ventures, L.L.C. and the Borrower;
PROVIDED that so long as such Liens are in existence the outstanding
Revolving Credit Loans of all the Lenders shall be no greater than
$15,000,000.
8.4 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except:
(a) any wholly owned Subsidiary may be merged or consolidated with or
into any other wholly owned Domestic Subsidiary or into the Borrower;
(b) any wholly owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any other wholly owned Domestic Subsidiary;
and
(c) either (but not both) (i) Astor Holdings, Inc. may be merged with
and into Astor II or (ii) Astor II may be merged with and into the
Borrower.
8.5 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and
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65
leasehold interests), whether now owned or hereafter acquired, or, in the case
of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock
to any Person other than the Borrower or any wholly owned Subsidiary, except:
(a) the sale or other disposition of any property in the ordinary
course of business; PROVIDED that the aggregate consideration of all assets
so sold or disposed of in any period of twelve consecutive months shall not
exceed an amount equal to 20% of the Borrower's EBITDA for the period of
four consecutive fiscal quarters then ended;
(b) the sale of inventory in the ordinary course of business; and
(c) as permitted by subsection 8.4(b).
8.6 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other than
dividends payable solely in common stock of a Holding Company, the Borrower or a
Domestic Subsidiary) on, or make any payment on account of, or set apart assets
for a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Borrower or any of its Subsidiaries or Holding Companies or any warrants or
options to purchase any such Stock, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Borrower or any Subsidiary
or Holding Company; PROVIDED that as long as no Default or Event of Default has
occurred and is continuing or would result therefrom, the Borrower may pay
dividends to Astor II (which may pay dividends to Astor Holdings, Inc.) to
redeem Preferred Stock in an aggregate amount not exceeding 50% of the Net
Proceeds of an initial public offering of common stock by the Borrower or Astor
II after the Closing Date and PROVIDED FURTHER that the foregoing provisions
will not prohibit (i) dividends or distributions payable to the Borrower or any
Subsidiary (and, if such Subsidiary has shareholders other than the Borrower or
another Subsidiary, to its other shareholders on a PRO RATA basis to such other
shareholders), (ii) the payment of dividends by the Borrower or ABI Acquisition
1 plc to Astor II and by Astor II to Astor Holdings, Inc., solely in amounts and
at the times necessary, to permit payment of amounts required for any
repurchase, redemption or other acquisition for value of any Capital Stock of
Astor Holdings, Inc. (or Astor II) held by any member of the Borrower's, Astor
II's or Astor Holdings, Inc.'s management pursuant to any management equity
subscription agreement or stock option agreement or similar agreement, or
otherwise upon their death, disability, retirement or termination of employment
or departure from the Board of Directors of the Borrower, Astor II or Astor
Holdings, Inc. (provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Capital Stock shall not exceed (A) $500,000 in any
twelve-month period or (B) $2,000,000 in the aggregate from and after the
Closing Date) and (iii) the payment of dividends by the Borrower or ABI
Acquisition 1 plc to Astor II, or by Astor II to Astor Holdings, Inc., in
amounts and at the times necessary to permit payment of (A) amounts payable by
Astor Holdings, Inc. under the Management Services Agreement, (B) amounts due
under the Tax Sharing Agreement, (C) administrative fees in respect of certain
partnerships that are investors in Astor Holdings, Inc., in an aggregate amount
not exceeding $28,000 in any twelve-month period and (D) operating expenses of
Astor Holdings, Inc. and Astor II incurred in the ordinary course of business in
an aggregate amount not to exceed $50,000 in any twelve-month period plus audit
fees and fees paid with respect to filings by Astor Holdings, Inc. or Astor II
with the Securities and Exchange Commission.
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66
8.7 LIMITATION ON CAPITAL EXPENDITURES. Directly or indirectly make or
commit to make any Capital Expenditures (excluding any such asset acquired in
connection with normal replacement and maintenance programs properly charged to
current operations) except for Capital Expenditures in the ordinary course of
business not exceeding, in the aggregate for the Borrower and its Subsidiaries
during any of the fiscal years of the Borrower set forth below (or with respect
to fiscal year 1997, during the period from the Closing Date to the end of such
fiscal year), the amount set forth opposite such fiscal year below:
Fiscal Year Amount
----------- ------
1997 $5,400,000
1998 $5,000,000
1999 $5,000,000
2000 $5,000,000
2001 $5,000,000
2002 $5,000,000
2003 $5,000,000
; PROVIDED that the lesser of (A) $1,000,000 and (B) 20% of any amounts
permitted herein for Capital Expenditures during any fiscal year and not so
expended in the fiscal year for which it is permitted, may be carried over for
expenditure in any following fiscal year.
8.8 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) the acquisition by the Borrower or any of its Subsidiaries of
assets or capital stock of one or more corporations or other Persons (any
such acquisition pursuant to this clause (c), a "PERMITTED ACQUISITION") so
long as (i) each such acquisition and all transactions related thereto
shall be consummated in accordance with applicable Requirements of Law;
(ii) the total consideration for each such acquisition shall not exceed
$10,000,000; (iii) each such acquisition shall, in the case of a Permitted
Acquisition of capital stock, result in such corporation or Person becoming
a Subsidiary; (iv) the Borrower shall have delivered to the Administrative
Agent a certificate demonstrating in reasonable detail PRO FORMA compliance
with Sections 7 and 8 of this Agreement immediately after giving effect to
each such acquisition, (v) the corporation or Person acquired must have had
positive earnings before taxes, interest, depreciation and amortization
expense, for the period of four consecutive fiscal quarters then ended;
(vi) no capital stock or other assets acquired in connection with any such
acquisition shall be subject to any Lien (other than Liens permitted by
Section 8.3); (vii) neither the Borrower nor any of its Subsidiaries shall
assume or incur, directly or indirectly, any Indebtedness or other
liability in connection with any such acquisition (other than Indebtedness
permitted
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67
by Section 8.2); and (viii) after giving effect to any such acquisition, no
Default or Event of Default shall have occurred and be continuing;
(d) loans and advances to employees of the Borrower or its Subsidiaries for
travel, entertainment and relocation expenses in the ordinary course of business
in an aggregate amount for the Borrower and its Subsidiaries not to exceed
$500,000 at any one time outstanding;
(e) investments by the Borrower in its wholly owned Subsidiaries and
investments by such Subsidiaries in the Borrower and in other wholly owned
Subsidiaries; PROVIDED, that investments by the Borrower in its wholly owned
Foreign Subsidiaries occurring after the Closing Date shall at no time exceed an
aggregate amount of $10,000,000; PROVIDED FURTHER that, except for investments
included in such foregoing $10,000,000 aggregate amount, any investments made by
the Borrower in Astor Stag Limited will be made by loans evidenced by the
Intercompany Note;
(f) investments by Astor Holdings, Inc. in Astor II and by Astor II in the
Borrower and ABI Acquisition 1 plc;
(g) any investment made as a result of the receipt of non-cash
consideration from an event described in subsection 4.4(a) that was made
pursuant to and in compliance with subsection 8.5;
(h) investments received as part of the settlement of litigation or in
satisfaction of extensions of credit to any Person otherwise permitted under
this Agreement pursuant to the reorganization, bankruptcy or liquidation of such
Person or a good faith settlement of debts with such Person;
(i) any investment not permitted by the foregoing clauses of this
subsection 8.8 by the Borrower or its Subsidiaries in a Person in which the
Borrower and/or its Subsidiaries owns, or immediately after giving effect to
such investment will own, more than 20% of such Person's outstanding Voting
Stock (but which Person is not, and will not be, after giving effect to such
investment, a Subsidiary) in an aggregate principal amount at any one time not
to exceed the Dollar Equivalent of $3,000,000 (excluding investments in
Rheochem);
(j) investments by the Borrower to purchase the Voting Stock of Rheochem
which it does not own, pursuant to the Shareholders Agreement of Rheochem
Manufacturing Company Inc. dated June 30, 1994, among the Borrower, Rheochem,
Inc. and Rheochem, as amended, PROVIDED that the Borrower shall have delivered
to the Administrative Agent a certificate demonstrating in reasonable detail PRO
FORMA compliance with Sections 7 and 8 of this Agreement (other than subsection
8.1(c), except for matters (other than PRO FORMA noncompliance with subsection
8.1(a)) that can reasonably be expected to be cured within 90 days after such
investment); and
(k) investments existing on the Closing Date and set forth on Schedule 8.8.
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8.9 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF AGREEMENTS.
(a) Make any voluntary or optional payment or prepayment on, or voluntary or
optional redemption or purchase of, or defease, or make any payment the effect
of which is to defease, any Subordinated Notes or, during the continuance of a
Default or Event of Default, any other Indebtedness (other than Indebtedness
arising under the Loan Documents), (b) directly or indirectly, by deposit of
monies or otherwise, prepay, purchase, redeem, retire, defease or otherwise
acquire, or make any payment on account of or premium payable in connection with
the payment, prepayment, redemption, defeasance or retirement of, any of the
Subordinated Notes; PROVIDED, that notwithstanding the provisions of this
subsection 8.9, the Borrower may (i) make payments of principal of and interest
on the Subordinated Notes when due and payable and redemptions or purchases of
the Subordinated Notes when required in accordance with the terms (including the
subordination terms) of the Subordinated Notes (as in effect on the date
hereof), (c) amend, modify or change, or consent or agree to or allow to occur
any amendment, modification or change to (i) any of the terms of the
Subordinated Notes, the ABI Shareholder Notes or, during the continuance of a
Default or Event of Default, any such other Indebtedness (other than any such
amendment, modification or change to the Subordinated Notes, the ABI Shareholder
Notes or such other Indebtedness which would extend the maturity, reduce the
amount of any payment of principal thereof, reduce the rate or extend the date
for payment of interest thereon or make changes relieving the Borrower from
compliance with the terms thereof) or (ii) the Intercompany Note, the Debenture,
the Management Services Agreement (other than changes that do not increase the
amount or affect the timing of payments by the Borrower thereunder), the Tax
Sharing Agreement or the ABI Shareholder Intercompany Notes (except for changes
to the ABI Shareholder Intercompany Notes corresponding to permitted changes to
the ABI Shareholder Notes) or (d) exercise any of its rights and powers under
the Debenture without the consent of the Administrative Agent.
8.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES: MANAGEMENT FEES.
Enter into any transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate unless such transaction is (i) otherwise permitted under this
Agreement, (ii) in the ordinary course of the Borrower's or such Subsidiary's
business and (iii) upon fair and reasonable terms no less favorable to the
Borrower or such Subsidiary, as the case may be, than it would obtain in a
comparable arm's length transaction with a Person which is not an Affiliate
PROVIDED, that this Section 8.10 shall not apply to (A) any transfer of tax
benefits and any tax sharing or tax loss surrender arrangements between or among
the Borrower, any Subsidiaries and any Holding Companies, (B) payments described
in subsection 8.6(iii)(A), (B), (C) and (D) (subject to the understanding set
forth below in the case of payments under the Management Services Agreement),
and (C) transfers by the Borrower or any Subsidiary, or of any Subsidiary to the
Borrower, of non-exclusive rights to use proprietary product formulations, it
being understood that payments made under the Management Services Agreement as
in effect on the Closing Date shall be permitted except after the occurrence of
a Default or Event of Default under Section 9(a) or (b).
8.11 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Borrower or such Subsidiary.
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69
8.12 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
the Borrower to end on a day other than March 31.
8.13 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into, or suffer to
exist, any agreement, other than this Agreement which prohibits or limits the
ability of any Subsidiary to (i) pay dividends or make other distributions or
pay any Indebtedness owed to the Borrower or any other Subsidiary, (ii) make
loans or advances to the Borrower or any other Subsidiary, (iii) transfer any of
its properties or assets to the Borrower or any other Subsidiary or the ability
of the Borrower or any of its Subsidiaries or Holding Companies to create,
incur, assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired PROVIDED, that this subsection
8.13 shall not apply to (A) restrictions existing on the date hereof applicable
to Indebtedness permitted under subsection 8.2(e) or other Indebtedness
permitted under subsection 8.2 that impose restrictions analogous to those
described in clause (B) below, (B) restrictions applicable to Indebtedness or
Capital Stock of a Person acquired by the Borrower or any Subsidiary as in
effect at the time of acquisition, except if such restriction was incurred in
connection with, or in contemplation of such acquisition or such restriction
applies to the Borrower, any Subsidiary (other than the Person acquired) or the
assets thereof (other than the assets of the Person so acquired) or any
after-acquired property, (C) restrictions arising by reason of customary
non-assignment or no-subletting clauses in leases or other contracts entered
into in the ordinary course of business and consistent with past practices, (D)
purchase money obligations or Capital Lease Obligations (or refinancings thereof
that impose no more restrictive restrictions) for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (B) above solely on the property so acquired; (E) Permitted Liens on
assets securing Indebtedness permitted hereunder and (F) restrictions with
respect to a Subsidiary imposed pursuant to a binding agreement which has been
entered into for the sale or disposition (including by merger or consolidation)
of all or substantially all of the Capital Stock or assets of such Subsidiary,
provided that such restrictions apply solely to such Capital Stock or asset of
such Subsidiary and such sale or disposition is otherwise permitted pursuant to
this Agreement.
8.14 LIMITATION ON LINES OF BUSINESS. Enter into any business, either
directly or through any Subsidiary, except for those businesses in which the
Borrower and its Subsidiaries or ADCO and its Subsidiaries are engaged on the
date of this Agreement or which are directly related thereto.
8.15 CHANGE IN DEPOSIT ACCOUNT LOCATIONS. Instruct or otherwise permit
any Person obligated under any of the Accounts to remit payments to any account
or other location other than those listed on Schedule 8.15 unless (a) (i) such
account or other location shall be satisfactory to the Administrative Agent and
(ii) prior to any such instruction, the operator of such account or other
location shall have executed and delivered to the Administrative Agent a Deposit
Account Agreement or (b) payment is remitted to the Borrower or any Subsidiary
(notwithstanding instructions to pay to such a permitted account or other
location) and such payment is promptly delivered by the Borrower or such
Subsidiary to such a permitted account or other location.
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SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof (including, without limitation, pursuant to subsection 4.16(c)); or
(b) The Borrower shall fail to pay any interest on any Loan, or any
other amount payable hereunder, within five days after any such interest or
other amount becomes due in accordance with the terms thereof or hereof; or
(c) Any representation or warranty made or deemed made by the Borrower
or any other Loan Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or
any such other Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in subsection 4.16(a),
subsection 6.1(a)(v), subsection 6.1(j), subsection 6.1(w), subsection
7.13, Section 8, Section 5 of the Borrower Pledge Agreement, Sections
4.3(a) or 4.4 of the Borrower Security Agreement or any material agreement
contained in any Mortgage; or
(e) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section), and such default shall continue
unremedied for a period of 30 days after the earlier of (i) the date on
which a Responsible Officer of the Borrower first learns of such default
and (ii) the date on which written notice thereof shall have been given to
the Borrower by the Administrative Agent or any Lender; or
(f) The Borrower or any of its Significant Subsidiaries shall (i)
default in any payment of principal of or interest of any Indebtedness
(other than the Loans) or in the payment of any Guarantee Obligation,
beyond the period of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or performance of
any other agreement or condition relating to any such Indebtedness or
Guarantee Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is
to cause, or to permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries)
to cause, with the giving of notice if required, such Indebtedness to
become due prior to its stated maturity or such Guarantee Obligation to
become payable; PROVIDED that no Default or Event of Default shall exist
under this paragraph unless the aggregate amount of Indebtedness and/or
Guarantee Obligations in respect of which any default or other event or
condition referred to in this paragraph shall have occurred shall be equal
to at least $250,000; or
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(g) (i) The Borrower or any of its Significant Subsidiaries or Holding
Companies shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the Borrower or
any of its Significant Subsidiaries or Holding Companies shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Significant Subsidiaries or
Holding Companies any case, proceeding or other action of a nature referred
to in clause (i) above which (A) results in the end of an order for relief
or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against the Borrower or any of its Significant Subsidiaries or
Holding Companies any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or
(iv) the Borrower or any of its Significant Subsidiaries or Holding
Companies shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) the Borrower or any of its
Significant Subsidiaries or Holding Companies shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(h) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Administrative Agent, likely to result in the termination of such Plan
for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Administrative Agent is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could have a Material Adverse Effect; or
(i) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries or Holding Companies involving in the
aggregate a liability (not paid or fully covered by insurance) of $100,000
or more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or
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72
(j) (i) Any of the Security Documents shall cease, for any reason
(other than release or termination in accordance with its terms), to be in
full force and effect, or the Borrower or any other Loan Party which is a
party to any of the Security Documents shall so assert or (ii) the Lien
created by any of the Security Documents shall cease to be enforceable and
of the same effect and priority purported to be created thereby (other than
release or termination in accordance with its terms); or
(k) Any Subsidiaries Guarantee or Holding Companies Guarantee shall
cease, for any reason (other than release or termination in accordance with
its terms), to be in full force and effect or any guarantor thereunder
shall so assert; or
(l) The Holding Companies (or one of them) shall cease to own,
directly or indirectly, 100% of the issued and outstanding capital stock of
the Borrower, free and clear of all Liens (other than the Lien granted
pursuant to the Holding Companies Pledge Agreements), or any of the Holding
Companies shall conduct, transact or otherwise engage in any business or
operations, incur, create, assume or suffer to exist any Indebtedness,
Contingent Obligations or other liabilities or obligations or Liens (other
than pursuant to any of the Loan Documents), or own, lease, manage or
otherwise operate any properties or assets, other than (1) incident to the
ownership of the Pledged Stock (as defined in the Holding Companies Pledge
Agreement) and (2) as permitted by this Agreement; or
(m) A Change of Control shall occur; or
(n) An event of default shall occur with respect to the Subordinated
Notes or any event shall occur which does or with the giving of notice or
passage of time would require the Borrower to prepay, purchase, redeem,
retire, defease or otherwise acquire, or to make any payment on account of
any principal of or premium payable in connection with the prepayment,
purchase, redemption, retirement, defeasance or other acquisition of, any
of the Subordinated Notes;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (g) of this Section with respect to the
Borrower or specified in paragraph (n) of this Section, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) shall immediately become due and payable, and (B)
if such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Majority Lenders, the
Administrative Agent may, or upon the request of the Majority Lenders, the
Administrative Agent shall, by notice to the Borrower declare the Commitments to
be terminated forthwith, whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Majority Lenders, the Administrative Agent may,
or upon the request of the Majority Lenders, the Administrative Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
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73
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit
in a cash collateral account opened by the Administrative Agent an amount
equal to the aggregate then undrawn and unexpired amount of such Letters of
Credit. The Borrower hereby grants to the Administrative Agent, for the
benefit of the Issuing Bank and the L/C Participants, a security interest in
such cash collateral to secure all obligations of the Borrower under this
Agreement and the other Loan Documents. Amounts held in such cash collateral
account shall be applied by the Administrative Agent to the payment of drafts
drawn under such Letters of Credit, and the unused portion thereof after all
such Letters of Credit shall have expired or been fully drawn upon, if any,
shall be applied to repay other obligations of the Borrower hereunder and
under the Notes. After all such Letters of Credit shall have expired or been
fully drawn upon, all Reimbursement Obligations shall have been satisfied and
all other obligations of the Borrower hereunder and under the Notes shall
have been paid in full, the balance, if any, in such cash collateral account
shall be returned to the Borrower. The Borrower shall execute and deliver to
the Administrative Agent, for the account of the Issuing Bank and the L/C
Participants, such further documents and instruments as the Administrative
Agent may request to evidence the creation and perfection of the within
security interest in such cash collateral account.
SECTION 10. THE ADMINISTRATIVE AGENT
10.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
10.2 DELEGATION OF DUTIES. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders
for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred
to or provided for in, or received by the Administrative Agent under or in
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74
connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of the Borrower to
perform its obligations hereunder or thereunder. The Administrative Agent
shall not be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower.
10.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee
of any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other
Loan Documents in accordance with a request of the Majority Lenders, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.
10.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice in
writing from a Lender or the Borrower referring to this Agreement, describing
such Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
PROVIDED that unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests
of the Lenders.
10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act
by the Administrative Agent hereinafter taken, including any review of the
affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to
make its Loans hereunder and enter
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75
into this Agreement. Each Lender also represents that it will, independently
and without reliance upon the Administrative Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan
Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Borrower which
may come into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages in effect on the
date on which indemnification is sought, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Loans) be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of, the Commitments, this
Agreement, any of the other Loan Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Administrative Agent under or
in connection with any of the foregoing; PROVIDED that no Lender shall be
liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Administrative Agent's gross
negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the Loans and all other amounts payable hereunder.
10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Borrower as though
the Administrative Agent were not the Administrative Agent hereunder and
under the other Loan Documents. With respect to the Loans made by it and with
respect to any Letter of Credit issued or participated in by it, the
Administrative Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the
same as though it were not the Administrative Agent, and the terms "Lender"
and "Lenders" shall include the Administrative Agent in its individual
capacity.
10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Majority Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
successor agent (provided that it shall have been approved by the Borrower),
shall succeed to the rights, powers and duties of the Administrative Agent
hereunder. Effective upon such appointment and approval, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or
any holders of the Loans. After any retiring Administrative
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Agent's resignation as Administrative Agent, the provisions of this Section
10 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement and the other
Loan Documents.
SECTION 11. MISCELLANEOUS
11.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented
or modified except in accordance with the provisions of this subsection. The
Majority Lenders may, or, with the written consent of the Majority Lenders,
the Administrative Agent may, from time to time, (a) enter into with the
Borrower written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such
terms and conditions as the Majority Lenders or the Administrative Agent, as
the case may be, may specify in such instrument, any of the requirements of
this Agreement or the other Loan Documents or any Default or Event of Default
and its consequences; PROVIDED that no such waiver and no such amendment,
supplement or modification shall (i) reduce the amount or extend the
scheduled date of final maturity of any Loan or of any scheduled installment
thereof, or reduce the stated rate of any interest or fee payable hereunder
or extend the scheduled date of any payment thereof or increase the amount or
extend the expiration date of any Lender's Commitment, in each case without
the consent of each Lender adversely affected thereby, or (ii) amend, modify
or waive any provision of this subsection or reduce the percentage specified
in the definition of Majority Lenders, or modify any pro rata provisions of
the Loan Documents or consent to the assignment or transfer by the Borrower
of any of its rights and obligations under this Agreement and the other Loan
Documents or release any material Subsidiary Guarantee or all or
substantially all of the Collateral, in each case without the written consent
of all the Lenders, or (iii) amend, modify or waive any provision of Section
10 without the written consent of the then Administrative Agent. Any such
waiver and any such amendment, supplement or modification shall apply equally
to each of the Lenders and shall be binding upon the Borrower, the Lenders,
the Administrative Agent and all future holders of the Loans. In the case of
any waiver, the Borrower, the Lenders and the Administrative Agent shall be
restored to their former positions and rights hereunder and under the other
Loan Documents, and any Default or Event of Default waived shall be deemed to
be cured and not continuing; no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
11.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made (a) in the case of delivery
by hand, when delivered, (b) in the case of delivery by mail when received,
or (c) in the case of delivery by facsimile transmission, when sent and
receipt has been confirmed, addressed as follows in the case of the Borrower
and the Administrative Agent, and as set forth in Schedule 1.1 in the case of
the other parties hereto, or to such other address as may be hereafter
notified by the respective parties hereto:
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The Borrower:
Astor Corporation
8521 Six Forks Road
Raleigh, North Carolina 27615
Attention: Chief Financial Officer
Fax: (919) 846-8283
The Administrative Agent:
The Chase Manhattan Bank
1 Chase Manhattan Plaza
5th Floor
New York, New York 10011
Attention: Robert Sachs
Fax: (212) 552-5795
with copies to:
Agent Bank Services Group
The Chase Manhattan Bank
140 E. 45th Street
New York, New York 10017
Attention: Daniel Fisher
Fax: (212) 622-0002
Chase Manhattan Investment Ltd.
9 Thomas Moore Street
Trinity Town
E19YT London, United Kingdom
Attention: Susan Wolfstenholm
Fax: 011-44-171-777-2360
PROVIDED that any notice, request or demand to or upon the Administrative
Agent or the Lenders pursuant to subsection 2.3, 3.3, 4.2, 4.3, 4.5 or 4.10
shall not be effective until received; PROVIDED FURTHER, that any notice,
request or demand relating to the Borrowing Base, including, without
limitation, delivery by the Borrower of any Borrowing Base Certificate in
accordance with subsection 7.2(d), shall not be effective unless a copy
thereof is sent to The Chase Manhattan Bank, Collateral Monitoring Group, 270
Park Avenue, New York, New York 10017, Attention: Terri Lubarski, telecopy
212-270-7449 and confirmation 212-270-7130.
11.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
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11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
making of the Loans hereunder.
11.5 PAYMENT OF EXPENSES AND INDEMNIFICATION. The Borrower
agrees (a) to pay or reimburse the Administrative Agent for all its
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification
to, this Agreement and the other Loan Documents and any other documents
prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby,
including, without limitation, the reasonable fees and disbursements of
counsel to the Administrative Agent, (b) to pay or reimburse each Lender and
the Administrative Agent for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, the fees and disbursements of counsel to each Lender and
of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each
Lender and the Administrative Agent harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any
waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold
each Lender and the Administrative Agent harmless from and against any and
all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance
and administration of this Agreement, the other Loan Documents, the
Acquisition Documents, the Acquisition or the use of the proceeds of the
Loans in connection with the Acquisition and any such other documents,
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable
to the operations of the Borrower, any of its Subsidiaries or any of their
properties (all the foregoing in this clause (d), collectively, the
"indemnified liabilities"); PROVIDED that the Borrower shall have no
obligation hereunder to the Administrative Agent or any Lender with respect
to indemnified liabilities to the extent arising from the gross negligence or
willful misconduct of the person seeking indemnification therefor. Without
limiting the foregoing, and to the extent permitted by applicable law, the
Borrower agrees not to assert, and hereby waives (and shall cause the
Subsidiaries not to assert and to waive), all rights for contribution or any
other rights of recovery with respect to all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever, under or related to
Environmental Laws, that any of them might have by statute or otherwise
against the Administrative Agent or any Lender. The agreements in this
subsection shall survive repayment of the Loans and all other amounts payable
hereunder.
11.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent and their respective
successors and assigns, except that the Borrower may not assign or transfer
any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
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(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or
more banks or other entities ("PARTICIPANTS") participating interests in any
Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the other
Loan Documents, and the Borrower and the Administrative Agent shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Loan Documents. No
Lender shall be entitled to create in favor of any Participant, in the
participation agreement pursuant to which such Participant's participating
interest shall be created or otherwise, any right to vote on, consent to or
approve any matter relating to this Agreement or any other Loan Document
except for those specified in clauses (i) and (ii) of the proviso to
subsection 11.1. The Borrower agrees that if amounts outstanding under this
Agreement are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall, to the maximum extent permitted by applicable law, be deemed to have
the right of setoff in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement; PROVIDED
that in purchasing such participating interest, such Participant shall be
deemed to have agreed to share with the Lenders the proceeds thereof as
provided in subsection 11.7(a) as fully as if it were a Lender hereunder. The
Borrower also agrees that each Participant shall be entitled to the benefits
of subsections 4.12, 4.13 and 4.14 with respect to its participation in the
Commitments and the Loans outstanding from time to time as if it was a
Lender; PROVIDED that, (i) in the case of subsection 4.13, such Participant
shall have complied with the requirements of said subsection and; (ii) no
Participant shall be entitled to receive any greater amount pursuant to any
such subsection than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by such
transferor Lender to such Participant had no such transfer occurred; and
(iii) a Participant's entitlement to the benefits of subsections 4.12, 4.13
and 4.14 with respect to its participation in the Commitments and Loans shall
be in lieu of, and not in addition to, the relevant transferor Lender's
entitlement with respect to such portion of Commitments and Loans.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any affiliate thereof or, with the consent of
the Administrative Agent (which shall not be unreasonably withheld or
delayed), to an additional bank or financial institution (an "ASSIGNEE") all,
or any ratable part of all, its rights and obligations under this Agreement
and the other Loan Documents, in a minimum amount of $5,000,000 pursuant to
an Assignment and Acceptance, substantially in the form of Exhibit M,
executed by such Assignee, such assigning Lender (and, in the case of an
Assignee that is not then a Lender or an affiliate thereof, by the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall
be a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder with a
Commitment as set forth therein, and (y) the assigning Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment
and Acceptance covering all or the remaining portion
<PAGE>
80
of an assigning Lender's rights and obligations under this Agreement, such
assigning Lender shall cease to be a party hereto).
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in subsection
11.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "REGISTER") for the recordation of the names and addresses of the
Lenders and the Commitments of, and principal amounts of the Loans owing to,
each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders may (and, in the case of any Loan or
other obligation hereunder not evidenced by a Note, shall) treat each Person
whose name is recorded in the Register as the owner of a Loan or other
obligation hereunder as the owner thereof for all purposes of this Agreement
and the other Loan Documents, notwithstanding any notice to the contrary. Any
assignment of any Loan or other obligation hereunder not evidenced by a Note
shall be effective only upon appropriate entries with respect thereto being
made in the Register. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Administrative Agent) together
with payment to the Administrative Agent of a registration and processing fee
of $3,500, the Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto
record the information contained therein in the Register and give notice of
such acceptance and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "TRANSFEREE") and any prospective
Transferee, subject to the provisions of subsection 11.16, any and all
financial information in such Lender's possession concerning the Borrower and
its Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such
Lender by or on behalf of the Borrower in connection with such Lender's
credit evaluation of the Borrower and its Affiliates prior to becoming a
party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and
Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
11.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED LENDER")
shall at any time receive any payment of all or part of its Loans or the
Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in
Section 9(g), or otherwise), in a greater proportion than any such payment to
or collateral received by any other Lender, if any, in respect of such other
Lender's Loans or the Reimbursement Obligations owing to it, or interest
thereon, such benefitted Lender shall purchase for cash from the other
Lenders a participating interest in such portion of each such other Lender's
Loan or the Reimbursement Obligations owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds
<PAGE>
81
thereof, as shall be necessary to cause such benefitted Lender to share the
excess payment or benefits of such collateral or proceeds ratably with each
of the Lenders; PROVIDED that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower,
any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and
all deposits (general or special, time or demand, provisional or final), in
any currency, and any other credits, indebtedness or claims, in any currency,
in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender
agrees promptly to notify the Borrower and the Administrative Agent after any
such set-off and application made by such Lender; PROVIDED that the failure
to give such notice shall not affect the validity of such set-off and
application.
11.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of
the copies of this Agreement signed by all the parties shall be lodged with
the Borrower and the Administrative Agent.
11.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
11.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or
any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of
<PAGE>
82
the Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 11.2 or at such other
address of which the Administrative Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
11.13 ACKNOWLEDGMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and
the Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrower and the Lenders.
11.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15 JUDGMENT. (a) If for the purpose of obtaining judgment in any
court it is necessary to convert a sum due hereunder in one currency into
another currency, the parties hereto agree, to the fullest extent that they
may effectively do so, that the rate of exchange used shall be that at which
in accordance with normal banking procedures the Administrative Agent could
<PAGE>
83
purchase the first currency with such other currency on the Business Day
preceding the day on which final judgment is given.
(b) The obligations of the Borrower in respect of this Agreement and
any Note due to any party hereto or any holder of any bond shall,
notwithstanding any judgment in a currency (the "JUDGMENT CURRENCY") other
than the currency in which the sum originally due to such party or such
holder is denominated (the "ORIGINAL CURRENCY"), be discharged only to the
extent that on the Business Day following receipt by such party or such
holder (as the case may be) of any sum adjudged to be so due in the judgment
currency such party or such holder (as the case may be) may in accordance
with normal banking procedures purchase the original currency with the
judgment currency; if the amount of the original currency so purchased is
less than the sum originally due to such party or such holder (as the case
may be) in the original currency, the Borrower agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify such party or
such holder (as the case may be) against such loss, and if the amount of the
original currency so purchased exceeds the sum originally due to any party to
this Agreement or any holder of Notes (as the case may be), such party or
such holder (as the case may be), agrees to remit to the Borrower, such
excess. This covenant shall survive the termination of this Agreement and
payment of the Loans and all other amounts payable hereunder.
11.16 CONFIDENTIALITY. Each Lender agrees to keep confidential all
non-public information provided to it by the Borrower pursuant to this
Agreement that is designated by the Borrower in writing as confidential;
PROVIDED that nothing herein shall prevent any Lender from disclosing any
such information (i) to the Administrative Agent or any other Lender, (ii) to
any Transferee or prospective Transferee which agrees in writing to comply
with the provisions of this subsection, (iii) to its employees, directors,
agents, attorneys, accountants and other professional advisors, (iv) upon the
request or demand of any Governmental Authority having jurisdiction over such
Lender, (v) in response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any Requirement of Law,
(vi) which has been publicly disclosed other than in breach of this
Agreement, or (vii) in connection with the exercise of any remedy hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
ASTOR CORPORATION
By:/s/ John F. Gottshall
---------------------------------
Name: John F. Gottshall
Title: V.P. CFO
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By:/s/ Lawrence Palumbo, Jr.
---------------------------------
Name: LAWRENCE PALUMBO, JR.
Title: Vice President
ATTORNEY-IN-FACT
<PAGE>
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ John Sykes /s/ Maria [illegible]
------------------------------------
Name: John Sykes Maria [illegible]
Title: AVP AVP
Address for Notices:
590 Madison Avenue
New York, New York 10022
Attention: John Sykes
Telecopy: (212) 756-5536
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Gregory R.D. Clark
--------------------------------
Name: GREGORY R.D. CLARK
Title: DIRECTOR
Address for Notices:
Commercial Loan Services
100 Federal Street MS 01-08-04
Boston, Massachusetts 02110
Attention: Halise Shrago
Telecopy: (617) 434-9820
<PAGE>
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By /s/ David Silander
------------------------------
Name: David Silander
Title: Vice President
Address for Notices:
First Union Capital Markets Group
of North Carolina
P.O. Box 3008
Raleigh, North Carolina 27602
Attention: G. Mendel Lay, Jr.
Telecopy: (919) 829-6067
and
First Union National Bank at NC
201 S. College St.
Suite 1300 - NC 0656
Charlotte, NC 28288-0656
Attention: Patrick McCormick
Telecopy: (704) 374-4820
<PAGE>
HELLER FINANCIAL, INC.
By /s/ Christopher J. Domke
------------------------------
Name: Christopher J. Domke
Title: Vice President
Address for Notices:
500 West Monroe Street
Chicago, Illinois 60661
Attention: Christopher J. Domke
Department/CFG
Telecopy: (312) 441-7367
<PAGE>
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ J. Christopher Mangan
------------------------------
Name: J. Christopher Mangan
Title: Vice President
Address for Notices:
One State Street
New York, New York 10004
Attention: Merily McLaughlin
Telecopy: (212) 858-2768
<PAGE>
SCHEDULE A
PERMITTED JURISTICTIONS
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Italy
Japan
The Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
<PAGE>
SCHEDULE B
ELIGIBLE OFF-SITE LOCATIONS
Stacy Specialty Sales
14102 Briar Place
Houston, Texas 77077
Freeport Terminals, Inc.
700 Riverside Drive
Freeport, Pennsylvania 16229
Fluid Energy
2629 Penn Avenue
Hatfield, Pennsylvania 19440
Hatfield Warehouse
2250 Maple Avenue
Hatfield, Pennsylvania 19440
<PAGE>
SCHEDULE 1.1
COMMITMENTS
Revolving Term Loan
Lender Credit Commitment Commitment
- ------ ----------------- ----------
The Chase Manhattan Bank $ 6,000,000 $ 4,000,000
The First National Bank of Boston 4,800,000 3,200,000
BHF-Bank Akmengesellschott 4,800,000 3,200,000
First Union National Bank of North Carolina 4,800,000 3,200,000
Heller Financial, Inc. 4,800,000 3,200,000
IBJ Schroder Bank & Trust Company 4,800,000 3,200,000
----------- -----------
$30,000,000 $20,000,000
<PAGE>
SCHEDULE 2.5
CLOSING DATE LETTERS OF CREDIT
BARCLAY BANK PLC
LONDON
ACCOUNT OF ASTOR STAG LTD AND ASTOR CORPORATION
500,000 STERLING
EXP DATE: 11/11/96
BANK BRUXELLES LAMBERT
BELGIUM
ACCOUNT OF ASTOR STAG SA AND ASTOR CORPORATION
BEF 50,000,000
EXP DATE: 3/31/97
PNC BANK NA
WARREN, PA
ACCOUNT OF PETROWAX REFINING AND ASTOR CORPORATION
$1,000,000
EXP DATE: 4/1/97
LUBE & WAX VENTURES LLC
BRIGHAM CITY UTAH
ACCOUNT OF ASTOR CORPORATION
$175,000
EXP DATE: 10/1/97
<PAGE>
SCHEDULE 5.22
UCC FILING LOCATIONS
Debtor: Astor Corporation
- -------------------------------------------------------------------------------
Local Filing Fixture
Specified Central Filing Office (if Filing Office
State Office required) (if required)
--------- ------- ---------- -------------
- -------------------------------------------------------------------------------
Delaware Secretary of N/A
State
- -------------------------------------------------------------------------------
Georgia Clerk of the N/A
Superior Court
- -------------------------------------------------------------------------------
Michigan Secretary of Office where a
State mortgage on the
real estate would
be filed or recorded
(County of Jackson-
Michigan Center)
- -------------------------------------------------------------------------------
Missouri Secretary of Office of Register N/A
State of Deeds (required
only if Debtor has
a place of business
in only one county
in the State)
- -------------------------------------------------------------------------------
New Jersey Secretary of N/A
State
- -------------------------------------------------------------------------------
North Carolina Secretary of Office of Register N/A
State of Deeds (required
only if Debtor has
a place of business
in only one county
in the State)
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
Pennsylvania Secretary of Office of Office where
Commonwealth Prothonatary the mortgage on
(required only the real estate
if Debtor has a would be filed
place of business or recorded
in only one county (Counties of
in the state) Venango
(Emlenton),
Crawford
(Titusville),
and Mckean
(Farmers' Valley)
- -------------------------------------------------------------------------------
Texas Secretary of Office of the clerk
State in the county where
a mortgage on the
real estate would
be filed or recorded
(County of Harrison-
two facilities in
Marshall)
- -------------------------------------------------------------------------------
Debtor: ABI Corporation
- -------------------------------------------------------------------------------
Local Filing Fixture
Specified Central Filing Office (if Filing Office
State Office required) (if required)
--------- -------------- ------------ -------------
- -------------------------------------------------------------------------------
Delaware Secretary of N/A
State
- -------------------------------------------------------------------------------
North Carolina Secretary of Office of register N/A
State of Deeds (required
only if Debtor has
a place of business
in only one county
in the State)
- -------------------------------------------------------------------------------
2
<PAGE>
Debtor: ABI Acquisition 1 plc
- -------------------------------------------------------------------------------
Local Filing Fixture
Specified Central Filing Office (if Filing Office
State Office required) (if required)
--------- -------------- ------------- -------------
- -------------------------------------------------------------------------------
Delaware Secretary of N/A
State
- -------------------------------------------------------------------------------
North Carolina Secretary of Office of N/A
State Register of
Deeds (required only
if Debtor has a place
of business in only one
county in the State)
- -------------------------------------------------------------------------------
3
<PAGE>
SCHEDULE 6.1(O)
PRO FORMA BALANCE SHEET
<PAGE>
ASTOR HOLDINGS II
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30,1996
------------------------------------------------------------
HISTORICAL
-------------------------- ASTOR
ASTOR TRANSACTIONS HOLDINGS II
HOLDINGS II ADCO ADJUSTMENTS PRO FORMA
----------- ---- ----------- ---------
(DOLLARS IN THOUSANDS)
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . $ 1,035 $ 3,559 $(4,594) (1) $ -
Accounts receivable, net . . . . . . . . . . 24,159 7,601 - 31,760
Receivables from affiliates. . . . . . . . . 304 - - 304
Receivables from Rheochem. . . . . . . . . . 606 - - 606
Inventory . . . . . . . . . . . . . . . . . 21,092 5,781 485 (2) 27,358
Prepaid expenses and other current assets . 3,635 204 - 3,389
-------- ------- ------- --------
Total current assets . . . . . . . . . . . . . 50,831 17,145 (4,109) 63,867
Property, plant and equipment, net . . . . . . 50,847 9,075 10,175 (3) 70,097
Investment in Rheochem . . . . . . . . . . . . 4,194 - - 4,194
Goodwill . . . . . . . . . . . . . . . . . . . 29,631 7,423 29,312 (4) 66,366
Intangible assets, net . . . . . . . . . . . . 6,465 471 (2,304) (5) 4,632
Deferred income taxes, net . . . . . . . . . . 3,299 353 1,961 (6) 5,613
Other assets . . . . . . . . . . . . . . . . . - 14 - 14
-------- ------- ------- --------
Total assets . . . . . . . . . . . . . . . . . $145,267 $34,481 $35,035 $214,783
-------- ------- ------- --------
-------- ------- ------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . $ 18,587 $ 2,054 $ - $ 20,641
Accrued interest payable . . . . . . . . . . . 875 - - 875
Accrued expenses . . . . . . . . . . . . . . . 6,685 2,306 130 (7) 9,121
Current portion of long term debt . . . . . . 4,539 - (4,429) (8) 110
-------- ------- ------- --------
Total current liabilities . . . . . . . . . . 30,686 4,360 (4,299) 30,747
Long term debt . . . . . . . . . . . . . . . . 63,517 - 68,022 (10) 131,539
Subordinated Note due to an affiliate (9). . . 5,708 - - 5,708
Deferred income taxes . . . . . . . . . . . . 4,772 1,031 3,360 (11) 9,163
Other long-term liabilities. . . . . . . . . . 2,519 - 978 (12) 3,497
ADCO redeemable preferred stock of subsidiary. - 3,920 (3,920)(13) -
Stockholder's equity:
ADCO stockholders' equity. . . . . . . . . . . - 25,170 (25,170)(14) -
Common stock . . . . . . . . . . . . . . . . . - - - -
Additional paid-in capital . . . . . . . . . . 36,671 - - 36,671
Retained earnings. . . . . . . . . . . . . . . 1,414 - (3,936)(15) (2,522)
Foreign currency translation adjustment. . . . (20) - - (20)
-------- ------- ------- --------
Total stockholder's equity . . . . . . . . . . 38,065 25,170 (29,106) 34,129
-------- ------- ------- --------
Total liabilities and stockholder's equity . . $145,267 $34,481 $35,035 $214,783
-------- ------- ------- --------
-------- ------- ------- --------
</TABLE>
(See footnotes on following page)
1
<PAGE>
ASTOR HOLDINGS II
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) Represents the use of ADCO cash of $3.6 million to redeem outstanding
preferred stock of ADCO's subsidiary and the use of Astor's existing cash
of $1,035,000 to fund the Transactions. See note 10 below.
(2) Represents the estimated write-up of finished goods inventory to fair
market value in connection with the purchase price allocation.
(3) Represents the estimated write-up of property, plant and equipment to fair
market value in connection with the purchase price allocation.
(4) Represents $36.7 million of excess purchase price over the fair market
value of the net assets acquired less the elimination of ADCO's existing
goodwill of $7.4 million. Management's preliminary allocation of the
purchase price for ADCO is as follows:
Purchase price:
Cash portion. . . . . . . . . . . . . . . . . . . . . . $54,414,000
Estimated fees and expenses . . . . . . . . . . . . . . 4,989,000
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . $59,403,000
-----------
-----------
Allocated as follows:
Existing book value of ADCO . . . . . . . . . . . . . . $25,170,000
Accrued dividend on redeemable preferred stock of
ADCO subsidiary . . . . . . . . . . . . . . . . . .. (117,000)
Increase in inventory to estimated fair market value . 485,000
Estimated increase in property, plant and equipment
to fair market value . . . . . . . . . . . . . . . . . 10,175,000
Elimination of existing ADCO goodwill . . . . . . . . . (7,423,000)
Transaction related liabilities . . . . . . . . . . . (2,261,000)
Increase in deferred tax. . . . . . . . . . . . . . . . (3,360,000)
Increase in goodwill. . . . . . . . . . . . . . . . . . 36,734,000
-----------
Total. . . . . . . . . . . . . . . . . . . . . . . . $59,403,000
-----------
-----------
(5) Represents deferred debt issuance costs related to the Offering of $3.5
million less the elimination of unamortized debt issuance costs related to
early extinguishment of term loans under the UBS Credit Facility of $5.8
million.
(6) Represents the federal and foreign tax benefits on the $5.8 million
extraordinary loss for write-off of debt issuance costs related to the
early extinguishment of term loans under the UBS Credit Facility.
(7) Represents the current portion of the transaction-related liabilities
resulting from the allocation of purchase price of $184,000 less the tax
benefit on the cost of early termination of interest swap contracts of
$54,000.
(8) Represents the repayment of current portion of long-term debt under the UBS
Credit Facility.
(9) Represents an unsecured loan note payable to the Parent maturing on July 5,
2003. Interest accrues on such note at the rate of 8% and is payable semi-
annually.
2
<PAGE>
ASTOR HOLDINGS II
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED)
(10) Represents the proceeds from the Offering of $109.5 million and the Bank
Term Loan under the Senior Bank Facility of $20.0 million, net of repayment
of long-term debt of $65.9 million. The sources and uses of funds of the
Transactions are as follows:
Source of funds:
Cash on hand. . . . . . . . . . . . . . . . . . . . $ 1,035,000
Bank Term Loan. . . . . . . . . . . . . . . . . . . 20,000,000
Proceeds from the Offering.. . . . . . . . . . . . . 109,450,000
------------
Total sources. . . . . . . . . . . . . . . . . . $130,485,000
------------
------------
Use of funds:
ADCO cash purchase price.. . . . . . . . . . . . . . $ 54,414,000
Redemption of ADCO's preferred stock. . . . . . . . 478,000
Repayment of borrowings under UBS Credit Facility. . 65,857,000
Fees and expenses. . . . . . . . . . . . . . . . . 9,736,000
------------
Total uses. . . . . . . . . . . . . . . . . . . . $130,485,000
------------
------------
(11) Represents the net deferred tax liabilities resulting from the allocation
of purchase price for the ADCO Acquisition.
(12) Represents the long term portion of the transaction-related liabilities
resulting from the allocation of purchase price.
(13) Represents ADCO's redemption of preferred stock of its subsidiary of $3.9
million.
(14) Represents the elimination of ADCO's historical stockholders' equity
resulting from the application of purchase accounting.
(15) Represents the cost of early termination of interest swap contracts, net of
tax benefit, of $68,000 and the elimination of unamortized debt issuance
costs related to early extinguishment of term loans under the UBS Credit
Facility, net of tax benefit, of $3.9 million.
3
<PAGE>
SCHEDULE 6.1(P)
CORPORATE STRUCTURE
The following chart depicts the equity ownership of the Company after
giving effect to the Transactions, including the ADCO Acquisition.
[GRAPHIC]
- -------------------------
(1) The outstanding voting preferred stock of ABI Acquisition 1 plc entitles
the holder thereof to (i) elect three of the four directors of ABI
Acquisition 1 plc. (ii) exercise 75% of the voting power of the outstanding
capital stock of ABI Acquisition 1 plc and (iii) an aggregate liquidation
preference of $ 1.7 million.
(2) The outstanding voting preferred stock of Astor Corporation entitles the
holder thereof to an aggregate liquidation preference of $28.5 million and
has a cumulative dividend rate of 12.5% per annum. The holder of such
shares is also entitled to exercise 13.2% of the voting power of the
currently outstanding capital stock of Astor Corporation.
<PAGE>
CAPITAL STRUCTURE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
COMPANY AUTHORIZED SHARES OUTSTANDING SHARES
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Astor Holdings, Inc., a a. 1,000,000 shares of Class A Common a. 535,715 shares
Delaware corporation Stock, $.01 par value per share
b. 1,000,000 shares of Class B Common b. 142,857 shares
Stock, $.01 par value per share
c. 1,000,000 shares of Class C Common c. 71,427 shares
Stock, $.01 par value per share
d. 1,000,000 shares of Class D Common d. 0 shares
Stock, $.01 par value per share
e. 4,000,000 shares of Conversion Common e. 0 shares
Stock, $.01 par value per share
f. 1,000,000 shares of preferred stock, $.01 f. 142,500 shares of
par value per share, of which 500,000 shares Series A Preferred
shall be Series A Redeemable Cumulative Stock and 82,500
Preferred Stock, $.01 par value per share, shares of Series B
and 82,500 shares shall be Series B Preferred Stock
Redeemable Cumulative Preferred Stock,
$.01 par value per share
- ----------------------------------------------------------------------------------------------------
Astor Holdings II, Inc., 10,000 shares of common stock, $.01 par 1,000 shares
a Delaware corporation value per share
- ----------------------------------------------------------------------------------------------------
Astor Corporation, a a. 100,000 shares of common stock, a. 25,000 shares
Delaware corporation $.001 par value per share of Common Stock
b. 100,000 shares of preferred stock, $.001 b. 3,800 shares
par value per share, of which 10,000 shares of Series A
shall be Series A Preferred Stock Preferred Stock
- ----------------------------------------------------------------------------------------------------
ABI Corporation, 1,000 shares of common stock, $1.00 par 1 share
a Delaware corporation value per share
- ----------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ABI Acquisition I, plc, a. 18,000,000 L1 deferred voting ordinary a. 1,075,626 shares
a public liability company shares
registered in England and
Wales and domesticated b. 2,000,000 L1 preferred voting ordinary b. 9,680,625 shares
in Delaware shares
- ----------------------------------------------------------------------------------------------------
ABI Acquisition II, plc, a a. 18,000,000 L1 non-voting ordinary a. _____shares
public liability company shares
registered in England and b. 2,000,000 L1 voting ordinary shares b. _____shares
Wales
- ----------------------------------------------------------------------------------------------------
Astor Stag Ltd. [370L] shares
- ----------------------------------------------------------------------------------------------------
Astor Stag S.A.
- ----------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SCHEDULE 6.1(R)
CONSENTS
NONE
<PAGE>
SCHEDULE 7.1(A)
MORTGAGED PROPERTIES
1401 Central Avenue, Marshall, Texas
1600 Commerce Street, Marshall, Texas
1100 East Main Street
Titusville, Pennsylvania 16354
Hill Street
Emlenton, Pennsylvania 16373
4401 Page Avenue, Michigan Center, Michigan
Routes 46 & 446
Farmer's Valley, Pennsylvania
<PAGE>
SCHEDULE 8.2
EXISTING INDEBTEDNESS
(As of Closing)
LENDER TYPE OF DEBTS AMOUNT
(IN THOUSANDS)
Chase Manhattan Term loans 20,000
Due to Holders Subnotes 109,450
PNC Bank Line of credit 800
Bank Bruxelles Lambert Line of credit 1,670
Quaker State Corporation Environmental note 178
Citizen Mortgage Company Home mortgage 150
ING Lease Capital leases 145
Series A and B Notes Payable Acquisition Debt 5,708
By Astor Holdings to ABI
Shareholders
TOTAL 138,101
<PAGE>
SCHEDULE 8.3
EXISTING LIENS
Lube & Wax Ventures L.L.C
P.O. Box 678
Brigham City, Utah
Citizens Mortgage Corp.
P.O. Box 9147
Columbus, GA 31908
International Nederlanden Lease UK, Ltd.
99 Gresham Street
London, England EC2P 2BR
<PAGE>
SCHEDULE 8.8
EXISTING INVESTMENTS
50% Interest in Rheochem Technologies, Inc.
<PAGE>
SCHEDULE 8.15
DEPOSIT ACCOUNTS AND RELATED BANK ACCOUNTS
ADCO
Comerica Bank #I85-0344035
245 West Michigan, Ave.
Jackson, Michigan 49201
ASTOR STAG LTD.
Barclays # 40548154
ABI CORPORATION ACCOUNT # TYPE
DELAWARE TRUST CAPITAL 0136-3859 CHECKING INVESTMENT
MANAGEMENT 1683012614
900 MARKET STREET MALL
P.O. BOX 8841
WILMINGTON, DE 19899
ASTOR CORPORATION (FORMERLY PETROWAX)
NATIONAL CITY BANK OF PA 0000-850438 MAIN OPERATING ACCOUNT
127 W. SPRING ST. WITH CASH MANAGEMENT
TITUSVILLE, PA 16354
TRUST CO. BANK 8801542500 LOCAL CHECKING
PO BOX 4418 MAIL CODE 011
ATLANTA GA 30302
BANK ONE, TEXAS, NA 1889164024 LOCAL CHECKING
101 E. AUSTIN STREET
MARSHALL, TX 75670
CITIZENS MORTGAGE CORP. 226955 HOME MORTGAGE
PO BOX 9147
COLUMBUX, GA 31908-9147
1
<PAGE>
ASTOR CORPORATION (FORMERLY PETROWAX) (CONTINUED)
BANK: PNC
NAME ON ACCOUNT [PETROWAX PA, INC.]
ADDRESS: P.O. Box 8480
Dept 89, 4th Floor
Erie, PA 16553
Phone: (814) 871-9359
Fax: (814) 871-9432
CONTACT: Carol Hampey
- -------
DESCRIPTION: ACCOUNT NUMBER:
- ----------- ---------------
Operating Account 60-3598-1790
Petty Cash 60-3603-1586
Payroll 60-3602-8459
Lock Box 10-0134-9591
BANK Hamlin Bank & Trust Co.
NAME ON ACCOUNT [PETROWAX PA, INC.]
ADDRESS: 333 W. Main Street
Smethport, PA 16749
Phone: (814) 887-5555
Fax: (814) 887-2478
CONTACT: Mr. Brown/Jim Kane
DESCRIPTION: Profit Sharing &
Savings Plan ACCOUNT NUMBER: 9012-39526
BANK Farmers Bank
NAME ON ACCOUNT [PETROWAX PA, INC.]
ADDRESS: Main Street
Emlenton, PA 16373
Phone: (412) 867-2311
Fax: (412) 867-1614
CONTACT: Rob Foust
DESCRIPTION: Petty Cash ACCOUNT NUMBER: 15536
BANK Wachovia Bank of North Carolina
NAME ON ACCOUNT Cathy A. Manterese/Margie E. Walters
ADDRESS: 8901 Six Forks Road
Raleigh, NC 27615
CONTACT: Rob Foust
DESCRIPTION: Petty Cash ACCOUNT NUMBER: 6269729128
BANK Citibank
NAME ON ACCOUNT MSC Holdings/Reliance
ADDRESS: New Castle, Delaware
DESCRIPTION: Workers' Comp Acct. ACCOUNT NUMBER: 3836-5259
2
<PAGE>
ASTOR STAG SA
ACCOUNT NO. COMMENTS
---------- --------
Banque Bruxelles Lambert 348-033398-73 Main bank account
BELGIUM
Banque Bruxelles Lambert 348-0333398-73 Collecting account in France
Generale De Banque (SGB) 248-0173173-58 Defunct
BELGIUM
Generale Bank (SGK) 2058881263 Collecting account in Germany
GERMANY
3
<PAGE>
EXHIBIT A-1 TO
CREDIT AGREEMENT
[FORM OF REVOLVING CREDIT NOTE]
REVOLVING CREDIT NOTE
$__________________ New York, New York
October 8, 1996
FOR VALUE RECEIVED, the undersigned, ASTOR CORPORATION, a Delaware
corporation (the "BORROWER"), hereby unconditionally promises to pay to the
order of _____________________ (the "LENDER") at the office of The Chase
Manhattan Bank, located at 270 Park Avenue, New York, New York 10017, in the
currency in which such Revolving Credit Loan was made, being the lawful money
of the United States of America or the United Kingdom and in immediately
available funds, on the Revolving Credit Termination Date the principal
amount of (a) __________DOLLARS ($______), or, if less, (b) the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Lender to
the Borrower pursuant to subsection 2.1 of the Credit Agreement, as
hereinafter defined. The Borrower further agrees to pay interest in like
money at such office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in subsection 4.7 of such
Credit Agreement.
The holder of this Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each
Revolving Credit Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurocurrency Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute PRIMA FACIE evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
shall not affect the obligations of the Borrower in respect of such Revolving
Credit Loan.
This Note (a) is one of the Revolving Credit Notes referred to in the
Credit Agreement dated as of October 8, 1996 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among the
Borrower, the Lender, the other banks and financial institutions from time to
time parties thereto and The Chase Manhattan Bank, as administrative agent (in
such capacity, the "ADMINISTRATIVE AGENT"), (b) is subject to the provisions of
the Credit Agreement and (c) is subject to optional and mandatory prepayment in
whole or in part as provided in the Credit Agreement. This Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
ASTOR CORPORATION
By: _________________________
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
Schedule A
to Revolving Credit Note
------------------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
- -----------------------------------------------------------------------------------------------------------------------------------
Amount Amount of ABR Loans
Converted to Amount of Principal of Converted to Unpaid Principal Balance
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurocurrency Loans of ABR Loans Notation Made By
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule B
to Revolving Credit Note
------------------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EUROCURRENCY LOANS
- -----------------------------------------------------------------------------------------------------------------------------------
Amount of
Amount Converted Interest Period and Amount of Principal of Eurocurrency Loans Unpaid Principal
Amount of to Eurocurrency Eurocurrency Rate Eurocurrency Loans Converted to ABR Balance of Notation
Date Eurocurrency Loans Loans with Respect Thereto Repaid Loans Eurocurrency Loans Made By
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FIRST AMENDMENT TO AGREEMENT
THIS FIRST AMENDMENT TO AGREEMENT (the "First Amendment") is made as of
October 24, 1996, by and between Lube & Wax Ventures, L.L.C. ("L&W"), a Delaware
limited liability company and Astor Corporation ("Astor"), a Delaware
corporation.
WHEREAS, L&W and Astor are parties to that certain Agreement (the
"Agreement"), dated as of October 1, 1996; and
WHEREAS, L&W and Astor desire to amend the Agreement as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to
legally bind themselves and their respective successors and permitted assigns,
L&W and Astor do hereby amend the Agreement as follows:
1. Section 4.5 of the Agreement shall be deleted in it's entirety. Any
security interest created under Section 4.5 of the Agreement prior to the date
of this First Amendment is hereby terminated.
2. Section 4.6 of the Agreement shall be amended to change the amount of
the Default Letter of Credit by deleteing the tern "One Hundred Seventy-Five
Thousand Dollars ($175,OOO)" and replacing it with the term "Two Million Five
Hundred Thousand Dollars ($2,500,000)". L&W hereby agrees to surrender the
outstanding Default Letter of Credit in connection with the issuance of the new
Defau1t Letter of Credit in the amount of Two Million Five Hundred Thousand
Dollars ($2,500,000).
3. Capitalized terms not otherwise defined herein shall have the meanings
given them in the Agreement.
4. Except as modified herein, all terms, conditions and covenants of the
Agreement shall remain in full force and effect. This First Amendment may be
executed in multiple counterparts, all of which when taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as of the date first above written.
LUBE & WAX VENTURES, L.L.C. ASTOR CORPORATION
By: /s/ R.O. Johnson By: /s/ Joseph L. Suave
------------------------ ------------------------
Name: /s/ R.O. Johnson Name: /s/ Joseph L. Suave
---------------------- ----------------------
Title: Exec. Comm Title: Vice President
--------------------- ---------------------
By: /s/ R. E. Germer
------------------------
Name: R.E. Germer
----------------------
Title: Exec. Comm
---------------------
<PAGE>
EXHIBIT 12
ASTOR HOLDINGS II, INC.
CALCULATION OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year
Ended
September
Year Ended March 31, 30, Six Months Ended September 30,
------------------------------------------------------- --------- ------------------------------
Pro Pro Pro
Forma Forma Forma
1992 1993 1994 1995 1996 1996 1996 1995 1996 1996
-------- ------- -------- ------- ------ ------ --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss)
before taxes
and extraordinary
item (25,931) (9,909) (32,544) (1,517) 2,043 3,282 7,038 (585) 5,091 5,938
Fixed Charges 5,133 2,500 2,412 2,325 6,169 14,854 14,854 2,151 3,808 7,396
-------- ------- -------- ------- ------ ------ --------- --------- -------- -------
Earnings(1) (20,798) (7,409) (30,132) 808 8,212 18,136 21,892 1,566 8,899 13,334
-------- ------- -------- ------- ------ ------ --------- --------- -------- -------
-------- ------- -------- ------- ------ ------ --------- --------- -------- -------
Fixed charges:
Interest expense 4,220 1,015 1,476 1,606 5,251 13,785 13,785 1,837 3,276 6,893
Amortization of
deferred debt costs 849 1,379 806 579 790 941 941 234 468 471
Imputed interest on
operating lease
obligations 64 106 130 140 128 128 128 80 64 32
-------- ------- -------- ------- ------ ------ --------- --------- -------- -------
Fixed charges(2) 5,133 2,500 2,412 2,325 6,169 14,854 14,854 2,151 3,808 7,396
-------- ------- -------- ------- ------ ------ --------- --------- -------- -------
-------- ------- -------- ------- ------ ------ --------- --------- -------- -------
Ratio of earnings to fixed
charges(1)(2) N/A N/A N/A N/A 1.33 1.22 1.47 N/A 2.34 1.80
-------- ------- -------- ------- ------ ------ --------- --------- -------- -------
-------- ------- -------- ------- ------ ------ --------- --------- -------- -------
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the captions "Independent
Auditors" and "Selected Financial Data", and to the use of our report dated June
7, 1996, in Amendment #1 to the Registration Statement (Form S-4 No. 333-14913)
and related Prospectus of Astor Holdings II, Inc. dated December 18, 1996.
Buffalo, New York
December 18, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
We consent to the use of our reports dated February 1, 1996, with respect to
the financial statements of Adco Techologies Inc. and March 18, 1994, with
respect to the financial statements of Adco Products, Inc. included in Amendment
No. 1 to the Registration Statement (Form S-4 No. 333-14913) and related
Prospectus of Astor Holdings II, Inc. dated December 18, 1996.
Detroit, Michigan
December 18, 1996
<PAGE>
EXHIBIT 23.3
[KPMG LETTERHEAD]
The Directors
Astor Corporation
8521 Six Forks Road
Suite 105 Our ref mww-02/a1/560
Raleigh
NC 27615 Contact Mark Wilford
USA 0171-3118383
19 December 1996
Dear Sirs
We consent to the use of our report included herein and to the reference to
our firm under the heading "Independent Auditors" in the registration
statement.
Yours faithfully,
/s/ KPMG
KPMG
[KPMG LETTERHEAD]
